All employers are now required to offer employees access to a qualifying pension scheme.
Auto –enrolment is required for all employees age between 22 and state pension age who have earnings in excess of £10,000. Employers are required to provide access to a scheme into which are paid minimum contributions at a specified % of qualifying earnings - defined as gross pay between £6,136 – £50,000 from 6th April 2019.
Most employers choose to meet their auto-enrolment obligation by enrolling employees in a defined contribution (DC ) scheme
The minimum %’s of qualifying earnings to a qualifying DC scheme is 8% from 6th April 2019, of which at least 3% must be an employer contribution (which would mean the employee was required to pay 5%).
Minimum contribution %’s
What this means is that if the employer does pay the Minimum % then the contribution required from the employee will rise from 3% in April 2018 to 5% in April 2019.
If an employer has a DC scheme with pensionable earnings defined differently to qualifying earnings then the % rates can differ e.g. if all earnings are pensionable then the total requirement from April 2019 could be 7% and the employer minimum 3%, or if only basic pay is pensionable then the %’s would be 9% of which 4% would have to be paid by the employer.
Employers can satisfy the auto-enrolment requirement by offering a defined benefit (DB)scheme which meets minimum prescribed requirements.
(Advice on a strategy to deal with increasing contributions can be found under the Defined Contribution tag on the website –‘Time to review your DC Scheme’)