Minimum contribution levels are increasing

By law, the minimum contribution levels for auto-enrolment, will increase again from 6 April 2019. We can help you to prepare.

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) will increase on 6 April 2019 (previously changed on 6 April 2018). This is known as Contribution Phasing
  • Employers have a legal responsibility to ensure the right contributions are paid for their employees
  • Depending on how much you pay in now, you and your employees may need to contribute more to your workplace pensions scheme

Here is what you need to do

(if your current contribution structure isn't already covering the minimums required from April 2019)

 

1. Decide your new contribution structure

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

Basic pay

Total pay

Qualifying band earnings

Own definition (at least equal to basic pay and 85% total pay)

    *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 guide for more information

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're producing letter templates that you can use to let your employees know about the changes you'll be making. These templates have been extensively tested to make sure the messages are clear and land positively with employees.

See 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. 

See 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. 

6. Update your schedules

  • When you are ready to increase 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 (PDF, 512KB) will take you through the process
  • If you have a master trust scheme and need us to update your legal documents, make sure you complete and return the form (PDF, 100KB) using the self-addressed envelope included with the letter we sent you

An annual review of contribution rates is good practice.  Read our guide (PDF, 362KB) for more information about this.

FAQs

Who is impacted by contribution phasing?

Can an employee pay less than the minimum contribution requirements?

What are the options for me if an employee proactively asks about reducing their contributions?

What if I'm using contractual enrolment rather than auto enrolment?

What happens if I don't apply the changes before the deadline?

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