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Author: JP / / Latest News

Pension contribution rates on the rise

If you’ve received a recent letter from The Pension Regulator (TPR), you may be aware that the statutory minimum contribution rates are due to rise for both the employer & worker. This effectively means you’ll be paying more into your workers’ pension pots from the 6th April 2018.

 

With a heavy emphasis from TPR & the government on people saving for retirement, this is a bid to get workers saving more and will be applicable to all employers who have auto enrolment duties.

 

Currently, you are most likely to be paying only 1% as an employer on qualifying earnings (earnings between £5,876 & £43,000 in 2017/18), but will be obliged to pay 2% from 6th April 2018. Each employee will also see an increase to 3% from this date which includes tax relief from the government if applicable.

 

This will be the case until 6th April 2019, when the rates increase a further 1% for employers & another 2% for employees, making a total contribution of 3% & 5% respectively.

 

If you are paying more than the regulatory minimum as an employer, your employees do not need to pay the full contributions. As long as the minimum employer & total contributions are met as set out in the table below you are complying with the legislation.

Pensionable Earnings Period Employer minimum Total minimum
Qualifying Earnings – Earnings between £5,876 & 45,000 (2017/18) Inc. commission/overtime etc. Staging date – 05/04/2018 1% 2%
06/04/2018 – 05/04/2019 2% 5%
06/04/2019 – onwards 3% 8%
Tier 1 – Must be at least basic pay Can Include other payments Staging date – 05/04/2018 2% 3%
06/04/2018 – 05/04/2019 3% 6%
06/04/2019 – onwards 4% 9%
Tier 2 – Must be at least 85% of total gross earnings Staging date – 05/04/2018 1% 2%
06/04/2018 – 05/04/2019 2% 5%
06/04/2019 – onwards 3% 8%
Tier 3 – Must be on all earnings Staging date – 05/04/2018 1% 2%
06/04/2018 – 05/04/2019 2% 5%
06/04/2019 – onwards 3% 7%

 

You will notice there are different specifications of pensionable earnings other than qualifying earnings. If you are using one of these via certification, the relevant minimum contributions are shown.

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