The majority of businesses across the UK are making preparations to increase their minimum workplace pension contributions, having successfully enrolled more than 8.5 million staff into schemes.
Auto-enrolment minimum contributions were due to rise in October 2017 under the original plans and then again in October 2018, but the Government took the decision to push the date back six months.
This means that the first increase will now take place on 6 April 2018 and will see total contributions increase from two per cent of qualifying earnings to five per cent of qualifying earnings, of which two per cent must be paid by the employer.
Then on 6 April 2019, the rate of contribution will rise again to a total of eight per cent of qualifying earnings, of which three per cent must be paid by the employer.
The increase in minimum contributions comes as the Government confirms that it will lower the starting age for auto-enrolment on workplace pension savings schemes from the current age of 22, down to 18.
It is believed that the move will introduce more than 900,000 young people into the workplace pension system, allowing these workers to save an additional £800 million.
Work and Pensions Secretary David Gauke told the BBC’s Andrew Marr Show: “We believe that what we’ve seen over the last few years since auto-enrolment came into place in 2012 is much greater saving for pensions.
“After decades of declines in workplace pension saving we are now seeing increases. We want to extend that benefit to people under the age of 22. At the moment the starting point is 22, we’re now lowering that to 18.”
While many workers may welcome these changes, some employers may look at them as yet more of a burden on their limited time and resources. This change will also need to be implemented into their existing payroll system if it is introduced.