As confirmed by the Chancellor of the Exchequer in the Autumn Budget, April 2018 sees the introduction of the new National Living Wage rate and an increase in minimum contributions for automatic enrolment pensions.
National Living Wage increase
On 1 April 2018, the National Living Wage (NLW) will rise for millions of workers in the UK. This is the rate paid to workers aged 25 and over. Currently, those in receipt of the National Living Wage earn £7.50 an hour. In April, this will rise by 4.4% to £7.83, as the government works towards it pledge of delivering a rate of £9 an hour by 2025.
The National Minimum Wage, which is for those who are at least school leaving age but below the age of 25, is also rising. Currently, those aged 21-24 earn £7.05 an hour. This is increasing to £7.38 an hour after 1 April. For those aged 18-20, the National Minimum Wage will rise from £5.60 an hour to £5.90 an hour. Under 18s will see an increase of 15p per hour, as their rate rises from £4.05 to £4.20 an hour, while apprentices will see an increase of 20p an hour, from an hourly rate of £3.50 to £3.70. Read more on these rises here.
Pension auto-enrolment contributions increase
From 6 April 2018, the minimum contributions to businesses’ automatic enrolment pension schemes will be increasing. This is as part of a longer term set of planned gradual increases.
Currently, the employer minimum contribution is 1% of qualifying earnings, another 1% from staff contribution. This is rising in April to an employer minimum contribution of 2%, with another 3% to be taken from staff contribution, to work out to a 5% total minimum contribution.
After April 2019, this will increase further. Employer minimum contribution will be 3%, and staff contribution will be 5%, so the total minimum contribution will be 8% of qualifying earnings.
Remember, employers and staff can choose to pay more than the minimum contributions if they wish, however, if the pension scheme does not increase its minimum contribution levels after 6 April 2018 accordingly, it will no longer be a qualifying scheme.
See more key points to consider over on The Pensions Regulator website here.
Need help preparing for the minimum contributions for automatic enrolment? We can help.
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