On the 6th April 2018, and then again on the 6th April 2019, employer and employee minimum contributions rates for defined contribution qualifying schemes will increase.
All employers should, by now, have received a letter from The Pensions Regulator advising them of their duty to increase contributions, however, this is not necessarily a simple exercise as the minimum level of contribution is dependent on the rules of the scheme and the definition of pay used to calculate the contributions. The table below illustrates the different definitions of pensionable pay and the respective minimum levels of contributions.
It is essential that employers ensure that the correct definition of pensionable pay is identified and the right level of increase is applied, with immediate effect from the date of increase, or you may face action from The Pension Regulator.
An employee communication and education programme is a useful tool to help employees understand the changes and the importance of their retirement planning, making them less likely to opt out of the pension scheme.
We recommend that this communication process is started as soon as possible to ensure employees remain engaged with their pension benefits. Please feel free to download our sample letter, which can be adapted to communicate these changes to your team, using the following link: https://www.finchib.co.uk/auto-enrolment-pension-contribution-increases-ready-april-2018-sample-letter-communicating-changes-employees/
*If any employer chooses to use or adapt this letter for their employees, please ensure you use the table above to identify the correct level of contributions applicable before issuing.