Workplace Pension Reform (Automatic Enrolment): What Employers Need To Think About When Preparing For Steady State

Employers need to ensure that the pension schemes they use to discharge their workplace pension reform (automatic enrolment) obligations will be ready for the second and final increase in minimum contributions in April 2019, otherwise known as steady state.

Our pension and employment experts consider what employers need to think about in the lead up to steady state, including considering whether scheme rule changes are needed, and how to communicate the changes with staff.

With all employers now obliged to assess and automatically enrol their workers into a qualifying workplace pension, pensions saving has finally become a norm rather than an exception. Currently, more than 78% of UK employees contribute to a workplace pension scheme.

The final piece of the automatic enrolment jigsaw is 'steady state', 6 April 2019. This is the date when overall minimum contributions for automatic enrolment made by defined contribution (DC) pension schemes must increase to an overall 8% of qualifying earnings, of which a minimum of 3% must come from the employer.

For employers relying on certification, the percentages are different but there will still be a corresponding increase to contribution rates from 6 April 2019.

Employers with DC schemes or sections should now be considering whether everything is in place to comply with increased minimum level contributions ahead of steady state on 6 April 2019.

Key action points for employers

Employers who are using their DC occupational pension scheme to comply with auto-enrolment requirements, or have an existing DC scheme which is being used as a 'qualifying scheme' to satisfy employer duties under the Pensions Act 2008 should act now to:

check that scheme rules reflect the increase to contributions and consider whether rule amendments may be needed; and review their communication strategy with the workforce to inform/remind them of the change. Employers who use a personal pension scheme to satisfy their duties under workplace pension reform (automatic enrolment) will need to check with the provider that the increases will be automatically implemented, as well as reviewing the communication strategy to inform/remind workers of the change.

Why should employers be considering this now?

If employers don't get their houses in order, they might find that their systems are not in place to move to the full minimum level of contributions in time for the 6 April 2019 deadline.

Many pension schemes have sufficient...