Communicating the minimum contribution increases to clients

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The total minimum contribution rate is due to increase in April 2018 rising from 2% to 5%. On the 6th April 2019, the total minimum contribution rate will increase further from 5% to 8%. This is known as phasing. The Pensions Regulator (TPR) is sending out letters to all employers informing them about the increase in the total minimum contribution rates. Employers need to ensure their payroll software can automate these increases and deduct the correct amount from the 6th April 2018 and 6th April 2019.  

Supporting your clients with the increases

The increase in minimum contributions should be simple to process using your payroll software. Your clients will need to be prepared to pay the additional employer minimum contribution rate. It will be important that also clients understand that their employees’ minimum contribution rates will also be increasing. Some employers are concerned about the affordability of the increase on their employees.

Failing to prepare could mean your clients may not pay the correct amount to the workplace pension scheme on time. This would put your client at risk of non compliance and they could face fines by TPR.

Qualifying workplace pension scheme providers will already be making changes to support the increases, and should communicate this to their clients. It is your client's responsibility to ensure they continue to use a qualifying pension scheme for their automatic enrolment duties.

For payroll bureaus, it would be good practice to communicate these increases to clients. There is no legal requirement to write to clients’ employees, however again it may be something that would be worth doing to ensure a seamless transition to the higher contribution rates.

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