Automatic Enrolment Rates Rise for Employers

Since it’s conception in 2012, automatic enrolment has helped millions of people contribute towards their pension. Employees are aided in this by having their employers also make contributions towards their retirement fund, but the rates employers and employees will need to contribute will shortly rise. Make sure that your business is prepared by checking the rates below.

 

Under automatic enrolment, minimum contributions are required to increase over time on set dates by law. On 6 April the minimum contribution levels will rise again, with a minimum of 3% being paid by employers towards the pension. Employees will make up the difference and contribute 5% to the pension to make a total of 8% contributions.

 

The table below shows the minimum contributions that employers who set up a defined contribution scheme for automatic enrolment must pay and the date when they must increase. This is calculated based on earnings between £6,032 to £46,350 per year (£503 to £3,863 per month or £116 to £892 per week).

 

Date effective	Employer Minimum Contribution	Employee Contribution	Total Minimum Contribution
Old rates up until 5/4/18	1%	1%	2%
Currently from 6/4/18 to 5/4/19	2%	3%	5%
6/4/19 onwards	3%	5%	8%

 

 

Automatic Enrolment evaluation report 2018

 

Since automatic enrolment has been introduced, it has been praised for helping people save towards their pension when they may have otherwise not been. Below are some key findings from the Department for Work and Pensions annual analytical report regarding automatic enrolment.

 

• More than 9.9 million workers have been automatically enrolled
• 1.4 million employers have met their duties
• 591,000 workers have been re-enrolled
• 73, 643 employers have met their re-enrolment duties
• 17.7 million eligible employees participate in a workplace pension (only 10.7 million in 2012)
• £90.3 billion is the total annual amount saved by eligible employees in 2017 across both sectors
• 82% of individuals interviewed, viewed automatic enrolment as a good thing for them personally
• Rates of opt out and termination remain consistent, with males and females having the same level of opt-out; but males have slightly higher levels of termination.
• Termination rates are highest among the 22-29 and 60 to state pension age groups
• Higher earners have higher opt-out rates
• 6.1 million employees will have to increase their contributions in April 2019 as they are contributing at the minimum level

 

Are you aware of Automatic Re-enrolment?

 

Since setting up employees on automatic enrolment pension schemes on your staging date, you may have had individuals who have opted out, left the scheme or stopped making contributions.

 

Under the government automatic re-enrolment legislation, employers have a duty to re-enrol their employees back into their qualifying workplace pension scheme on each third anniversary of original staging or duties date, if they are found to be eligible jobholders on such three-yearly date. Your employees have the right to opt out again if they wish.

 

Employers can choose one cyclical automatic re-enrolment date for the assessment of their workers and this date must fall within three calendar months before or after the third anniversary of the employers staging date.

 

If you would like more details on anything discussed in this post, then please contact us for further information.