From April 2019, the minimum Automatic Enrolment (AE) pension contributions will increase from 5% to 8% of band earnings, altering the level of take-home pay and total remuneration to members in workplace pension schemes. This could potentially change employees’ attitudes to AE and there is debate as to whether this could lead to a high number of employees stopping saving into a pension scheme, or conversely be of benefit to more adequate incomes in retirement.

Key results: 

  • The 5.9 million eligible employees who are already contributing at a rate above the minimum level may not have an increase in their contributions or see any reduction in their take-home pay from March to April 2019 due to rises in minimum contribution rates.
  • Increasing AE contributions in April 2019 across band earnings affects higher earning individuals proportionately more than those on lower pay.
  • Individuals earning between £12,600 and £16,000 per year will see an increase in their take-home pay from April 2019 due to the combined positive impact of income tax and NI changes.
  • Those on National Living Wage (NLW) will benefit greatly from the mandatory wage increase introduced in terms of take-home pay.
  • While employee contributions will increase in April 2019 resulting in a reduction in take-home pay, overall remuneration will increase as a result of the corresponding rise in employer pension contributions.
  • Overall, the cost to the employer will increase due to higher minimum employer contributions.

 

Reports