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Business Owners Warned Over 3% Increase In Mandatory Pensions Contributions From April

7th February 2019

Scottish business owners are warned that mandatory pension contributions are increasing by 3% in April and action is needed immediately according to leading accountants and business advisors French Duncan LLP. From 6th April 2019, where employers make the minimum 3% contribution then employees must make 5% in pension auto-enrolment contributions to ensure the minimum 8% total contribution is met. The existing provision up to the April deadline is 2% for employers and 3% for staff.

All businesses operating PAYE payrolls are required by law to make the minimum contributions for all their qualifying employees at the very least. Where employers cover the current minimum contribution requirement of 5% staff are not required to make contributions.

As Linda Kelly, Head of Payroll with French Duncan LLP, explained: "Auto-enrolment is a way of offering a method of building up a reasonable pension pot for most people in the workforce. This increase in the value of contributions is a further step in building that pension pot at a reasonable rate."

“It does, however, require business owners to act immediately to ensure that their systems are adjusted to increase the payments from the start of April. For businesses paying monthly this is only two pay runs away so if companies have not implemented these changes they must do so straight away.”

Linda Kelly Aug 2017 250Px

Linda continued: “The 2018/19 employee earnings levels affected by pension contributions legislation range from £6,032 to £46,350. The increases to pensions contributions requirements relate to all auto-enrolment pension schemes and all existing pension schemes apart from defined benefits schemes. Business owners will need to let all employees know about these changes as some will obviously be making higher contributions from the start of April.”

“Not all these increases apply to all businesses, so you need to check whether you are affected by checking in your pension scheme documentation or direct from your pension scheme provider. These changes apply to all qualifying employees except for individuals that requested you put them into a scheme which does not require employer contributions.”

Linda concluded: “Your payroll processing software will need to be updated so these increases can be applied from 6 April 2019 onwards. If you use the services of a payroll bureau you should confirm that these requirements will be in place. If you run a monthly payroll the April 2019 pay run needs to be calculated at the new rates from 6 April, so if your software does not support these types of pro-rated contributions, you'll need to speak with your pension scheme provider and software supplier or payroll bureau to work out exactly how you will handle these changes. If you are having any problems, then French Duncan provide comprehensive payroll support to all clients.”

As Linda Kelly, Head of Payroll with French Duncan LLP, explained: “Auto-enrolment is a way of offering a method of building up a reasonable pension pot for most people in the workforce. This increase in the value of contributions is a further step in building that pension pot at a reasonable rate.”

“It does, however, require business owners to act immediately to ensure that their systems are adjusted to increase the payments from the start of April. For businesses paying monthly this is only two pay runs away so if companies have not implemented these changes they must do so straight away.”

Linda continued: “The 2018/19 employee earnings levels affected by pension contributions legislation range from £6,032 to £46,350. The increases to pensions contributions requirements relate to all auto-enrolment pension schemes and all existing pension schemes apart from defined benefits schemes. Business owners will need to let all employees know about these changes as some will obviously be making higher contributions from the start of April.”

“Not all these increases apply to all businesses, so you need to check whether you are affected by checking in your pension scheme documentation or direct from your pension scheme provider. These changes apply to all qualifying employees except for individuals that requested you put them into a scheme which does not require employer contributions.”

Linda concluded: “Your payroll processing software will need to be updated so these increases can be applied from 6 April 2019 onwards. If you use the services of a payroll bureau you should confirm that these requirements will be in place. If you run a monthly payroll the April 2019 pay run needs to be calculated at the new rates from 6 April, so if your software does not support these types of pro-rated contributions, you'll need to speak with your pension scheme provider and software supplier or payroll bureau to work out exactly how you will handle these changes. If you are having any problems, then French Duncan provide comprehensive payroll support to all clients.”

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