The next increase in Pension Auto Enrolment (AE) contributions will take place from 6 April 2019 for both employees and employers.
The minimum employer contribution will increase from two per cent to three per cent, while the employee contribution will rise from three per cent to five per cent – taking the total minimum contribution from five per cent to eight per cent.
The minimum contribution only applies to employees earning £10,000 a year or more and percentage contributions will be calculated using only the employee’s earnings between £6,136 and £50,000 from April. This is an increase from the existing income threshold of £6,032 to £46,350.
For the purposes of Pension Auto Enrolment contributions, earnings include:
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- Salary
- Wages
- Commission
- Bonuses
- Overtime
- Statutory sick pay
- Statutory maternity pay
- Ordinary or additional statutory paternity pay
- Statutory adoption pay
It is important to ensure that your payroll processes take account of the Pension Auto Enrolment changes, as the penalties for non-compliance can be steep.
Background to Pension Auto Enrolment
Employers must automatically enroll eligible workers into a workplace pension scheme. To be eligible, a worker must be aged between 22 and the State Pension age, earn over £10,000 a year, and usually work in the UK. The employer is also responsible for managing the scheme, completing a declaration of compliance, and re-enrolling staff every three years.
Questions?
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