Increase to the Workplace Pension

In this month's Horsham Accountancy Blog, we focus on the Increase to the Workplace Pension in April 2019 and what the changes will mean for both individuals and employers.

Having a suitable pension in addition to the State Pension can make all the difference to you being able to live comfortably after you retire.

At Giltinan Kennedy, we make use of our wide range of professional contacts to ensure you have a suitable independent adviser and we work with them to provide you with impartial advice in areas such as pension schemes.

How changes to the Workplace Pension will affect you

As an individual, if you pay into a Workplace Pension, your contributions are due to increase from April, with both you and your employer paying in more.

This will bring the minimum amounts paid into your pension up to a total of 8% of your qualifying earnings.

So, what will that look and feel like for your finances?

The current rules mean that employers must contribute a minimum of 2% of your pre-tax salary, with you contributing 3%. From April, employers and employees will have to contribute a minimum of 3% and 5% respectively.

The People's Pension website has useful, easy to understand information about how the change will affect Individuals.

Changes to the Workplace Pension for Employers

Firstly, check if you are exempt from the changes. For example, you don't need to take any further action if you don't have any staff in a pension scheme for automatic enrolment, OR if you are already paying above the increased minimum amounts.

If you are not exempt, the changes will apply whether you set up the pension scheme for automatic enrolment or you decided to use an existing scheme.

The amount you and your staff pay into your pension scheme will vary depending on the type of scheme you have chosen and the rules of that scheme.

Your staff contribution may also vary depending on the type of tax relief applied by your scheme.

When you are calculating contributions for this type of scheme you include the following:

• salary
• wages
• commission
• bonuses
• overtime
• statutory sick pay
• statutory maternity pay
• ordinary or additional statutory paternity pay
• statutory adoption pay.

You may have agreed with your pension scheme to base minimum contributions on different elements of staff pay. If so, you will need to apply different increases. If you're unsure about the rules of your particular scheme, it's best to speak to your pension provider.

The Pensions Regular has also published some useful steps for employers, below.

What do you need to do?

Employers need to make sure the increases are implemented by April 6, 2019. You should allow plenty of time to ensure this happens.

1. Work out which increases apply to you.

• If you are unsure, check your scheme documents or speak to your pension scheme provider.

2. Work out which staff it applies to.

• You need to make the increases in contributions for ALL staff who you put into a pension scheme and which you pay into, including any new staff you put into this scheme. The increases do not apply to staff who asked to be put into a scheme that you don't have to pay into.

3. Make sure the way that you calculate contributions and pay them to the pension scheme is ready to apply these increases.

• If you use a payroll provider you should speak to them to check everything is in place to process the increases
• If you pay your staff yourself using payroll software, you must make sure it is set up to process the increases
• If you are unsure what to do speak to the software provider
• If you use your own process to pay your staff, you will need to ensure the increases are implemented
• If you use HMRC basic payroll tools you will need to put in place a process to ensure the increases are implemented.

You can use our online contributions calculator to help work out your costs for each member of staff.

Telling your staff about the 2019 increases

You should let your staff know about the increases. On the regulator's website, you can find an example letter template you can amend and more information for Employers.

Dermot Kennedy, Partner

Based near Horsham, West Sussex, Giltinan and Kennedy LLP is regulated by the Institute of Financial Accountants (IFA) and works alongside other professionals, such as legal partners to offer a complete service.

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