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What are the recent changes to minimum contributions?

The legal minimum contribution rates vary depending on what part of a worker’s earnings you use to calculate contributions. The minimum contribution rates have increased from April 2018 and will increase again in April 2019.

If you’re using qualifying earnings the minimum contribution rates are:

Date Minimum contributions (as a percentage of a worker’s pensionable earnings)
October 2012 to 5 April 2018

 Total contribution: 2 per cent.

 The employer must pay at least 1 per cent.

6 April 2018 to 5 April 2019

Total contribution: 5 per cent.

 The employer must pay at least 2 per cent.

6 April 2019 onwards

Total contribution: 8 per cent.

 The employer must pay at least 3 per cent.

 

If you’re using certification to calculate contributions, read How do I calculate my contributions using certification? to check the minimum contribution rates from April 2018.

If you’re using the custom option you can set your own earnings basis and contribution levels. You need to ensure that the contribution rates are at least equivalent to minimum contributions for qualifying earnings.

If you wish to change the contribution level or the earnings basis you use to calculate contributions please see How do I edit an existing worker’s group?

What do I need to do?

You’ll need to ensure that you collect and pay the correct contributions in line with the new contribution rates from 6 April 2018. The new contribution rates will apply to your groups starting from the pay period which covers 6 April 2018.

You should let your workers know about the increase in contribution rates. If you use a payroll provider, you can ask them if everything is in place to apply the increase in contribution rates.

For more information about the increase in minimum contributions please see The Pensions Regulator (TPR) website.

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