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Proposals for auto-enrolment for 18-year olds by 2020 and increases in minimum pension contributions

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The Department for Work and Pensions (DWP) has proposed that all 18-year-old workers will be automatically enrolled into a workplace pension scheme by 2020.

The current auto-enrolment regime requires employers to enrol workers who are at least 22 years old and earn over £10,000. The new proposals are aimed at “getting more people into the habit of saving” and will see an extra 900,000 workers automatically enrolled in workplace pension schemes.

In related news, the minimum contributions that employers and their staff pay into automatic enrolment workplace pension scheme are increasing in two phases. The first increase must be in place from 6 April 2018 and the second from 6 April 2019.

All employers with staff in a pension scheme for automatic enrolment must take action to make sure at least the minimum amounts are being paid into their pension scheme. This table shows the minimum contributions you must pay and the date when they must increase:

Date Employer minimum contribution Staff contribution Total minimum 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%

 

The staff contribution rate may vary depending on the type of tax relief applied by your scheme. If you are unsure check your scheme documents.

If you would like any advice on this topic, our pensions team are able to assist. Please contact David Smedley or Andrew Rayment.

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