An employer is required to have a pension scheme their staff to pay into unless they opt out. This is an auto-enrollment, or workplace pension, scheme. Since the scheme was introduced in 2012, an estimated 10 million eligible workers have been enrolled.

In this scheme the employee pays a set minimum amount, and then the employer makes a contribution on top of this. This requirement has been up and running for several years now . From April 2018 the minimum payment an employee was to make was 3% and the employer made another 2%. This led to a total minimum contribution of 5%.

The employer does have the option, should they wish, to pay the whole minimum contribution.

From April 5 2019 the rates change to 5% for staff and 3% for employers, totalling 8%. This will obviously, have an impact on the staffs’ take home pay.

The actual amount that each party has to pay will depend on the actual scheme that the employer is running and the type of tax relief applied to it. This information should be available on the documentation provided by your scheme provider you the employer.

There is some speculation that, as a result of the potential “hit” to workers take home pay, there will be an increase in employees opting out of the scheme thus defeating the Government’s aim in increasing the number of people making provisions for their retirement. In 2108, when there was a previous increase in minimum contributions, 0.7% of people stopped their payments into the pension. The Government has said that it will monitor the situation after the increase comes into play.

The employer should make all employees aware of the upcoming changes so that there are no surprises in the payslip after 5 April 2019. When considering the income on which the pension is to be paid into most schemes you need to consider the usual sources of income including:

• Salary/wage

• Overtime

• Bonus

• Commission

• Statutory sick and maternity pay

• Paternity pay

It is the employer’s legal duty to make sure that they are making the correct minimum payments under the Pensions Act 2008.

Your scheme provider or manger should have more information about auto-enrollment and the upcoming changes. They will be able to assist you in calculating the new contributions and provide any information that you need.

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