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Automatic Enrolment: Increase to Minimum Pension Contributions

The minimum pension contributions under auto enrolment (qualifying pension schemes) increased in April 2018 and will increase again in April 2019.

Minimum total contribution under qualifying earnings
From 6 April 2018 5%
From 6 April 2019 8%

These minimums apply where employers are using at least qualifying earnings as the basis of calculating pension contributions. Qualifying earnings for the 2018/19 tax year are earnings between £6,032 and £46,350.

Employers can choose to pay some or all of employees’ element of the minimum contribution, e.g. employers could pay 5% of qualifying earnings from April 2018 with no contribution required from employees. Employers and/or employees can choose to pay more than the statutory minimum contribution.

The table below shows the minimum contributions employers must pay under the qualifying earnings basis and the dates when they must increase:

Date effective Employer minimum contribution Employee contribution Total minimum contribution
To 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

Employers can choose to calculate minimum contributions on one of three alternative bases. The tables below show the minimum contributions employers and employees must pay under each basis and the dates when they must increase:

Set 1 – Pensionable pay at least equal to basic pay
Date effective Employer minimum contribution Employee contribution Total minimum contribution
To 5 April 2018 2% 1% 3%
6 April 2018 to 5 April 2019 3% 3% 6%
6 April 2019 onwards 4% 5% 9%
Set 2 - Pensionable pay at least 85% of total earnings
Date effective Employer minimum contribution Employee contribution Total minimum contribution
To 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%
Set 3 – Pensionable pay equal to total earnings
Date effective Employer minimum contribution Employee contribution Total minimum contribution
To 5 April 2018 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 4% 7%

What action should employers take?

You should check your current levels of contributions against the April 2018 minimums. If your pension scheme is currently meeting these new minimum contribution levels then no action is required. If the contribution levels do not meet the April 2018 minimums then you need to consider the following:

  • How will the minimum contributions be met?
  • How will increases be communicated to employees?
  • Are payroll aware of the changes and able to make them?
  • Discuss the changes at your governance meetings.

Support for you

We issued 3 employer awareness letters with information about the changes:

We have also prepared a proposed draft employee communication which can be tailored to suit your employees.

You can visit The Pensions Regulator site www.tpr.gov.uk/increase for more detailed information and guidance or click on our FAQs below. Your Employees can access further support online at www.scottishwidows.co.uk/ae2018