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2% pension increase for employees from April 2019

Under Auto enrolment 2% increase for employees from April 2019 . Who knows?

This may sem an odd question, but all employees will find a big hole in their take home pay from April 2019 because of Auto enrolment. Their contribution will increase by 2% nominally. In reality for a basic rate taxpayer,[ paying 20% IT and  12% NIC and the current AE contribution of 3%], this will be a reduction of 3% in their take home pay. What are employers doing to prepare for this?

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12th Dec 2018 15:12

Nothing. It's the employees' choice to stay in the scheme or leave. The employer shouldn't be part of that decision in any shape or form - beyond, of course, pointing out that the pension will be going up.

Not sure your calculations are valid anyway, given that the personal allowance will be increasing. Any calculation will depend on the exact earnings, a broad brush approach isn't possible.

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12th Dec 2018 15:27

I'm not sure there's anything to prepare for.

Employers have no choice but to implement the rise and, if they've been keeping up to date with their AE duties, the employees will be aware of the rise so it's entirely their choice whether to keep paying in.

Also, I'm not sure where your 3% comes from. Not least because PA and NI thresholds will change at the same time.

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By Matrix
12th Dec 2018 16:30

Employers who are my clients will be sending out the letters with the increase (generated by me). I am not sure what you are suggesting they do, give a pay rise? They already have to contribute 3%, pay for the submissions and will have to re-enrol everyone shortly just to be compliant.

If employees read the letter then it is all within their control, they can opt out.

People seem to find the money for iPhones and endless lattes so putting some money away for the future is not a bad thing.

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By puzzel
12th Dec 2018 16:39

if the Government get their way, I think a lot will opt out.
Extract from a UK accounting firm:
In December 2017, following a review of the auto-enrolment system by the Department for Work and Pensions, the government proposed to change the lower age limit from 22 to 18 (while maintaining the upper age limit at the SPA). Under the proposals, those aged between 18 and the SPA would be automatically enrolled into a workplace pension scheme if they earned above £10,000 per year. Workers aged 16 to 18 and employees over the SPA would remain eligible to opt into their workplace pension scheme.

The government is also proposing to remove the lower threshold for qualifying pensionable earnings (£6,032 in 2018/19). Under the plans, employers and employees contributing to pensions via automatic enrolment would make contributions from £1 of earnings rather than from the lower threshold.

The government plans to implement the proposals in the mid-2020s.

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By DJKL
12th Dec 2018 16:53

Just wait until the lower thresholds possibly get removed and contributions are based on total salary.

Can't remember when it was suggested this might be but think it was some point in the 2020s, at that juncture all those with staff on limited hours will have to pay as long as the employees do not opt out.

What I find most scary is the number of people these days who do not appear to give any real consideration to what they will live on when they retire, whether pension, ISA, property ,there are vast swathes with no provision.

Frankly if I had been HMG I would have started day one on all earnings (why should someone with four part time jobs get no employer contributions?) and opting out would not have been an option.

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By Matrix
12th Dec 2018 17:50

This all sounds fun and extra admin, enrolling or postponing everyone.

What happens to all these pension pots given people move jobs so often? The impression I get is that employees don't tend to set up logins to the pension providers.

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By DJKL
to Matrix
12th Dec 2018 18:26

I though we were getting a HMG platform where we could view all pensions we had together-or did that also get binned?

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By tom123
to DJKL
12th Dec 2018 20:16

Think it got binned, too hard/brexit etc.

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By tom123
12th Dec 2018 20:18

I stuck the notice from the pensions regulator onto our factory notice board.

That's about it it, really.

We chose to base contributions on full salaries, rather than messing about with bands etc. Having said that, at present we (employer) contribute 3% to the employee's 2%, so a bit of a jump to get to 5% ees.

We haven't really thought yet about the January pay rises though.

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12th Dec 2018 22:04

Personally would not work for a company paying just the minimum contributions.

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