Minimum pension contribution increasing
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Under automatic enrolment, minimum pension contributions are required to increase over time on set dates.
By law, on 6 April 2018, employers are required to increase the amount of minimum contributions into their staff's automatic enrolment pension to at least 2% of qualifying earnings. Employees will have to pay the shortfall needed to make a total minimum contribution of 5%.
The minimum contribution levels will rise again on 6 April 2019, with employers paying a minimum of 3% towards the pension, and employees paying the difference to make a total of 8% minimum.
Both employer and staff can choose to contribute more than the minimum amounts to the pension if they want to.
Employers can choose to pay more than the minimum contribution, up to the full 5%, meaning staff do no need to pay anything. If you pay in more than the legal minimum contribution, but less than the total minimum contribution shown in the table below, then staff will need to pay in at least enough to make up the shortfall between these amounts. The table is based on earnings between £5,876 to £45,000 per year (£490 to £3,750 per month, or £113 to £866 per week), and including certain elements of pay.
| Date effective |
Employer minimum contribution |
Staff contribution |
Total minimum contribution |
| Until 5th April 2018 |
1% | 1% | 2% |
| 6th April 2018 - 5th April 2019 | 2% | 3% | 5% |
| 6th April 2019 onwards | 3% | 5% | 8% |
If you don't have any staff in a pension scheme for automatic enrolment, or if you are already paying above the increased minimum amounts you do not need to take any action.
Three things for employers to check
1) Will your payroll deduct the increases?
While many payroll providers may automate their software so
contributions are increased automatically, employers should check if
their payroll software will do this. Their payroll should be ready to
deduct the increased contributions when they rise on 6 April 2018 and
then again in April 2019, otherwise the right contributions might not be
paid across to the scheme at the right time.
2) Is your pension scheme making the changes needed to support the increases?
Employers should also check their pension scheme is making necessary
changes to support the increases and ensure they are continuing to use a
qualifying scheme and the right amount of pension contributions are
deducted. If an employer's chosen pension scheme doesn't support the
increases, then they will need to talk to them about their options.
3) What are you currently contributing? You may not need to take action
Employers and their staff can also choose to pay in more than the
minimum contributions if they want to and employers who are already
paying above the increased total minimum amounts need not take any
further action.
For more guidance on increasing contributions visit The Pensions Regulator website.
Useful links
If you have any other queries please contact us.
