a quick guide to increases to minimum contributions · 2019-11-04 · as an example, chris is paid...

A quick guide to increases to minimum contributionsHow to update your Online Services account ready for the increases to minimum pension contributions

For people, not profit

2 | A quick guide to increases to minimum contributions

Contents

Why are contributions increasing? 3

What are contributions increasing to? 4

When do you need to increase your minimum contributions? 6

Account MOT – are your settings up to date? 7

What do I need to do on my Online Services account? 9

Journey one – steps to take 10

Journey two – steps to take 14

Updating your payroll (if you have one) 18

Telling your employees about the change 18

Paying below the minimum contribution levels 19

Paying below the minimum contribution levels – the process 20

Useful links 21


Why are contributions increasing?

When automatic enrolment was introduced, the government set:

• the minimum total contribution and minimum employer contribution to be paid into an automatic enrolment pension scheme

• how minimum contributions will increase gradually to help ease employers and employees into automatic enrolment.

Increases to the minimum contributions are a statutory process that all employers have to go through.

Increase to minimum contributions – what’s it all about?

By law, minimum contributions should increase in two phases: 6 April 2018 and then again on 6 April 2019. This is known as ‘contribution phasing’. It’s important that you’re ready for the next increase in contributions so that the correct contributions are deducted at the right time, and that your pension scheme remains a qualifying scheme for members.


What are contributions increasing to?

The phased increase to minimum contributions will align with the start of the tax year as well as the payroll year (this makes it easier for payroll software to manage the changes).

How much employers and their staff need to pay depends on what contribution basis the employer uses to work out pension contributions.

Employers using the qualifying earnings basis to work out pension contributions

These are the minimum levels for employers that use qualifying earnings basis to work out their contributions:

Employers using their own definition of pensionable pay

When an employer has decided to use their own definition of pensionable pay (also known as self-certification), there are different minimum contribution levels. Employers should confirm which definition of pensionable pay they’re using and check which minimum contribution level applies to them.

Pensionable earnings (set 1) – When contributions are worked out on at least basic pay.

DateEmployer minimum

contribution

Employee contribution

Tax relief on employee

contribution

Total minimum

contribution

Until 5 April 2018 1% 0.8% 0.2% 2%

6 April 2018 - 5 April 2019 2% 2.4% 0.6% 5%

6 April 2019 onwards 3% 4% 1% 8%


contribution



contribution

Total minimum

contribution

Until 5 April 2018 2% 0.8% 0.2% 3%

6 April 2018 - 5 April 2019 3% 2.4% 0.6% 6%

6 April 2019 onwards 4% 4% 1% 9%


What are contributions increasing to?

Employers using their own definition of pensionable pay

Pensionable earnings (set 2) – When contributions are worked out on at least basic pay (but pensionable pay must make up at least 85% of total earnings. The employer must monitor this).

Total pensionable earnings (set 3) – Include wages, commission, overtime, bonuses, performance-related pay and any other earnings paid to the jobholder.

These tables are all based on the ‘tax relief at source’ method of claiming tax relief. You can read more on other tax relief methods on our website.


contribution



contribution

Total minimum

contribution

Until 5 April 2018 1% 0.8% 0.2% 2%

6 April 2018 - 5 April 2019 2% 2.4% 0.6% 5%

6 April 2019 onwards 3% 4% 1% 8%


contribution



contribution

Total minimum

contribution

Until 5 April 2018 1% 0.8% 0.2% 2%

6 April 2018 - 5 April 2019 2% 2.4% 0.6% 5%

6 April 2019 onwards 3% 3.2% 0.8% 7%


When do you need to increase your minimum contributions?

Although the minimum contribution increases begin again from 6 April 2019, employers need to begin assessing their staff on these new minimums from the beginning of the pay period that includes 6 April. Some payroll software will be able to support paying lower contribution rates until the 5 April and then increase it to the higher amount from the 6 April onwards. We will accept this as long as this is within a single submission covering one pay period.

