, Senior Employee Benefit Consultant at Scrutton Bland explains more.
Minimum pension contributions will need to increase from April 2019. As a reminder, there are four different definitions of pensionable pay employers can use. The minimum payment you need to make will depend on which definition of pensionable pay you use. These are:
||Pensionable Pay Definition
||Employer minimum contribution
||Total minimum contribution
|From 6 April 2019 onwards
|Set 1 - Basic Pay
|Set 2 - Pensionable Pay*
|Set 3 - Total Earnings
*Set 2 – where pensionable pay is at least 85% of total earnings.
The key three things you need to do now are:
Hopefully you will have already budgeted for the additional pension contribution cost increase to the business. If not, it is important that you consider the cost implications which will arise from these increases.
You should think about a communication strategy for your employees which explains the changes, as they are also likely to need to budget for the increase.
Consider whether your current scheme and pensionable pay definition is still appropriate. Many companies reacted to the initial auto enrolment legislation and put in place a basic scheme with contributions at the lowest possible level, which may not be competitive in the market. Pension contributions are likely to be your biggest employee spend after salary so making sure your employees understand and value your pension scheme is important.