Hi all,
As a Charity, we are careful to plan our budgeting well ahead. One of the areas we are looking at now is the increase in pension contributions that will rise form 5% to 7% in 2018.
We currently pay a 5% employer contribution, which fortunately covers the requirement. When that requirement goes up to 7% in 2018, it will leave us needing to find the extra 2% from somewhere. We are discussing it next week with a view to establishing if we up our employer contribution to 7%, get staff to pay the 2% out of their salaries, or maybe meet halfway and opt for 1% contribution by both..
I posed the question on the CIPD discussion forum and haven’t had a huge response yet – though it seems that retail sector are intending that employees will make the extra contribution.
Anyone able to give any indication on this?
Cheers
Steve
Replies
Hi Nadine
Thanks for the post, the first thing I would do is check my AE staging date, you will need your PAYE reference number and you can access this here.
http://www.thepensionsregulator.gov.uk/employers/know-your-staging-...
The legislations means employers have a statutory duty to comply with the AE requirements. In terms of what you suggest the Pensions Act 2008 includes 'the right for workers not to suffer a detriment' as a result of AE, therefore as you indicate what you are suggesting would not be in line with this.
Next I would assess your workforce to understand how many of your employees would be eligible to be automatically enrolled, this is dependent on age and earnings so you may find that many of your workforce are not eligible to be automatically enrolled. If they are, then they also have the right to opt out, albeit the legislation prohibits employers providing inducements to employees to opt out.
I hope this helps.
Let us know how you get on.
Regards
Sarah
Hi Steve
I suspect this is because pensions can be a bit of a tricky area (and forgive me I am no expert).
So here goes, when you say that the employer contributions goes up to 7% in 2018 are you referring to the automatic enrolment entitlements? If you are you are correct they do go up to 7% (or indeed 8% or 9%) dependant on which certification option the Company chooses. In the case you describe 7% applies to Set 3 which is 7% on total earnings. As opposed to Qualifying Earnings, Set 1 or 2.
The good news however is that the 7% comprises 4% employee contributions and 3% employer which if you already pay 5% you are currently meeting. As you indicated this is subject to phasing arrangements so in the case of Set 3 this would be
1 October 2012 - 30 September 2017 Employer Cont 1%
1 October 2017 - 30 September 2018 Employer Cont 2%
1 October 2018 onwards Employer Cont 3%
Anyhow if I am totally barking up the wrong tree I apologise for confusing things! I am currently studying for the Certificate in Pensions Auto Enrolment and my exam is on Thursday (Eeeek!) so I am revising like mad at the moment and hopefully what I have posted is correct!
But importantly you highlight a really vital role which HR play which is ensuring that Companies are building in the additional contributions and organisation costs into their budgets. One step at a time though in my case I am trying to ensure that my clients are aware of their staging date and what their statutory duties are! so one step at a time ;-)
Cheers
Sarah
Thanks Sarah,
Yes, I was referring to the auto enrolment scheme. Your reply is really useful and easy to grasp - perfect for me to understand! ;-)
Good luck in your exam!
Steve