Employment News

News added on 28.01.2019

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Automatic enrolment

Forthcoming changes to the pensions automatic enrolment regime

The government has decided that the automatic enrolment earnings trigger will again remain at £10,000 for tax year 2019/20. However, other aspects of the pensions auto-enrolment regime are to change from 6 April 2019.

The earnings trigger determines at what point an eligible worker is entitled to be automatically enrolled by their employer into a workplace pension scheme and for the past few years it’s been frozen at £10,000. The draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019 has now been laid before Parliament and, if approved, it confirms that the earnings trigger will again stay at £10,000 for tax year 2019/20.

However, the qualifying earnings band is to increase. The qualifying earnings band sets minimum contribution levels for money purchase pension schemes. The minimum of the band is also relevant for defining who can opt in to a workplace pension scheme if they earn under the earnings trigger. The draft 2019 Order provides for the qualifying earnings band to continue to be aligned with National Insurance contribution rates for tax year 2019/20, i.e. the lower limit of the band will increase from £6,032 to £6,136 and the upper limit of the band will increase from £46,350 to £50,000.

In addition, from 6 April 2019, the employer’s minimum contribution into their auto-enrolment workplace pension scheme will increase from 2% to 3% of qualifying earnings and the total minimum contribution will increase from 5% to 8% of qualifying earnings. As workers must make up the shortfall of whatever remains of the total minimum contribution after taking account of the employer’s contribution, it means that a worker’s minimum contribution will therefore increase from 3% to 5% of qualifying earnings if the employer only pays their required minimum contribution. However, if the employer contributes more than their required minimum amount but less than the total minimum amount, then the worker only needs to make up the difference between the employer contribution and the total minimum. All auto-enrolment pension schemes with contribution rates that would be below the minimum amount after the rate increases must apply the higher rates to remain a qualifying scheme.

Although the earnings trigger is being frozen, the lower and upper limits of the qualifying earnings band are to increase from 6 April 2019 to £6,136 and £50,000 respectively. The qualifying earnings band sets minimum contribution levels for money purchase pension schemes. In addition, the minimum contribution levels themselves are to increase from 6 April 2019 from 2% to 3% of qualifying earnings for employers and from 3% to 5% of qualifying earnings for workers, making a new total minimum contribution of 8%.

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