What are the most recent changes to the minimum pension contributions?

As of 6th April 2019 the minimum contribution to an employee’s pension scheme has risen from 5%, with at least 2% from the employer, to 8%, with at least 3% from the employer. This is a substantial increase and hence will have a notable effect on your employees take home pay packet.

The majority of employees will have been contributing 3% of their pay to their pension and from 6th April this has jumped to a contribution of 5%- making their April pay appear less than before. Please be aware that these percentages can change depending on if you (the employer) contribute the minimum amount to the pension scheme as required by the new regulations. This decrease in take home pay may raise some queries from staff, so it is important as the employer to explain that in reality their pay has increased and now more money is entering their pension. With a pension, it is advised to start contributing to it as early as you can, and obviously contribute as much as you can, so younger employees should not be put off from staying enrolled in the scheme.

As an employer, can I give advice about the scheme?

As the employer, you are unable to advise your employees to enter or leave the scheme, however, you can provide them with all the information about the scheme and how it affects them, helping them to make an informed decision on their enrolment.

The main points to make your employees aware of are the following:

• It is an opportunity to boost your pension savings through your pay packet in a workplace pension scheme – with the added bonus of your employer and the Government making contributions.
• You are automatically enrolled in the scheme, the default is to be opted-in, hence you must take action and request to be opted-out.
• It is possible to drop out of the scheme for a few months and then re-enrol to suit your spending/financial needs.
• The contribution is taken from your pre-tax salary, so it actually costs you less than it sounds.
• To be automatically enrolled in the scheme you must be over 21 and earn over £10,000 a year.
• The money will be held by your pension provider and you won’t be able to access it until age 55.
• Overall, it’s a pay rise but with less take home pay.

How can MSP help?

At MSP, we have a great Payroll team who can assist you with your pension administration and make life a little easier. For further assistance please contact our Head of Payroll Kate Furley on 01252 733683 or at Payroll@mspsecretaries.co.uk