Employers will need to work out where the 6 April falls within their pay period – if they have a payroll provider they might be able to help them with this.

If your pay periods are aligned to tax weeks or months, don’t worry your new pay period will start on 6 April.

Start of pay period 6 April End of pay period

Date to start assessing under the new minimums

What’s a pay period?

Under automatic enrolment rules, this is the period of time over which earnings are to be measured. The pay period is the time in which your employee’s salary is paid. For example, for employees paid monthly, it’s one month. The pay period can also be a tax week or month. The pay period relates to the amount of time the employee is paid for, rather than the amount of time between payments (pay frequency). If an employee is paid weekly on a Wednesday for hours completed between Sunday and Saturday the previous week, the pay period is from Sunday to Saturday, not Sunday to Wednesday or Wednesday to Wednesday.

As an example, Chris is paid a monthly fixed basic salary in arrears, regardless of how many hours he works in the month. He’s paid on the 20th of April for work done from the 1st to the end of the previous month (March). Chris’ pay period runs from the 1st to the end of the month in which he is paid (1 – 30 April).


Account MOT – are your settings up to date?

Things to check:

How your Online Services account was set up – perhaps this was a while ago or someone else did the initial set-up. But it’s important to get it right, so you can be sure employers are making the correct contributions.

1. Is the tax basis right?

Employers will be deducting contributions either after tax (known as relief at source) or before tax (known as net pay arrangement). You can check your tax settings on the ‘Submit employee data’ page on your Online Services account. Just look for the ‘Guides & settings’ tab on the top right of the page whilst submitting employee data to us.

Employers should compare this to their payroll if they have one, to make sure they’re making the contributions correctly. If you’ve any queries about the tax basis of your account, you can get in touch on [email protected] so we can help.

2. Do we have employees’ National Insurance (NI) numbers?

We need employees’ NI numbers to make sure we’re applying the right tax relief if employers are deducting contributions after tax (known as relief at source). If we’re missing this, by law we won’t be able to apply tax relief and contributions may not meet the legal minimum contributions. No matter how employers pay their pension contributions, we need the employee’s NI number, so we can trace members in the future. You can check employees NI number(s) on the ‘Manage employee details’ section of your homepage. We’ll alert you with an exclamation mark if we’re missing any.


Account MOT – are your settings up to date?

3. Are the worker group settings right?

We need to know if the worker group settings are right. A worker group is a group of employees who have the same contribution level. We use this to make sure we’re sending out employee’s joiner information with the correct contribution amounts displayed. We also use worker group information to do assessments (if we work your contributions out for you).

Check this on the account home screen section ‘Manage worker groups’. You’ll find all the worker groups that are set up with their contribution percentage and basis. Compare this to your payroll (if you have one) to make sure these settings are correct. If this isn’t right, you can change this yourself by clicking ‘Edit’ alongside the worker group you want to change. Employers should also make sure their employees are allocated to the correct worker group.

Important: getting your payroll right

Although we’re here to help you along the way, it’s your responsibility to make sure your payroll and The People’s Pension account are set up right. If we don’t have the correct information, you might not be complying with automatic enrolment rules. We have a legal duty to monitor your contributions and may report to The Pension’s Regulator if you don’t meet the legal minimum contributions.


What do I need to do on my Online Services account?

Depending on how the account was set up, you’ll follow a different journey in your Online Services account.

Journey one

You’ll follow this journey if your worker groups have all the following:

• One worker group per admin account, and

• Contributions currently at 2% employer and 3% employee (if you’re deducting contributions after tax (known as net or Relief at Source) this will be 2.4% employee), and

• Contributions based on qualifying earnings

We will increase your contributions for the worker group on your Online Services account automatically. But employers need to confirm these changes.

