Automatic Enrolment

April 2019 Contribution Increase triggers enquiries

The next increase will happen on 6 April 2019 to a total of 8% of qualifying earnings of which 3% must be paid by the employer.

see here https://www.thepensionsregulator.gov.uk/en/employers/increase-of-automatic-enrolment-contributions

This triggered an interesting question from one of our member firms this week.

“What do you do with an employee that already has a stand-alone plan and we contribute to it but they do not wish to increase their contributions?”

We are talking here about someone that is quite happy with the existing “status quo” of contributions and the current plan they operate. What happens with the rate increase? Do they have to pay more?

According to the Pensions Regulator the solution is as follows:

If the employee and employer want to continue the current arrangement, even though it would be less than the new, mandatory AE contribution rates, they may do so…….

The key points here are: 

1. The member is already in a pension plan and contributes but it is not the Qualifying Workplace Pension (QWP)
2. The member if being auto-enrolled has the option of opting out (but the employer cannot suggest or recommend this)
3. If they have already opted out they need do nothing until the 3 year re-enrolment comes around.

So you can maintain a stand-alone pension plan for an employee outside of the qualifying workplace scheme with lower contributions but you must remember to re-enrol them every three years and the employer must be careful not to encourage, recommend or push such a thing, it has to come from the employee.

Niel.gavin@ifac.eu