As an SME, are you ready for the auto-enrolment contribution increases?
Auto-enrolment minimum contributions are set to increase by law from the current minimum rates on 6 April 2018, with a second phase due on 6 April 2019. This means that auto-enrolment contributions must increase to the new minimum levels, to ensure that your pension remains as a qualifying scheme.
Clearly, SMEs should be planning how to incorporate the additional costs within their overall remuneration strategy and budgets. If the work hasn't started on this, you should get onto it straight away. The pensions regulator website can provide you with the information you need on contributions going forward.
You should also be looking to communicate with your members, so that they understand what is happening and how it will affect them. When members were first automatically enrolled, they would have received a letter either from you or your pension provider. This would have confirmed that contribution levels will increase over time. So whilst you are not obliged to notify them now, we believe it makes sense to do so, to help minimise disruption and queries.
For SMEs and organisations who are applying the minimum statutory contributions based on qualifying earnings, applying the increases will be relatively straightforward through your payroll software or payroll provider. Remember, these are statutory increases and need to be applied to help avoid possible fines from the Pensions Regulator.
Similarly, for SMEs and organisations who currently have contribution levels in excess of the increases due, in their contractual enrolment and qualifying pension schemes, no further action will need to be taken.
However, some SMEs may not be currently applying the minimum statutory contributions based on qualifying earnings. In these cases, decisions need to be made.
For example, if your current employee contribution rate is 0% and employer rate is 2% of qualifying earnings, do you intend keeping the same scenario in place by increasing the employer rate to 5% from April 2018 to ensure compliance, or do you intend to look to get your employees to start contributing from this point?
By this stage, most SMEs will have the whole process in hand. However, if you need any last minute advice or support, contact Kellands Corporate today.