By law, all auto enrolment workplace pension schemes must reach a minimum contribution level.
Many employers have chosen the statutory phasing timeline which means the first increase happened in April 2018, with a further planned increase as shown in the table (click to enlarge).
Other employers have chosen a customised approach, following a different timeline and in some cases, different contribution increases too. Many of these employers will experience their next increase soon and we’re communicating with them in advance.
You’ll need to make the appropriate changes to your payroll system to ensure the new minimum contributions are in place to meet the effective date which applies to your scheme.
If your scheme is an auto enrolment scheme, we’ll provide the information you need to help you with this through your employer dashboard.
If your scheme is a qualifying scheme, you’ll need to update your payroll with the required contribution changes in the usual way.
If some or all of your members have opted for salary exchange to fund contributions, you’ll need to ensure the change to contribution levels is covered in the salary exchange agreements you have with these members.
We’re writing to members as their increase approaches. We also highlight the benefits of saving for their retirement through your pension scheme. Here are examples of the letters.
We’ve also created posters, postcards and an article template to help you to raise awareness of the change.
If you'd like hard copy posters or postcards please email us at Member.Communications@royallondon.com. Just let us know how many of each you need and confirm the address you’d like us to send them to.
To make sure all your scheme members know what’s happening, we’re also writing to those who are already above the new minimum contributions, confirming there will be no change for them.
The increase in contributions is a great opportunity for your members to save more, helping to build up their pension savings and giving them the chance of a better retirement. However investment returns are never guaranteed. So while your members' savings could grow, their value can also go down. This means they could get back less than what they put into their plan.
There may be some circumstances where a member may not want to pay the increased contribution.
The Pensions Regulator rules state very clearly that employers must not induce members to pay contributions below the minimum. However, you can agree to allow a member to pay contributions below the scheme default minimum.
If you agree these arrangements with a member, there are a few things you and the member need to be aware of.
|Plan number||Title||First name||Last name||Payroll ref no||NI No.||Date of birth||Agreed member contribution||Employer contribution||Include in future phasing (Y/N)|
We've prepared template wording which you can personalise and provide to any members in this position.
It’s important that your employees make their own decision about the level of contribution they want to make. You can find out more in The Pensions Regulator detailed guidance for employers.