Over the summer the government has issued regulations to extend the two transitional periods during which minimum contribution levels for jobholders who are auto-enrolled in a defined contribution (DC) scheme are being phased in:
- the minimum contribution during the first transitional period (employer's staging date to 2018) is 2% of qualifying earnings, with a 1% minimum employer contribution; and
- in 2018 the rate will rise, under the second transitional period, to 5% in total, with a 2% minimum employer contribution.
By 6 April 2019, the full contribution requirements apply and all employers should be auto-enrolling eligible jobholders into a fully qualifying scheme with 8% contributions, at least 3% coming from the employer.
Last year, the government announced that, in order to simplify pension administration, the transitional periods would be aligned with the start of the tax year. As a result, the first transitional period will run until 5 April 2018 (instead of 30 September 2017, as currently scheduled). The second transitional period will run from 6 April 2018 to 5 April 2019 (instead of 30 September 2018). Regulations made over the summer bring these changes into force on 1 October 2016.
Comment & Actions
- Trustees of auto-enrolment qualifying schemes may need to check what their scheme rules say about employer contributions. If the phased increases in contributions are hard-wired into scheme rules, a rule amendment will be necessary to take advantage of the new transitional dates. It has been suggested that this would not be a "listed change" requiring consultation with employees, as it may come within the exemption for a change "for the purposes of complying with a statutory provision". However, strictly speaking the change would be to take advantage of a provision, rather than to comply, so trustees may feel it would be safer to consult. In any event, they will certainly want to tell members about it.