Are You Aware of Auto Enrolment Minimum Contribution Rise?
Research from Scottish Widows has revealed misunderstanding around minimum contributions people make to remain compliant with auto enrolment.
At present, minimum contributions are set to 2%, with 1% coming from the employee, and the other 1% from the employer. However, research from Scottish Widows has revealed that over two thirds of employees – 68% of people – do not realise that from April 5th 2018, these contributions rise to a new minimum, and do so again from April 6th 2019. The research was conducted earlier this year from a pool of 5,000 people and the results were revealed earlier this month.
A breakdown of the increases is provided below.
Up to April 5th 2018, 2% of qualifying earnings must be paid as minimum contributions. This is made up of 1% each from both the employee and employer.
Between April 6th 2018 and April 5th 2019, the minimum contributions rise to 5% minimum, with 2% from the employer and the remaining 3% coming from the employee.
The final phase of the Workplace Pension Reforms sees the minimum contributions rise once again. From April 6th 2019 onwards, the minimums are set to 8% in total, with the employer contributing 3% and the remaining 5% coming from the employee.
For each of the three phase increases, the employer contributes 1%, 2% and 3%, with the employee making up the rest to meet the minimum requirements. However, the employer can chose to pay more and reduce the amount that the employee needs to pay to meet the requirements.
These increases are nothing new, they’ve been part of the plan for auto enrolment all along, but this research from Scottish Widows highlights that perhaps communications are not as effective as the could be.
David Holton, Director of Pension Propositions at Scottish Widows, said: “The industry and employers alike need to continue encouraging all workers by providing them with ongoing support on the benefits of being more engaged with longer term savings.”
Scottish Widows did reveal that despite this lack of awareness, only 3% of people who took part in the research stated that they plan to opt-out, perhaps revealing an appetite among employees to save for their retirement despite the additional financial pressure.
What Are You Doing to Prepare?
Payroll World wrote earlier in October about not only how employees will be preparing for these increases, but also about how businesses intend to manage the calculations and payments. With the IRIS AE Suite™, these worries would be non-existent. Developed though close relations with The Pensions Regulator, pension providers – including Scottish Widows – and customer feedback. Used by over 7,000 businesses of all industries and sizes across the UK to process auto enrolment for over 600,000 employees, it stands as the industry’s most comprehensive AE solution.
For a free software demonstration of the IRIS AE Suite™, simply click below to arrange a time and date that fits with your schedule and see the benefits of the Suite today.