We provided a number of options to our poll question, “How do you inform your employees of phased increases to automatic enrolment pension contributions?” Of the 327 responses we received, the majority (46%) send a personal letter to their employees to inform them of the increases. 12% use a company newsletter and an equal number (7%) use either their company intranet or payslip to convey the increase in pension contributions. The remaining 17% use a stock letter, staff meeting or reward event to inform their employees. Are the 11% of employers who do not communicate changes at all, causing themselves more work in the long run? Those employees who notice a reduction in take home pay are surely going to go straight to the person who administers their pay to ask why this is and more likely than not, opt out of staying in their workplace pension.
It is not too late to write to staff to let them know about the increase in contributions - letter templates are available on TPR’s website, including in other languages for staff who may not speak English.
10 million people are now newly saving or saving more, thanks to the roll out of automatic enrolment. In addition, by successfully meeting their duties, more than 1.4 million employers, with the support of the pensions industry and advisers, have helped to change the savings landscape.
As the latest Compliance and Enforcement bulletin (October to December 2018) from The Pensions Regulator shows, there is still some work to do to ensure that members’ pensions savings stay safe:
Darren Ryder, TPR’s Director of Automatic Enrolment said in a recent blog:
“…Over the past seven years since automatic enrolment began, we’ve heard in our conversations with employees that they’re pleased they have been put into a pension. We’ve also heard over and over again that they probably wouldn’t have joined a pension themselves. They are glad it was done for them. Now, people are continuing to save and to save more. Inertia has been a powerful factor and in no small part explains the success of automatic enrolment. But we can’t always rely on inertia. We want people to actively appreciate the benefits and necessity of saving. We want savers to get to know their pension and decide what they’ll need to save to be able to look forward to their retirement.
Increasing engagement and knowledge means giving people easy access to information they need…”
Are you prepared for 6 April?
By law, the total minimum contributions your organisation must pay into its staff workplace pension schemes increase on 6 April 2019. You need to be ready for this increase, and make sure you’re set up to pay the correct amounts into staff pension schemes - so you comply with the law, and your staff receive the pension payments they’re entitled to.
From 6 April, the total minimum contribution including employer and employee payments must be no less than 8% of qualifying earnings. Your organisation must pay a minimum of 3%, with staff making up the rest of the 8%.
Your organisation can choose to pay more than its 3% minimum contribution if it wishes. If so, staff won’t need to pay in as much to meet the total minimum contribution of 8% of qualifying earnings.
Total minimum contribution
Employer minimum contribution
Staff contribute the remainder
Date effective
Current rates 6 April 2019
5% 8%
2% 3%
Up to 3% Up to 5%
You should be ready to calculate contributions using the new rates the first time you run payroll from 6 April.
Your organisation may have agreed with its scheme provider to calculate minimum contributions in a different way. This is called certification, and details of what they need to do can be found on TPR’s website.
It should be simple for the new rates to be applied, but you should prepare now by speaking with your payroll team and software service providers, to make sure your systems are ready.
If your organisation already contributes more than the total minimum of 8% into staff workplace pension schemes, or it uses a defined benefit (DB) scheme for automatic enrolment, it doesn’t need to take any action. And if any staff asked to be put into a scheme that your organisation doesn’t pay into, the increases don’t apply to them.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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