You might have heard about the increase in the pension contributions and wonder how that will affect your business, or you as an employee. Both employee and employer will pay more into the pension scheme over the coming years, and the responsibilities of the employer will therefore increase as any mistakes will have more serious consequences. For many business owners, these responsibilities are still quite unclear. On this page, we shall outline the upcoming changes, and ways to deal with the increase in contributions.
The Climbing Contributions
Currently employers and employees are paying a 1% contribution rate into the pension scheme, until the end of the current tax year on the 5th of April 2018. As an employer, you must be pay a minimum rate of 2% into the employee’s pension fund from April 6th onwards. Form this date employees will have to pay a contribution rate of 3% and in 2019 the rate is going to jump to 3% for employers and 5% for employees. For many employers, this could have a noticeable financial impact.
From 06/04/2018 to 05/04/2019
From 06/04/2019 on
Employees and Employers have the right to contribute more towards the pension funds.
Communicating the Increase in Contributions with your Employees
The most important responsibility you have as an employer, is communicating the changes with your staff. The letter your employees received prior to auto enrolment contained a clear explanation on the upcoming increase in the contribution rates, so your employees should be well informed.
However, you may wish to remind your employees about the upcoming increases again, to avoid confusion and to help reduce the number of employees who maybe thinking of leaving the scheme. Communicating these changes could be done by help of your current accounting firm, or payroll service provider that is running your Pension Scheme.
Are you an owner of a SME and looking to hire a specialist to take care of your auto enrolment needs? At The Financial Management Centre we have a wealth of experience when it comes to auto enrolment. We have the tools and knowledge to ensure the adjustment to the auto enrolment rates goes smoothly. Contact your local Financial Management Centre office for more information. Alternatively, use our contact form for more information.