Ask the Expert: How do we prepare for UK pension contribution increases? Ask the Expert: How do we prepare for UK pension contribution increases?

Ask the Expert: How do we prepare for UK pension contribution increases?
28 Mar 2018

When I answered a question recently about minimum auto-enrolment pension contribution percentages going up in April 2018, it led to a number of other queries being raised too:

  1. What UK employers should do to prepare in terms of the effective date, the scheme rules and checking the functionality of their payroll software, which was covered in my last article;
  2. What employers should do to prepare their workforces, which is what I intend to explore here.

While employers are under no statutory obligation to advise workers of any changes to their pension contribution levels, it does make a lot of sense to let them know. After all, increases in minimum percentages will have a direct impact on their net pay.

As a result, a little bit of communication may save an awful lot of telephone calls to the payroll department as people query why their net pay has gone down. Furthermore, in the same way that employers wrote to workers when they were first enrolled in the pension scheme, it is considered the professionally responsible thing to do to write to them again about contribution increases.

Template letters

It is worth noting that, on The Pensions Regulator’s (TPR) website under a section entitled ‘Members should know what is happening’, it advocates writing to workers to tell them about the changes. Helpfully, the ‘resources’ area also contains a link to ‘template letters’ under ‘letters and e-mails’. TPR then hammers its message home by including another link under ‘Staff should know what is happening’.

While these template letters may not be the best you will ever come across, they do provide a starting point for writing your own. Each employer will have their own style and, indeed, their own pension scheme. But bear in mind that the template letters are aimed at schemes that use ‘Qualifying Earnings’ as the basis for pensionable pay, which will not be applicable to everyone.

It is also worth checking the agreement you have with your pension provider as they may take responsibility for writing such letters anyway.

Letters are not the only way

Letters are one way of communicating but, seeing as we are now in the 21st century, they are not the only, and are not even necessarily the most effective, means of getting your message across. So consider alternatives such as:

  • Posters;
  • E-mail;
  • Staff noticeboards;
  • Payslips;
  • Intranet/self-service site;
  • Staff briefings.

There is nothing wrong with communicating the same message in more than one way. But make sure it is consistent and beware of communications overload.

It is all about communication and support

Even with the best communication and most appropriate channels in the world, some workers are always going to be missed (and may not engage with your communications anyway). Also remember that not all workers are based in the same location, especially now that remote working is more common.

As a result, employers need to prepare themselves for the inevitable fact of staff queries and ensure that sufficient resources are in place to answer them. It is bound to be a busy time for payroll departments so allow for it.

In summary

Communication and support are key to making contribution increases as painless as possible for both employers and workers. Plan your communication and support strategy and ask yourself:

  1. What do I need to say to my workers?
  2. What is the best way to communicate?
  3. Who will do the communicating and what will the message be?
  4. Will we be able to support the inevitable queries?

Also beware of information and communication overkill – and remember that we have to go through all of this again in April 2019!

 Ian Holloway 

Ian Holloway is head of legislation and compliance at Cintra HR and Payroll Services https://cintra.co.uk. He has been in the payroll profession for over 30 years, processing payrolls large and small from organisations across all sectors until 2011 when he started helping to educate the profession by means of course material, newsletters and face-to-face presentations.

 

When I answered a question recently about minimum auto-enrolment pension contribution percentages going up in April 2018, it led to a number of other queries being raised too:

  1. What UK employers should do to prepare in terms of the effective date, the scheme rules and checking the functionality of their payroll software, which was covered in my last article;
  2. What employers should do to prepare their workforces, which is what I intend to explore here.

While employers are under no statutory obligation to advise workers of any changes to their pension contribution levels, it does make a lot of sense to let them know. After all, increases in minimum percentages will have a direct impact on their net pay.

As a result, a little bit of communication may save an awful lot of telephone calls to the payroll department as people query why their net pay has gone down. Furthermore, in the same way that employers wrote to workers when they were first enrolled in the pension scheme, it is considered the professionally responsible thing to do to write to them again about contribution increases.

Template letters

It is worth noting that, on The Pensions Regulator’s (TPR) website under a section entitled ‘Members should know what is happening’, it advocates writing to workers to tell them about the changes. Helpfully, the ‘resources’ area also contains a link to ‘template letters’ under ‘letters and e-mails’. TPR then hammers its message home by including another link under ‘Staff should know what is happening’.

While these template letters may not be the best you will ever come across, they do provide a starting point for writing your own. Each employer will have their own style and, indeed, their own pension scheme. But bear in mind that the template letters are aimed at schemes that use ‘Qualifying Earnings’ as the basis for pensionable pay, which will not be applicable to everyone.

It is also worth checking the agreement you have with your pension provider as they may take responsibility for writing such letters anyway.

Letters are not the only way

Letters are one way of communicating but, seeing as we are now in the 21st century, they are not the only, and are not even necessarily the most effective, means of getting your message across. So consider alternatives such as:

  • Posters;
  • E-mail;
  • Staff noticeboards;
  • Payslips;
  • Intranet/self-service site;
  • Staff briefings.

There is nothing wrong with communicating the same message in more than one way. But make sure it is consistent and beware of communications overload.

It is all about communication and support

Even with the best communication and most appropriate channels in the world, some workers are always going to be missed (and may not engage with your communications anyway). Also remember that not all workers are based in the same location, especially now that remote working is more common.

As a result, employers need to prepare themselves for the inevitable fact of staff queries and ensure that sufficient resources are in place to answer them. It is bound to be a busy time for payroll departments so allow for it.

In summary

Communication and support are key to making contribution increases as painless as possible for both employers and workers. Plan your communication and support strategy and ask yourself:

  1. What do I need to say to my workers?
  2. What is the best way to communicate?
  3. Who will do the communicating and what will the message be?
  4. Will we be able to support the inevitable queries?

Also beware of information and communication overkill – and remember that we have to go through all of this again in April 2019!

 Ian Holloway 

Ian Holloway is head of legislation and compliance at Cintra HR and Payroll Services https://cintra.co.uk. He has been in the payroll profession for over 30 years, processing payrolls large and small from organisations across all sectors until 2011 when he started helping to educate the profession by means of course material, newsletters and face-to-face presentations.

 

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