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13 Mar

Are you prepared for auto-enrolment changes in April 2019?

 

Is your company prepared for the new auto-enrolment requirements coming into play in April 2019? 

Since its introduction in 2012, auto-enrolment has redefined the pensions saving landscape. According to data from the Pensions Regulator, it's brought a total of 9,937,000 people into auto-enrolment schemes to date. 

Currently, minimum contribution for employers is 2% of an employee’s qualifying earnings, however this will rise to 3% in 2019/20. Meanwhile, employees must put in 3%, which will rise to 5% from April 2019.

If your company is currently part of an auto-enrolment scheme, and are unsure about how this change may affect you, we’ve put together a small list of the some of the main points you’ll have to consider before April 2019. 

Check current scheme rules

As a first step, you should check what your scheme rules currently say about minimum compulsory contributions, as some arrangements may already meet the legislative standard applicable from 6thApril 2019 onwards. 

Some schemes may also have already “hardwired” the contribution increases into their governing documentation. 

Decide how you will meet the rise in contributions 

As the automatic enrolment legislation does not require minimum employee contributions as such, it is up to you to decide how to bridge the gap between your minimum contributions and the total minimum contribution requirements. For example, looking at both ends of the spectrum, either you could ask the employee to make up the difference between the two amounts or, alternatively, you could bear the entire cost. There are also several variations in between.

Requirement to consult

If you are increasing member contributions to a DC arrangement, you will generally need to consult all affected members and ensure they are happy to go ahead with the increase if you haven’t already done so. 

Documentation

It may be necessary for the pension scheme’s governing documentation to be amended to deal with the increase in minimum contributions. In addition, the scheme’s trustees will have to revise their payment schedule which, among other matters, sets out the rates of contributions payable towards the scheme by or on behalf of your company and the active members.

Payroll

Finally, you must ensure that your payroll systems are prepared to calculate and deduct any change in contributions. 

 

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