Workers set for auto-enrolment pension contributions rise

Jamie Younger

This change sees the minimum contributions employers and employees pay into defined contribution automatic enrolment workplace pension schemes increasing from 2 per cent to 3 per cent for employers and from 3 per cent to 5 per cent for staff contributions. Total minimum contributions overall therefore increase from 5 per cent to 8 per cent.

For those currently paying at the auto-enrolment minimum rate and on an average salary of £27,000 employee contributions will increase from around £500 to £800 per annum from 6 April 2019.

The Pensions Regulator (TPR) has advised that the increase in the minimum contributions applies whether a new auto-enrolment scheme was specifically set up or whether an old scheme was adopted for the purpose of auto-enrolment. These changes do not affect defined benefit pension schemes.

The TPR is also advising employers that qualifying earnings include salary, wages, overtime, bonuses, commissions, statutory sick pay, and statutory maternity/paternity/adoption pay in calculating the required contributions.

Jamie Younger, partner at accountancy firm Saffery Champness, based in Edinburgh, and head of the firm’s landed estates and rural business group, said: “Whilst there is no legal obligation on employers to write to those in their auto-enrolment scheme notifying these changes, clearly with a further percentage going into pension contributions this could mean a decrease in take home pay for some members of staff where they may not have had a pay rise in the last 12 months. They will however stand to benefit from higher incomes in retirement.