What's changing - and what does it mean for you?

  • The minimum contributions that are required to be paid into a Qualifying Workplace Pension Scheme (QWPS) increased on 6 April 2019
  • Employers have a legal responsibility to ensureright contributions are paid for their employees
  • Depending on how much you pay in now, you and yourmay need to contribute more to your workplace pensions scheme in order to comply with these regulations

Here is what you need to do

If your current contribution structure isn’t already covering the minimums required from 6 April 2019.

1

Decide your contribution structure

Your contribution structure must meet the new statutory minimum amounts - these will vary slightly depending on the pensionable pay definition that you use:

Previously 6 April 2018 - 5 April 2019 Now 6 April 2019
Employer minimum 3% 4%
Employee* 3% 5%
Total minimum contribution 6% 9%
Previously 6 April 2018 - 5 April 2019 Now 6 April 2019
Employer minimum 2% 3%
Employee* 3% 4%
Total minimum contribution 5% 7%
Previously 6 April 2018 - 5 April 2019 Now 6 April 2019
Employer minimum 2% 3%
Employee* 3% 5%
Total minimum contribution 5% 8%
Previously 6 April 2018 - 5 April 2019 Now 6 April 2019
Employer minimum 2% 3%
Employee* 3% 5%
Total minimum contribution 5% 8%

*An employee minimum applies if the total minimum is not covered by the employer. The employee minimum is the difference between the total and employer contribution rates.

  • Both you and your employees can choose to pay more than the minimums
  • You can choose to cover the total minimum

Download our employer guide for more information (PDF, 246KB)

2

Consult with your payroll provider

  • You should speak to your payroll provider well in advance
  • You will need to understand their process for phasing and what support they can provide, so that the correct amounts are calculated and deducted at the right time

3

Choose when to increase

  • By 6 April 2019, you should have increased contributions to meet the new statutory minimums
  • Most employers are expected to make changes at the start of a pay period (on or before 6 April) to avoid pro rata increases
  • You may also want to increase before the deadline so phasing contributions is more convenient for you (for example, to align with your company year-end date or to avoid more work around tax year end)

Any decision to increase contributions earlier than the contribution phasing dates may require employee consultation. Standard Life cannot give advice on this, so if the employer is in any doubt, they should consult an employment lawyer on this matter.

4

Write to your employees

We believe that contribution phasing is an opportunity to help members take the right next step for their retirement and make sure they value the money paid into their pension.

We’ve produced letter templates that you can use to let your employees know about the changes you have made. These templates have been extensively tested to make sure the messages are clear and land positively with employees.

Download our letter templates (PDF, 74KB)

In addition, we have created our new ‘Ready to Go’ campaigns, these posters and flyers will help you communicate your auto enrolment changes.

Download our Ready to go campaigns (PDF, 77KB)

To help your employees understand how much might need to save so they reach their retirement goals, we've also got online tools to help.

5

Recertify your scheme

If you are using a pensionable pay definition other than qualifying band earning, you will need to produce a contribution certificate. The Department of Work and Pensions produced guidance which contains a template and a high level step by step guide.

Download guidance from DWP (PDF, 332KB)

6

Update your schedules

  • When increasing your contributions, you (or your payroll provider or adviser), should update your payment schedule to reflect your new contribution then login and submit this as normal.

* If you normally follow our renewal process, make sure you update your renewal schedule - our Renewal Schedule Guide will take you through the process.

Download our renewal schedule guide (PDF, 512KB)

* If you have a master trust scheme and need us to update your legal documents, make sure you complete and return the form using the self-addressed envelope included with the letter we sent you.

Download our scheme contribution basis form (PDF, 100KB)

An annual review of contribution rates is good practice.

Download our employer guide for more information (PDF, 246KB)

7

Frequently asked questions

Contribution phasing impacts new and existing employees. It also impacts you as an employer.

You must contribute at least the employer minimum amount required.

New employees need to be joined to a QWPS with a contribution rate that at least meets the total minimum contribution rate that is required at the time. Statutory opt out rules apply.

Contribution phasing impacts the existing population of employees in a number of ways. Those members who are in the scheme on a qualifying basis are subject to meeting the minimum contribution requirements. If they are not meeting the minimums they must be phased up.

Existing employees who are not qualifying or entitled workers do not need to be increased. Cyclical re-enrolment rules apply as usual. Employers may voluntarily decide to increase contributions anyway because of the requirements of employment contracts, fairness to staff or from an administration point of view.

An employee could ask for contributions to be reduced or stopped - sometimes called ‘soft opt out’, ‘levelling down’ or “opting down”. Unlike the statutory one month opt out when they were first enrolled, plans will not be fully terminated and contributions paid to date would not be refundable.

You are under no obligation to accept a request from the employee to pay less than the minimum amounts.

Some employers may allow it however this should not be promoted in any way. You legally cannot encourage this. It is important to note that you must not induce employees to reduce their contributions to below the statutory minimum level. To do so could be perceived as a breach of the safeguarding rules.

If an employee wants to pay below the mandatory minimum contribution levels and if the employer allows it then these employees stay in the scheme on a non-qualifying basis. In doing so, they forfeit the right to mandatory employer contributions.

The employer will need to keep a record of all employees who have chosen to reduce their contributions to below the minimum. These employees are now in the scheme on a non-qualifying basis. Cyclical re-enrolment rules apply as usual.

You and the employee would need to agree on one of these options

  1. The employee pays what they can afford and you continue to pay the employer minimums
  2. The employee pays what they can afford and you pay less than the minimums (or nothing at all)
  3. Both you and the employee stop paying into the scheme

Under all these scenarios, the employee remains in the scheme. If contributions are made it will be on a non-qualifying basis. You and the employee need to document what you have agreed.

All employers need to meet the mandatory minimum contribution levels that are required to be paid into their QWPS. The process by which the members were joined to the scheme doesn't matter - whether it was through auto enrolment, contract of employment or they may have been joined to the scheme before auto-enrolment came in. The increases must be applied to members who are in on a qualifying basis.

It's our duty to monitor compliance and report non-compliance to the Pensions Regulator. The regulator can choose to fine and/or take legal action against employers who do not comply with their duties.

You'd have to back date and repay any missed/delayed payments to make sure your employees are no worse off.

We'd expect most employers to use their payment schedule (one-off payment option) to pay all arrears at once. They'll also need to write to employees and explain what has happened and how they are fixing it.

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