April 2018 sees a raft of legislation changes which impact on pensions, benefits and rewards. Statutory sick pay, national minimum wage, statutory maternity pay, and salary sacrifice rules all change and in addition, the main change we will focus on in this article, is the increase in minimum pension contribution levels for workplace pensions.

Employers who currently pay 1% will be required to contribute a minimum of 2% and employees who pay 1% will now be obliged to pay at least 3% of their salary to a workplace pension. There is concern about the impact this will have on lower paid employees and that it might result in a mass spike of opt outs from workplace pensions that will undo all the good work in attracting new pension savers.

Employers have such an important role in communication

Research suggests that just under half of employees do not know auto-enrolment minimum pension contributions are increasing and around the same percentage are not aware that auto-enrolment minimum contributions are increasing. This means that many employees are in in for a shock when they get their payslip and they will weigh up whether they feel they can afford to pay higher contributions or prefer to fund short term bills like having a summer holiday this year. This is where employers have such an important role in communicating these changes, to remind employees of the long-term benefits of workplace pension and why the accumulation stage is so important. Employers need to tell people why it matters.

There are some important messages for employees…

Ian Beestin from pension educators Money Alive emphatically encourages any employees considering opting out to think again. “Because of compound interest the value of contributions you make when you are young are likely to have a much greater impact on the size of your pension pot (and your retirement income) than contributions you make as you get closer to retirement. There will always be demand on your scarce cash resources but the impact of paying into you pension early in life, doubled your employer’s matching contributions, all ramped up by the generous tax breaks a pension offers are three big prizes to give up. Think long and hard before turning your back on free money from you, your employer and the government.”

The regulator is ramping up activity to ensure auto enrolment continues to be a success.

One example in the press recently which is worth noting is the Pensions Regulator (TPR) case against the directors and senior HR staff of recruitment organisation Workchain, for illegally opting employees out of their workplace pension. The TPR are seeking a prosecution on the basis of ‘computer misuse’ claiming that senior staff logged on to the organisation’s online pension system using employees’ personal details and terminated employees’ workplace pension membership. The maximum sentence for a conviction of computer misuse is six months’ imprisonment and an unlimited fine.

If you need support with auto enrolment legislation and administration or need expert help communicating with employees about the increases in pension contributions then get in touch with us.

Author : Love Your Employees

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