By Ashley Preen
April 7, 2017
Auto-enrolment has been proposed to support employees to ensure that are automatically registered to join a workplace pension scheme. The new framework will also provide an easy solution for small businesses that have only begun to provide their employees with a pension scheme. Both workers and employers can make contributions to their workplace pension.
There are certain guidelines as to the minimum contribution an employer must contribute to an employee’s workplace pension based on an employee’s ‘qualifying earnings’.
However Auto-enrolment does not occur in the following situations:
For the 2017-2018 tax years, an employee will contribute a minimum rate of 1% of their earnings over the threshold of £ 5,876 up to the £45,000. A rise in the minimum contribution rate will occur over the next two years. This rate will rise to 3% in April 2018 and then 5% in April 2019 if approved by Parliament (see table below).
If an employee is not Auto-enrolled then they can be re-assessed every month once their employers pension scheme is up and running. If they choose not to be registered into a workplace pension scheme, then they need to inform the pension company itself in writing as well as their employer. After 3 years, they will be re-assessed and if they meet the criteria for Auto-enrolment then they will be automatically registered for a workplace pension scheme.
Phasing Period | Employer Minimum contribution | Total Minimum contribution |
---|---|---|
Before 5 April 2018 | 1% | 2%(including 1% staff contribution) |
6 April 2018 to 5th April 2019 | 2% | 5%(including 3% staff contribution) |
6 April 2019 onwards | 3% | 8%(including 5% staff contribution) |