Auto-enrolment update: rate rises ahead

All employers and employees who have signed up to workplace pension schemes should be aware that contribution rates are increasing from next month.

As of 6 April 2018, the minimum contribution rates will increase by:

1% to 3% for employees
1% to 2% for employers

And, as of 6 April 2019, these contribution rates will rise further to:

5% for employees
3% for employers

These new rates form part of government legislation and will apply to all employees and employers, regardless of size (the only exception is one director companies).

Alerting employees

Although rate rise information was included in auto-enrolment starter packs, some staff may have not read the information fully, or may have forgotten about the increase. The government is therefore recommending that all businesses communicate this change to their staff, if they haven’t already done so.

The new pension rates will be deducted automatically from April, so if a member of staff cannot afford to pay the increased minimum contribution, they will need to leave the scheme in advance of the change.

Cash flow planning

Businesses also need to factor their increased pension contributions into their cash flow planning and financial forecasting. The financial ‘hit’ will be higher for employers who are paying their employees’ minimum contribution as well. The combined increases will see these firms paying 5% from 6 April 2018 and 8% from 6 April 2019.

For further help

We have created a template letter for clients to send to their employees which explains the new pension rate rises fully. To ask for a copy, or if you have any other queries, please call Rob Tompkins on 01225 325580, or email