The 6th April 2018 sees the start of a new tax year, which includes increased contribution requirements as well as impacting some other less obvious processes.

  • Over 95% of participating employers in Salvus Master Trust need to take action
  • Ensure you read The Pensions Regulator online guidance

http://www.thepensionsregulator.gov.uk/en/employers/phasing-increase-of-automatic-enrolment-contribution

The new minimum contribution rates from 6th April 2018 are:

Pensionable Salary

Employer Minimum

Total

Minimum

Employee#

Qualifying Earnings (Statutory Minimum)

2%

5%

3%

At least basic salary (Set 1)

3%

6%

3%

At least basic salary (Set 2)*

2%

5%

3%

Total earnings (Set 3)

2%

5%

3%

Important notes:

* This option is only available where the pensionable earnings for all employees (including those not in the pension) are greater than 85% of total earnings (calculated as a group)

# There is no employee minimum but employees must contribute the difference if the employer’s contribution is less than the total minimum. The employee contributions above indicate the requirement when the employer contributes at the minimum rate.

 

 What contribution rate do I need to pay?

This depends on how you have chosen to calculate Pensionable Salary You can find this out:

  • on the recent Payment Schedule sent to all employers in the Pensionable Salary field
  • by logging into the Employer Portal:
    • go to Settings
    • Settings again
    • it is displayed in the Certification Set at the bottom of the page

How is tax relief calculated on employee contributions?

Salvus Master Trust (the Scheme) is a net pay method scheme, or in plain English, the full percentages listed above should be deducted from pay before tax is calculated, for example:

a monthly pensionable salary of £1,500 and employee contribution of 3%, deduct £45 before tax is calculated

When do I need to start paying contributions at the new rate?

The new contribution rates are required for Pay Dates on or after 6th April 2018.

What if I’m already contributing more than the minimum contribution needed?

If the total contribution and employer contribution have already been met or exceeded, then you do not need to take any action.

I’m currently paying more than the minimum – can I reduce my contributions so that they are in line with the minimum?

If you want to reduce your contributions, you may need to enter into consultation with your staff first. We recommend you seek  advice before reducing contributions to understand the requirements and implications.

What if my pay period over laps the change in tax year?

Pay Dates falling on or after 6th April are subject to the increased rates, for the whole pay period, including days before 6th April.

What if my employees are paid in arrears?

It is the pay date that determines the rate, not when the employee worked the hours being paid, for example, hours worked in tax week 52 paid in tax week 1 are subject to tax week 1 minimum contribution requirements

Can the increase be postponed?

No, the increase must be applied for all contributions on or after 6 April

What action do employers need to take?

Ensure payroll is ready

Do not assume the increase will happen automatically.

Check that the person(s) responsible for processing payroll are prepared to deduct the increased rates and understand the payroll software requirements

For example Sage has online help, general info here, Pensions Module here and manual updates here

Update your employees

It is likely that your employees will need to pay more so will see an increase in their deductions from pay. Whilst they would have been informed of the increasing contributions when enrolled, they are likely to have forgotten so should be reminded.  

The Scheme is publishing information available to those logging into the Member Portal.

Be ready to submit the increased contributions

The Scheme will not accept contributions below the new minimum contribution requirements. It is the employer’s responsibility, and legal duty, to comply with the requirements.

What if I don’t increase the contributions?

All employers must meet the new legal minimum contributions. Your employer portal will not accept contributions which are below the amounts needed under law.  The Scheme

  • has a duty to monitor contributions
  • will write to Employers who get this wrong
  • must tell The Pensions Regulator of any employer that isn’t doing what they are required to do

Payroll has been run at the wrong rates, what should I do?

If you can, re-run payroll with the correct rates and submit the new and correct data in your employer portal.

If you can’t re-run payroll:

  • submit contribution data that reflects the increased contributions that should have been deducted – the correct amounts can then be collected and added to your employee’s pension accounts.
  • the amounts of adjustment should then be reflected in the following pay run – you should let your staff know about this
  • make sure that the following contribution data is submitted without the additional adjustments, i.e. doubling up the previous adjustment

Will contributions increase again?

Yes, the minimum contribution rates increase again from 6th April 2019, details are available on The Pensions Regulator website, link at the top of the page.

I use Tax Periods as pay periods, what other implications does a change of tax year have?

Tax Week 53 – Assessment users

Tax Week 53 is effectively the 1 day, 5th April (or two days in a leap year). Submitting data for tax week 53 depends on what date your pay date falls :

  • If your pay date falls on 5th April
    • submit data for the 5th April pay date as normal
    • submit data for Tax Week 1 as normal
  • If your paydate does not  not fall on 5th April
    • submit data for Tax Week 1
    • the platform automatically records all earnings and contributions as £0.00 as there is no pay day in Tax Week 53
    • immediately submit Tax Week 1 again, against Tax Week 1

Tax Week 53 – Secure Upload users

Tax Week 53 is effectively the 1 day, 5th April (or two days in a leap year).

When Tax Week 53 is required, import the next available data:

  • If your pay date falls on 5th April
    • submit data for the 5th April pay date as normal
    • submit data for Tax Week 1 as normal
  • If your pay date does not  fall on 5th April
    • submit data for Tax Week 1
    • the pay period dates will automatically move to Tax Week 1, complete Tax Week 1
    • submit data for Tax Week 2 as normal

The first day of the pay period is changing

In the 2017/18 tax year the 6th April was on a Thursday, in 2018/19 it is on a Friday.

Weekly payroll data submission may be impacted if uploaded as early as possible. If submitting data on Thursday now, in 2018/19 you may need to wait until Friday for the pay period to start.

Note:

  • you can  upload the data before the pay period starts to validate it, but it must be uploaded again when the pay period has started and then submitted
  • there will be no impact on the experience for monthly payrolls, equally fortnightly and four weekly payrolls are less likely to be impacted
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