Pension Increases 6th April 2018 – Are you ready?
Date: 12th October 2017 | Categories: Employment law
On the 6th April 2018, the minimum that a business needs to contribute to their staffs auto-enrolled pension scheme will double, going from 1% to 2%. The minimum that staff need to contribute will also increase, going from 1% to 3%. Some pension schemes may already have it built into their terms and conditions that the pension increases will happen automatically.
Is Your Business Compliant?
Employers should check the terms and conditions on any pension policies they have in place for their staff. If this is the case, then the employer doesn’t need to do much. They can notify staff that their contributions will be increasing. This may save on queries at the time that the increase occurs as staff will notice more of their pay being allocated to their pension than before.
If the business fails to make these pension increases, then they are at risk of their pension scheme not qualifying for auto-enrollment. The risk here is that the regulator can impose fines on an organisation until it brings itself in line with their legal requirements. This can range from fixed fines of £400, or between £5,000 and £50,000 and/or daily fines of between £50 to £10,000.
Should a business wish to make changes to the terms and conditions of the scheme, then consultation will need to occur with staff. It is better to get this done sooner rather than later to ensure that the process runs smoothly in time for 6th April 2018. Consultation is only a requirement if the business has 50 or more employees.
- As with all pension schemes, the employees can determine whether they wish to remain part of the scheme and increase their contributions. They also have the option of ‘opting-out’ of the scheme and bring their contributions to an end.
- There is also an option whereby the staff member keeps their contributions at the same level and doesn’t make the required increase. This will have to be checked within the pension scheme’s terms and conditions to see if this is possible. Some schemes may not allow this. If they do allow it, and the employee keeps their contribution at a lower level rather than the minimum required by law, then the scheme will not meet the requirements to be a qualifying scheme for them.
The impact for the business in this scenario is that, if the schemes terms and conditions allow for it, the business may be able to stop its contributions as the employee is not meeting their legal obligation for the scheme. In this situation it is vital that the business checks the terms and conditions of the scheme to ensure they don’t run into difficulty with the regulator.
By Jason Bruce – Wirehouse Employment Law Consultant