After delays to contribution rises, new dates have been approved for rate increases
Having announced a delay to planned auto-enrolment contribution rate increases in the 2015 Autumn Statement, parliamentary approval has now been given to new dates.
These rises are set to take place in April 2018 and April 2019.
Previously, the total minimum had been set to go from 2% to 5% in October 2017, followed by a rise to 8% in 2019. However, in the 2015 Autumn Statement, these rise were delayed to align with the tax year and to help businesses administer the changes.
Alan Morahan, managing director, Punter Southall Aspire comments: “Employers will be pleased to get confirmation that planned contribution increases have been delayed by 6 months, which will certainly help their financial planning process over the next couple of years.
“However, while employers will welcome the delay in contribution increases it rather flies in the face of what auto-enrolment is meant to be about. This huge project was established to address the fact that the majority of UK employees were not saving enough, or at all, to provide for anything close to an adequate income in retirement. Delaying the increase of contributions will impact future pot sizes, which cannot be viewed as a positive by those people that auto-enrolment was aimed at.”
Mike Cherry, policy director at the Federation of Small Businesses adds: “The problem that you've got at the moment is, while there is the review next year in 2017 of auto-enrolment, given the fact that things have now been pushed back a little bit, our concern is that review may not harness some of the issues that will come up when the vast majority of small businesses now have to face auto-enrolment.
“We would advocate that that is delayed until you actually have enough evidence to understand what any subsequent issues may be over the next 12 to 18 months.'