From 6 April 2019, auto-enrolment pension laws are changing. Richmal Price answers employers' FAQs about what this means for payroll.

The Pensions Act 2008 states that the legal minimum that must be paid between an employee and employer to a qualifying auto-enrolment scheme will increase automatically to 8 per cent on 6 April 2019 (of which an employer must pay 3 per cent).

This is an increase from the current combined 5 per cent legal requirement (of which the employer must pay 2 per cent). If an employer does not make these legal changes, they could be subject to a fine from the Pensions Regulator.

What does this mean for me as an employer? Currently, we pay 2 per cent employer contributions and 3 per cent employee contributions for those auto-enrolled into our qualifying auto-enrolment scheme.

There are two options: you pay 1 per cent extra contributions and the employees 2 per cent extra, or if you wish, you can absorb the extra 3 per cent cost yourself.

My employee is stating I need their express written consent to increase their auto-enrolment pension contributions this April. Is this correct?

No. As the increase is based on the pension legislation requirements, you do not need an employee’s express written agreement to increase their pension contributions to meet the 8 per cent total requirement (of which the employer must pay 3 per cent).

We currently pay more than 8 per cent combined for a qualifying auto-enrolment scheme. What happens here?

Providing you as the employer pay at least 3 per cent, and the total of the contributions is at 8 per cent or more, there is no action that needs to be taken as of 6 April this year. Any further employee increases for this scheme will need your staff’s express written permission.

We would also advise you to seek guidance from your pension provider if you are looking to seek to change any contractual aspects of the pension scheme. 

An employee has already opted out of the auto-enrolment scheme we offer and pays into their own private pension scheme from their pay. We don't make any employer contributions into their pension pot. Do we need to do anything?

As the employee has opted out of the auto-enrolment scheme, you do not have to make any pension contributions as an employer.

Should I notify staff of the April 2019 changes?

Writing to your staff to make them aware of the legal auto-enrolment changes prior to 6 April 2019 would be highly advisable, to gives them the opportunity to ask you any questions and budget accordingly.

What about staff who have already opted out?

If you have any staff who have opted out of the auto-enrolment pension scheme, they will remain opted out until their re-enrolment date arrives (the reoccurring three-year anniversary after they were staged into the auto-enrolment scheme).

At the re-enrolment date they are assessed again, and if they qualify, they are re-enroled. They will then have the right to opt out again if they wish to).

What if my employees want to opt out now because they are increasing contributions?

Employees have the right to opt out of the pension scheme at any time. However, if they opt out after 30 days of being enrolled in, no refunds will be given back to you or your employee from the pension provider. 

What should I be checking prior to the 6 April 2019 change?

Check that your payroll software is set up to process the changes. Or, if you process payroll manually, make sure that you have the correct percentages needed to calculate the pension from April onwards. If you use the services of a payroll bureau, contact them to make sure everything is in place ready for your April pay runs.

About the author

Richmal Price is payroll expert at  Peninsula, @peninsula_uk, which offers HR, employment law and health and safety support services to businesses, as well as tax and payroll advice, employee assistance programmes and HR and health and safety training. 

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