Until now for auto enrolment schemes with contributions based on ‘band earnings’ (also known as qualifying earnings) employer and employee automatic enrolment minimum contributions have totalled 2% of ‘band earnings’, with the employer having to pay at least 1%.
From 6 April this year, the minimum contributions rose to 5%, with at least 2% from the employer.
Where the employer and employee are only paying the minimum required the extra outlay could be significant, especially for employees. Taking someone earning £26,000 a year as an example, the employer contributions will increase 98% from £16.77 a month to £33.28. The employee contributions will rise 198% from £13.42 a month to £39.94.
Further increases happen in April 2019, as the total minimum rises to 8% with at least 3% from the employer. Each April there are generally also tax and NIC changes and changes to the qualifying earnings band, so the impact on employees will be cushioned marginally.
If you would like to discuss how automatic enrolment affects you, then please contact us.
The Financial Conduct Authority does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. Tax laws can change. Occupational pension schemes are regulated by The Pensions Regulator.