By now, almost every company and individual employing staff in the UK has had to come to grips with the requirements of Pension Automatic Enrolment.

If you have a new payroll then this problem may still await you at the start of 2018.

This paper does not deal with the advantages and disadvantages of Automatic Enrolment or the problems in choosing the appropriate Scheme provider. It is limited to the minimum cost option available to Employers.

Many schemes have been set up to only pay pensions on the band of income where employees pay the basic National Insurance contributions and at the minimum contribution level of 1% by the employees and 1% by the employers.

Contribution rates

These rates were always intended to rise over time but with so many other regulatory matters to keep up to date with, it seems that this is the appropriate time for a reminder of the imminent increases as set out below.

Date Employer minimum contribution Total minimum contribution
Employer’s staging date to 05/04/18 1% 2% (including 1% staff contribution)
06/04/18 — 05/04/19 2% 5% (including 3% staff contribution)
06/04/19 onwards 3% 8% (including 5% staff contribution)

What if a member of staff decides they can’t afford the increased contribution?

If a member of staff decides that they do not wish to pay the increased levels which reach 5% by 6 April 2019 then they can opt out at any time and the Scheme provider will have given guidance on how this is achieved.

However, the employee cannot gain a repayment of the pension contributions paid to date.

This option is only available during the first month after each individual has been enrolled in to the Pension Scheme.

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