Journey two

Follow this journey if you have any other variations of the above, for example:

• More than one worker group per admin account, or

• Contributions not set to the current minimums of 2% employer and 3% employee (if you’re deducting contributions after tax (known as net or Relief at Source) this will be 2.4% employee), or

• Contributions not based on qualifying earnings – for example pensionable or total earnings.

We won’t increase your contributions for the worker groups on your Online Services account automatically. Employers need to make the changes themselves and confirm they’re meeting the new legal minimum contributions.


Journey one – steps to take

When you log in to your Online Services account, you’ll see a message at the top of the page where you can click to view your worker groups.

Step

1

Click here to view your worker group. You can also click on the ‘Mange worker groups’ tab under ‘Manage employer’



Once you’ve clicked ‘View worker group’ we’ll take you to the ‘Manage worker groups’ page. Here we’ll explain the changes we’re going to make.

Employers need to confirm that they’re happy with the changes by clicking ‘I confirm we are meeting the legal minimums’.

You can click on ‘View worker group history’ to see what the worker group will be changed to and also when this is going to happen.

Step

2



We’ll let you know we’ve got your confirmation. You’ll then need to make sure you also make these changes within your payroll, if you have one, so you’re deducting the correct amounts. Now you’ve confirmed this to us, we won’t display any more alerts to you about the increase.

If you want to make changes to worker groups

If you want to make any changes to your worker group setting that’s different to what we’ve proposed, you’ll need to click the ‘Edit’ button.

Step

3



This will open the ‘Update your contribution levels’ screen where you’ll be able to enter your own contribution levels (as long as they are above the minimum levels for employer contribution and total contribution), as well as when you’d like them to start from.

Once you’ve amended your worker group click ‘Update’. Once you’ve clicked this, we’ll show you a final confirmation screen to let you know we’ve updated your settings. You’ll then need to make sure you also make these changes within your payroll, if you have one, so you’re deducting the correct amounts.

If you enter contributions below the new legal minimums the following message will be displayed (depending on if contributions are too low for employer or total).

Step

3

Remember you won’t be able to put in contribution levels below the new legal minimums after the 6 April.


Journey two – steps to take

When you log in to your Online Services account, you’ll see a message at the top of the page where you can click to ‘Manage worker groups’.

Step

1



Once you’ve clicked ‘Manage worker groups’ we’ll take you to the ‘Manage worker groups’ page. Here we’ll highlight in red and with an exclamation mark any worker groups that don’t meet the increased legal minimum contributions.

For the worker groups highlighted, you’ll need to make changes to the contribution levels yourself by clicking the ‘Edit’ button.

Step

2



When you click the ‘Edit’ button alongside the group you want to change, this will open the ‘Worker group information’ screen.

Here you’ll be able to amend the contribution levels for the worker group to make sure you’re meeting the new legal minimums by 6 April.

You’ll also have to enter the date you want this to take effect. This date will need to be the beginning of the pay period that includes the 6 April (we’ve suggested a date for you in the red box above).

Once you’re done click ‘Update’.

If you enter contributions below the new legal minimums the following message will be displayed (depending on if contributions are too low for employer or total).

Step

3



If you still have groups to be updated, you’ll return to the ‘Manage worker groups’ page. The worker group you’ve just amended will be confirmed at the top of the screen. You will also need to make sure you’ve updated your payroll if you have one.

Any worker groups still left to update will be highlighted with a red exclamation mark.

Repeat Step 3 until all worker groups are updated.

Step

4

You can also see the changes you’ve just made, by clicking on ‘View worker group history’

Once all your worker groups have been updated, we’ll show you a final confirmation screen to let you know the changes you have made and when these will take effect. You’ll also need to make sure you’ve updated your payroll if you have one.

Step

5


Updating your payroll (if you have one)

Telling your employees about the change

If your workforce is assessed by payroll software (and it works out your contributions) then you need to make sure you remain compliant. Get in touch with your payroll software provider to ensure this happens.

