The next increase in Automatic Enrolment (AE) pension contributions for both employees and employers will take place from 6 April 2019.
The minimum employer contribution will increase from two per cent to three per cent, while the employee contribution will rise from three per cent to five per cent – taking the total minimum contribution from five per cent to eight per cent.
The minimum contribution only applies to employees earning £10,000 a year or more and percentage contributions will be calculated using only the employee’s earnings between £6,136 and £50,000 from April. This is an increase from the existing income threshold of £6,032 to £46,350.
For the purposes of AE pension contributions, earnings include:
- Statutory sick pay
- Statutory maternity pay
- Ordinary or additional statutory paternity pay
- Statutory adoption pay
It is important to ensure that your payroll processes take account of the changes, as the penalties for non-compliance can be steep.