Auto-enrolment moves to the next stage in April

From next April employers and employees will find their auto-enrolment contributions rising. Are you ready for the changes?

The success story of auto-enrolment (so far)

Over the last three years over 8.5 million people have begun saving for their retirement and almost 800,000 employers have successfully enrolled their employees and complied with their auto-enrolment duties. The success so far has outperformed many predictions. April 2018 sees auto-enrolment move on to its next stage. The minimum total contribution required to date has been just 2% of band earnings (that is, earnings between £5,876 and £45,000 a year in 2017/18). Of this, the employer must pay at least 1%. For an employee earning £25,000 a year, a typical minimum 1% contribution works out at £12.75 a month after basic rate tax relief.  

Read more about Pension Auto-Enrolment in our last update.

Increased contributions

Next April, the minimum contribution will rise to 5%, with the employer paying at least 2% of this total. Most employees’ contributions will triple to 3%. There’s another 3% increase in 2019, meaning the employer will pay a minimum 3% and most employees 5%.  Based on this year’s rates, that £12.75 a month in March 2017 will have increased to £63.75 a month by May 2019. The new tax year in April generally sees changes to the personal allowance and national insurance contribution levels. Both generally boost employees’ net pay and so hide some of the increased deduction from earnings. If you’re an employer, you should ensure you have budgeted for your contributions increases in 2018/19 and then again in 2019/20. And you should alert your employees to their contribution increase before it takes effect.
To discuss this article in more detail, or to discuss any wider tax planning, please talk to us. T: 020 7376 9333 E:

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