Employer auto enrolment pension contribution set to double with effect from 6th April 2018

15th March 2018

 

All employers and employees currently paying the minimum contribution of 1% will have to factor contribution increases into their cashflow in order to meet the rise in the level of auto enrolment funding.

From 6 April 2018 to 5 April 2019, the employer minimum contribution will increase to 2% with staff contribution equalling 3%. This will rise again in the year to 5th April 2020.

The contribution levels continue to rise until the employer is paying a minimum of 3% towards the pension and the total minimum contribution reaches 8% – with the member of staff making up the balance.

If the employer pays the total minimum contribution the staff member will not need to pay any contributions unless the scheme rules require a contribution.

Both the employer and staff member can choose to contribute a higher amount to the pension if they wish.

If the employer contributes more than their required minimum amount – but less than the total minimum amount – then the staff member only needs to make up the shortfall between the total minimum and the employer contribution.

The table below shows the phases of contribution increases with the employer paying only their minimum and the staff contribution being the difference between the total minimum and the employer minimum:

Date                           Er minimum contribution         Ee contribution              Total minimum contribution

Until 5 April 2018                               1%                                          1%                                          2%

6 April 2018 to 5 April 2019            2%                                          3%                                          5%

6 April 2019 onwards                       3%                                          5%                                          8%

Automatic enrolment pension schemes with contribution rates below the minimum amount (after the rate increases) must apply the higher rates in order to remain a qualifying scheme.



 
Other items in Blogs
 
Lucy Bayliss
8th January 2020 It’s the final countdown!

There are only 23 days until the self-assessment tax return deadline of 31 January 2020. If your return is not filed electronically by this date, an automatic £100 penalty will be applied. Please note that the deadline for filing a paper tax return was 31 October 2019 and therefore all returns are required to be…

Read More »

Vanessa Pearson
13th December 2019 April 2020 Proposed IR35 changes: Status appeals process

As the planned changes to who determines IR35 status are fast approaching, contractors would be well advised to review their contracts on HMRC’s updated CEST (Check Employment Status for Tax) tool. Having provided answers to questions regarding substitution, control and nature of the work, the updated tool will give HMRC’s view of the workers employment…

Read More »

Ben Kilby
12th December 2019 VAT Surcharge

Have you or your business received one between 23 April 2018 and 31 January 2019?   If so, you may want to check if it has been dated. If it has not been dated you may be in for a refund. Any surcharge liability notice or surcharge liability notice extensions are invalid if they have…

Read More »

Lucy Bayliss
25th November 2019 Don’t let your tax bill affect your festive joy. Instead, spread your tax payments throughout the year!

With the festive period fast approaching, it is easy to lose sight of your self-assessment tax return!   If you are employed or receiving a pension and you file your return before 30 December 2019, you can elect to have your tax collected through ‘Pay As You Earn’ (PAYE) rather than paying one lump sum…

Read More »

Ian Piper
22nd November 2019 2019 Growth: Missing in action?

(Data Source) As another year draws to a close, local SME businesses will be forgiven for looking forward to drawing a line under it. With 2019 sales growth barely nudging 1%, it has been a year of focusing on not slipping backwards, rather than the usual mantra of continually signing up new accounts.  When commentators…

Read More »

Mark Burrows
21st November 2019 Avoiding Self Assessment Tax Scams

HM Revenue & Customs have reminded Self Assessment taxpayers to watch out for fraudsters as the tax return filing deadline of 31 January approaches.   HMRC say they have received nearly 900,000 reports of suspicious phone calls, texts or e-mails from scammers pretending to be the tax authority.  Most of these messages were about fake…

Read More »