Article by The Pensions Regulator
As you’ll no doubt already be aware, this April will see the start of increased pensions contributions for employers and their staff. The total minimum contribution will rise from 2% to 5% and then to 8% in April next year.
Increasing minimum contributions should be a straight forward task for your clients to do but there are a number of checks they’ll need to make and we encourage them to start in good time. The Pensions Regulator has information alerting employers to what they need to do and pension providers are also providing employers and staff with information.
Tell staff about the changes
While there is not a legal duty to tell staff about the increase, we encourage employers to have information they need about their staff’s workplace pension and how it is changing. Our recent advertising campaign encourages staff to get to know their pension and appreciate its benefits and staff are likely to want to know about the changes.
It’s the law
Nearly one million employers have now enrolled more than 9 million people and staff now expect a workplace pension. Automatic enrolment is creating a new savings culture and the increase in contributions is an important part of the policy to boost retirement outcomes.
We know most employers want to do the right thing for their staff and we are here to help. However we will take action if an employer is not meeting their responisbilities. Failing to make and maintain the correct pensions contribuitons could result in a fine or court action.
It is not enough to just comply with automatic enrolment laws by putting staff into a scheme. Employers must also meet their duties to contribute into their employees’ pensions every month and they must ensure they are paying in at least the minimum.
Pension providers have a duty to tell us if an employer is not maintaining the correct contrbutions and staff can also use our anonymous whistleblowing service if they are concerned the correct payments are not being made.
Three things for employers to check:
- Will their 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.
- Is their 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.
- What are they currently contributing? They 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.
Guidance for business advisers: www.tpr.gov.uk/phase
Guidance for employers including a letter template to tell staff about the changes: www.tpr.gov.uk/increase
For information relating to specific scheme rules, contact the pension scheme provider.
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