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Auto-enrolment contributions – changes to phasing in of minimum contributions

It has recently been confirmed that the timetable for phasing in of contributions for automatic enrolment will be altered later this year. This will need to be monitored along with other relevant limits to ensure that employers are complying with the regime.

The key to compliance with the automatic-enrolment regime is ensuring that the correct level of contributions are made to a qualifying scheme at the correct time for eligible employees.

In the interests of simplifying administration of this, there is going to be a change made to the phasing in of minimum contributions.

Changes to phasing in of minimum contributions

Regulations have recently been published, coming into force later this year, which alter the dates on which the minimum contributions required will need to be increased.  The phasing in of these increases will be as follows:

  • From the employers staging date until 5 April 2018 (previously 30 September 2017) the statutory minimum contribution for an employer is 1% of a jobholder's qualifying earnings.
  • From 6 April 2018 to 5 April 2019 (previously 30 September 2018) the statutory minimum contribution for an employer is 2% of a jobholder's qualifying earnings.
  • From 6 April 2019 (previously 1st October 2018) the statutory minimum contribution for an employer is 3% of a jobholder's qualifying earnings.

The new phasing dates align with the tax year, with the intention being that this will be administratively easier for employers and scheme providers.

Annual review of automatic enrolment triggers & earnings band

In addition to monitoring changes to the minimum contributions level, there are a number of factors relevant for auto-enrolment purposes that need to be monitored to ensure that the correct employees are automatically enrolled and that the correct level of contributions is paid for them.

Earnings trigger

The earnings trigger, which is the amount that a jobholder must earn in order to be eligible to be automatically enrolled is £10,000 for the tax year 2016/17.  This figure has not been increased since the start of tax year 2014/15.

Qualifying earnings band

Automatic enrolment contributions require to be paid on a band of earnings referred to as the qualifying earnings band.

The qualifying earnings band is reviewed annually. For the 2016/17 tax year the lower and upper band limits are as follows: 

  • Lower end of qualifying earnings band - £5,824 (no change from 2015/16 tax year) 
  • Upper end of qualifying earnings band - £43,000 (increased from £42,385 for 2016/16 tax year) 

Action for employers

It is important that employers monitor and update their systems appropriately to accommodate for the changes described above.  Any changes which will impact on forward financial planning and should be taken into account.

If you have any questions or would like more information, please contact a member of our specialist pensions team.

Author: Vicki Thomas

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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