Announcement: Final Government phased increase to Auto-enrolment pension contributions

Do you need to do anything?

Deadline 12 April 2019:

Yes. First, please read this announcement carefully as it may affect you financially.

Provided you are happy for the minimum Employee contributions described on this Announcement Page below to proceed, you need take no action at all.

Should you not already be contributing the minimum amount and do not wish to do so, you should contact jeanette@pattersonmills.com by 12 April 2019, otherwise you will have the new contribution rate, as outlined below, deducted from your pay and invested to your pension from your April pay by law.

The Background

As many of you will be aware, Homeprotect has always been pro-active in taking on its Government pensions auto-enrolment duties for its Staff. Back in 2014, the new pension scheme was established and the Company contributed double the minimum contributions permitted

This announcement continues a positive trend that Homeprotect started in 2014, as its 4% amount is a third higher than the minimum employer contribution of 3%, reflecting the desire to maintain a high standard in our benefits offering to our Staff.  In addition, the Company invests the valuable add-on of 6.9% from the saving made on Employer’s National Insurance, on all employee contributions that you make.

The Company also decided to design its pension scheme in such a way as to save Employee National Insurance for all Staff (this is, for basic rate taxpayers, a whopping 12%).  This is in addition to the above-mentioned sharing of the saving in its own Employers’ National Insurance.

Here’s what’s happening

The final Government changes that come into effect in April 2019 require a total minimum pension contribution of 8%, which is the final phase of increases pre-set from the introduction of Auto-enrolment pensions in 2012.  We are pleased to announce that Homeprotect will be increasing its employer contribution to 4% and you will be asked to match this contribution and commit a minimum 4% of your basic pay to your pension scheme with Royal London.

The new statutory contribution rate above takes effect from your April 2019 pay.

Homeprotect’s pension scheme: still best value for retirement 

The auto-enrolment rules are set by the Government and implemented by The Pensions Regulator. These have involved a gradual increase over three time-frames to all UK minimum pension contributions.

The Homeprotect pension scheme with Royal London remains extremely good value to you as an investment for reitrement, because you make great tax savings in addition to the Homeprotect contributions going to your pension fund.  We know that, as Independent Financial Advisers, your pension scheme still represent the very best value to meet your retirement income planning objectives.

The value in action

For basic rate taxpayers your tax relief and resulting total contributions invested are very much in your interests and works as follows:

Example of £100 from your monthly pay:

A contribution rate of 4%, after allowing for the lower taxes you pay, actually costs you just 2.72% of your pay.

The above calculation is proportionately accurate, where the example of an Employee contribution of £100 is taking place.

It also shows that the equivalent growth on your own after tax true cost is a huge 157.21%!  This is because you have a cost to you of just £68.00 for a total amount invested into your pension fund of £174.90 in the above table.

Thus, in principal, it is absolutely the case that investing into your pension makes sense for you and your Family’s financial future: there is nowhere better to invest for your retirement, when you have an Employer effectively more than doublig your contributions.  The Government knows this and that’s why Auto-enrolment was introduced.

About the new minimum contributions from you

As te new total contribution rate has increased from 5% to 8%. Homeprotect has taken the step to increase its contributions from 3% to 4%, which is something it does not have to do at all, under the new rules.  In practice, your Employer is keen to make investing into your pension scheme as easy as possible for you.

All Employees will now also need to contribute a matching 4% as a new minimum with effect from their April 2019 pay.

For those Employees currently investing less than 4% to their pension scheme, there are now two options for April 2019 payroll onward:

1. Accept automatic contributions being deducted from pay of the new minimum 4% with effect from April’s pay, which we strongly recommend is in your interests, or,
2. Opt-out of the pension scheme

It is very important to understand that, for those that do wish to “opt-out” of the pension scheme to avoid personal contributions, the Company will also no longer contribute to your Royal London Fund in the Scheme.

Your Royal London Fund itself would remain invested and still under the investment advice service from Patterson-Mills that Homeprotect also pays for on your behalf and you would be able to re-join the contributory side to the Scheme at any time in the future.

Those not already in the pension scheme

The Company operates a standard 2-month statutory postponement period for its Auto-enrolment obligations. This means that if you were not on the Homeprotect February 2019 payroll, your personal automatic enrolment to the Homeprotect company pension scheme will happen with the May 2019 payroll, or aftwer as applicable to your joining date.  Therefore, this Announcement Notice still applies to you, except that it is from the month as relevant to you, following the Government rule change.

How to opt-out

Your Employer is not permitted by law to discuss opting-out of your company pension scheme and so you would need to contact jeanette@pattersonmills.com by email in the first instance.  Jeanette will inform you how to electronically opt-out of the Scheme, which can only be done by you.  The deadline to avoid any contributions being taken in April is 12th April to contact Jeanette, though you are able to opt-out at any time afterward in respect of future payroll periods.

Why investing into your pension is such a good idea

Although both the Government and your Employer (as well as Patterson-Mills!) believe that it is certainly a good idea to remain a member of your company pension scheme – and the financial incentive is clear above – at this time, you cannot be forced to agree to start making contributions, or even to increase your payments to 4%.

The table below summarises the minimum contributions changes referred to above.

As always, if you have any queries regarding the above, please don’t hesitate to get in touch confidentially with your HR Manager or indeed Chris Rathbone at Patterson-Mills (who can be reached by email to chris@pattersonmills.com).
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