Auto-enrolment update for 2019/20

There are some forthcoming changes to the auto-enrolment programme to be aware of.

The government has recently confirmed the auto-enrolment earnings trigger and qualifying earnings bands for 2019/20, following its annual review:

Current and proposed automatic enrolment thresholds

  Trigger Lower limit qualifying earnings band (per year) Upper limit qualifying earnings band (per year)
Current
(2018/19)
£10,000 £6,032 £46,350
Proposed
(2019/20)
£10,000 £6,136 £50,000

 

The auto-enrolment earnings trigger determines who is eligible to be automatically enrolled into a workplace pension by their employer. The qualifying earnings band is the band of earnings in respect of which contributions are made – the band is defined by the lower limit and the upper limit.

The minimum contributions you and your staff pay into your automatic enrolment workplace pension scheme will also increase from 6 April 2019. This table below shows the minimum contributions you must pay:

Date Employer minimum contribution Staff contribution Total minimum contribution
New rate: 6 April 2019 onwards 3% 5% 8%
Current rate: 6 April 2018 to 5 April 2019 2% 3% 5%

So, assuming that you contribute the minimum amount and your PA contributes the rest, how much will these changes cost you? Let us look at an example.

2018/19

Your PA Marcie earns £250 per week. In 2018/19, neither you nor Marcie pay pension contributions on the first £116 of pay, thus you will each pay contributions based on £134 (£250 less £116) each week. You will put £2.68 (2% of £134) into her pension scheme each week. Marcie will put in £4.02 (3% of £134) although, depending on which pension scheme you use, you may only need to deduct £3.21 from her wages – the rest will be paid into her pension pot by the Government as tax relief.

2019/20

Your PA Marcie still earns £250 per week. In 2019/20, neither you nor Marcie pay pension contributions on the first £118 of pay, thus you will each pay contributions based on £132 (£250 less £118) each week. You will put £3.96 (3% of £132) into her pension scheme each week. Marcie will put in £6.60 (5% of £132) although, depending on which pension scheme you use, you may only need to deduct £5.28 from her wages – the rest will be paid into her pension pot by the Government as tax relief.

So, taken together, the changes will mean that you have to pay an extra £1.28 into her pension each week (or £66.56 per year).

We plan to post another news article in the New Year, looking at how to practically implement the increases. Do check back to our website for any updates.

(21-12-2018)