Check out our template letters in the communications toolkit

Although there are no additional duties under automatic enrolment for you to tell your employees about the increase to contributions, it’s a good idea to do so. This will help minimise queries and reduce the risk of some employees deciding to leave their pension scheme.

Also there, you’ll find other helpful material like:

• Simple wording to put on employee payslips explaining the change

• Posters to raise awareness in your workplace

• An animation to explain the benefits of a workplace pension and how the change taking place in April affects them.

It’s a good idea to point them to the webpage too. This explains the changes to their workplace pension in more detail.


Paying below the minimum contribution levels

The People’s Pension does support employees who want to pay below the legal minimum contributions. If an employee is unable to, or doesn’t want to pay the increased amounts, they’ll be able to stop contributing by opting out or leaving the qualifying scheme. This must be the employee’s choice, and you legally cannot encourage or induce your employees to do so. Employers can (but will no longer have to) pay any contributions for that employee.

If you’d like to continue paying contributions for your employee who wants to pay below the legal minimum contributions

An employer can agree to pay below the legal minimum contributions for the employee (but doesn’t have to). Even though the employee will continue to contribute to The People’s Pension, they would not be considered a member of a ‘qualifying scheme’. An employee can also come directly to us and pay pension contributions via Direct Debit. Employees can read more about this on our website: www.thepeoplespension.co.uk/personal-payments

Any employees who choose to stop contributing, opt-out or pay below the legal minimum contributions will need to be re-assessed at your next re-enrolment date.

Read our guide ‘Paying below the minimum contribution levels’ for more information on how to support this at www.thepeoplespension.co.uk/below-minimums

An employer must not coerce, persuade or suggest their employees stop paying into their pension or pay below the legal minimums.


Paying below the minimum contribution levels – the process

Four steps an employer should take to support employees to pay below the contribution minimums

If an employer agrees to allow an employee to pay below the legal minimum contributions, they should follow these steps. If an employer has already done this before and have the PBM worker group already, there’s no need to do it a second time.

The employee lets their employer know that they would like to reduce their payments into their pension. There are no additional duties under auto-enrolment to confirm this in writing, but employers may want to. This will help reduce disputes on what was agreed.

Employers should update payroll software (if they use one) to change the pension deductions to match what the employer has agreed with their employee. They’ll also need to assign employees to their new worker group ‘PBM’.

The Employer contacts us to say they’d like to allow employees to reduce their payments into their pension pot. We’ll need requests via email for monitoring purposes. We’ll then activate a new worker group called ‘PBM’ (paying below minimums).

Next time employers submit their employee data, we’ll do some checks to make sure the employee is still an active employee and place them in the new worker group. The employee will also get a letter from us to confirm this change. If employers use The People’s Pension to assess their contributions, or submit their data through manual keying, we won’t be able to suggest a contribution for any employees in the ‘PBM’ worker group.

Step

1

Step

2

Step

3

Step

4

B & C E Financial Services Limited Manor Royal, Crawley, West Sussex, RH10 9QP. Tel 0300 2000 555 Fax 01293 586801.

Registered in England and Wales No. 2207140. To help improve our service we may record your call. B & C E Financial Services Limited is authorised and regulated by the Financial Conduct Authority Ref: 122787. It acts as a distributor of, and an administrator for, pensions (including The People’s Pension Scheme), accident and death insurance and a range of financial welfare products. X

X T

PP 0

457.

0219

Useful links

The People’s Pension

Here’s where to find more information about contribution phasing: www.thepeoplespension.co.uk/employers/contribution-increases

The Pensions Regulator

The Pensions Regulator has more information on their website: www.thepensionsregulator.gov.uk/en/employers/phasing-increase-of-automatic-enrolment-contribution

Want to know more?

[email protected]

01293 586 666 (Monday - Friday 8:30am - 5:30pm)

a quick guide to increases to minimum contributions · 2019-11-04 · as an example, chris is paid...

Documents