Auto Enrolment Earnings Threshold
Auto enrolment pensions earnings thresholds confirmed for tax year 2018/19
The Department for Work and Pensions (DWP) have announced the automatic enrolment earnings thresholds amount for the 2018/2019 tax year.
These thresholds changes will take effect on the 6th of April 2018.
The amounts are reviewed annually, which this page will update on the release.
The table below shows the new thresholds as compared to the current tax year:
|New amounts for 2017-2018 (Effective 6 April 2017)||New amounts for 2018-2019 (Effective 6 April 2018)|
|Lower level of qualifying earnings||£5,876||£6,032|
|Earnings trigger for automatic enrolment||£10,000||£10,000|
|Upper level of qualifying earnings||£45,000||£46,350|
Firms due to automatically enrol their workers before 5 April 2018, must use the thresholds for their current tax year (2017-2018) when assessing their workers if they are just meeting the minimum requirements.
How Do These Figures Affect Auto Enrolment?
The table below shows the figures from above when broken down into pay reference periods of weekly, monthly, quarterly and annual earnings.
|2018-2019||Annual||1 week||1 month||1 quarter|
|Lower level of qualifying earnings||£6,032||£116||£503||£1,508|
|Earnings trigger for automatic enrolment||£10,000||£192||£833||£2,499|
|Upper level of qualifying earnings||£46,350||£892||£3,863||£11,588|
For the earnings trigger, when a worker is paid the equivalent amount above they meet one of the assessments for being automatically enrolled into a pension. As long as they are also aged between 22 & the State Pension Age (currently 65 for men and increasing to 65 for women by 2020), and they are living and working in the UK, they have to be enrolled.
The lower level and higher level of qualifying earnings are significant when an employer uses the qualifying earnings definition of salary to base their pension contributions on.
For example, if an employer wanted to pay into a pension of a worker earning £20,000 per year, they would only pay contributions on £13,968 of the worker’s salary. The first £6,032 would be deducted from the salary and contributions would not be paid on this.
The minimum contributions that must be paid are shown below:
In the example above, the total or gross amount paid per month into a pension in 2018 would be:
From the Worker £34.92
From the Employer £23.28
Employer can choose to pay more than the minimum contributions and can pay on a basic salary or on all pay.
If an employer used a basic salary definition the figures would be:
From the Worker £50.00
From the Employer £33.33
For the worker / employee, that actual amount they would see being deducted from their pay in these examples is £27.94 & £40.00 respectively. This is because of tax relief that is provided by the government. The worker / employee’s contribution is topped up when it is paid into a pension.
If you are reading this and are wondering why we keep referring to workers, this is because the auto enrolment rules apply to more people than just employees. If you are unsure if someone who isn’t directly employed by you should be enrolled, it is the employer who will need to decide, and we can help you work this out.
We Can Help Answer Your Questions About Auto Enrolment
Whether it is over the phone, talking by skype or face to face. We are auto enrolment specialists and using us can save you time and money. That’s what we do, so please don’t hesitate to contact us if you would like to know more.
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Tel: 01298 214 191