Employers and their advisers should be aware that meeting their duties late or failing to set up a scheme as soon as they employ eligible staff, will not save them money. This is because contributions will need to be backdated to the date they first employed staff.
On-going duties
Automatic enrolment is not a one off-task – employers also have on-going duties. This means they must continue to assess staff and keep records.
Every three years, employers must automatically enrol staff who initially opted out back into a workplace pension. They must then complete a redeclaration of compliance within five months of the anniversary of their staging date. Between now and the end of the year, 12,000 employers are due to complete their re-declaration of compliance.
Research shows that 96% of employers surveyed said they were confident they are successfully meeting their on- going duties. They also said that automatic enrolment was easier than they expected.
Increases in contributions
By law, on 6 April 2018, all employers are required to increase their contributions into their staff's automatic enrolment pension to at least of 2%. Staff contributions will also increase so that their contributions make up the shortfall needed to bring the total minimum contribution up to 5%.
Contribution levels will rise again on 6 April 2019, with employers paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% - with staff making up the 5% difference.
The table below shows the minimum contributions employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on earnings between £5,824 to £43,000 per year (£486 to £3,583 per month, or £112 to £827 per week), and including certain elements of pay.
Employer minimum contribution
Total minimum contribution
Date effective
Staff contribution
Until 5 April 2018
1%
1%
2%
6 April 2018 to 5 April 2019
2%
3%
5%
6 April 2019 onwards
3%
5%
8%
Compliance and enforcement
While compliance with the law remains high, there are a small minority of employers who fail to meet their duties. TPR will take action to ensure staff receive the pensions they are entitled to.
Our quarterly compliance and enforcement bulletin shows where we have used our powers, and the rolling list of employers who have paid an escalating penalty notice but remain non-compliant. The list features both small and multinational companies, with county court judgments secured by TPR for fines up to £52,500.
TPR will consider taking additional enforcement action against employers who remain non-compliant, including prosecution in appropriate cases in accordance with TPR’s published prosecution policy.
For information and guidance on what employers need to do to meet their duties, and by when, visit TPR's website
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Template letters for employers to explain auto enrolment increases to staff 3 October 2017
Before 6 April 2018 employers will need to take steps to make sure automatic enrolment increases are implemented. Employees also need to be well informed to avoid any unnecessary payroll queries.
The following steps need to be implemented before 6 April 2018 and also need to be repeated before 6 April 2019. The Pensions Regulator (TPR) recommends that you start this process early, as this may take some time.
1. Work out which increases apply to you.
The Chartered Institute of Payroll Professionals
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