Expect some changes to your pension scheme in April 2019
Increased pension costs to employers
As of April 2019, the joint employer-employee contributions paid into a workplace pension will increase from 5% to a total minimum of 8%. So for employers, the contribution increases from 2% to 3% and for employees, a bigger jump, from 3% to 5%.
Automatic pension enrolment was introduced between October 2012 and February 2018. From October 2017, all businesses who employee at least one person have to have a qualifying workplace pension in place for the purposes of automatic pension enrolment.
The Pensions Regulator writes to all employers reminding them of their duties but not to employees. Employers who do not meet their auto-enrolment responsibilities may be fined, ranging from a £400 fixed penalty to a varying daily penalty, which can increase from £50 to £10,000.
Pension re-enrolment- the three year cycle
The staging date (the date the workplace pension was initially set up) is based on the size of an employer, starting with those with the most employees. Every three years after an employer’s staging date, The Pensions Regulator informs them of their duties regarding pension re-enrolment. Many SMEs will be receiving this notification for the first time.
Employers will have a six-month window in which to set their re-enrolment date. Once this date has been set, all eligible employees will be automatically re-enrolled into the workplace pension scheme. Employers will have to communicate this to their employees prior to it happening, to fulfil their employer duties as well as reducing the number of employee queries that will occur if communication does not take place.
As before, the employees will be able to opt out within 30 days of being re-enrolled. If they do opt out, they will get their pension contribution refunded back to them.
Employer pension fines
Since The Pensions Regulator introduced fines to employers who were not fulfilling their obligations, the fines have increased from just under £200,000 in 2014/2015 to more than £40 million in 2017/18. These figures are a combination of both fixed penalty notices and escalating penalty notices.
However, an escalating penalty notice can vary between £50 and £10,000 a day. The value of the fine depends on the number of employees and is issued if the employer has still not complied with a statutory notice and after a fixed penalty fine has been issued.