The Workplace Pension Scheme - minimum contribution level to increase from April 2018

Steven High

Steven High

Financial Planner

The automatic enrolment of eligible employees into a Workplace Pension scheme commenced in October 2012. By February of this year, all employers will have reached their staging date and undertaken the required duties.  The scheme has been regarded as a big success with over 640,000 employers having completed their initial duties as at the end of June 2017.

The amount that the employer and employee contribute into the pension scheme will vary depending on the type of scheme chosen and the rules for that scheme. According to the Pension Regulator, most schemes were set up on the Qualifying Earnings basis which currently requires a minimum contribution of 2% per annum to be paid, increasing to 5% in 2018 and 8% in 2019.

The Regulator has been writing to all employers to remind them of the increase from 6th April 2018 and then the further increase from 6th April 2019. This applies whether an existing scheme was used or a new pension scheme was set up.

As an employer you do not need to take any further action if you do not have any staff in a pension scheme or are paying above the minimum amounts. Whilst there is no legal requirement to inform the employees of the increase for the reason that they would have received a letter at the time of enrolment, it would be prudent to advise them of the change as it may have been several years since this communication was issued and pre-empt any questions that they might have in advance of the increase.

If you would like to meet the statutory minimum contribution rate introduced from 6 April 2019 at an earlier date, this is certainly possible, and we would recommend that you speak to the pension scheme provider or your financial adviser to discuss this.

If so, the employer does not have to pay a higher rate to compensate - and under the scheme rules the employer may not have to pay any contributions. If this causes the total contributions to fall below the legal minimum (e.g. 5% in 2018-19), they will become members of a non-qualifying scheme who will then need to be automatically re-enrolled at the appropriate triennial re-enrolment date.

Johnston Carmichael Wealth is a team of Financial Planners who have the expertise to guide clients through the myriad of Auto Enrolment regulations. We offer an annual service to provide employers with peace of mind that they are fulfilling their duties. If you wish to find out more please speak to your local Johnston Carmichael Wealth Financial Planner or feel free to contact Steven High, Financial Planner at