Pension Contributions and the Living Wage

April 2018 Changes Explained

Pension Contributions and the Living Wage – April 2018 Changes Explained

The new financial year is approaching fast. This April, we’re seeing some big changes to the law with regards to both minimum wages and auto-enrollment pension contributions, that will impact on businesses across the UK.

In this post, we take a look at the changes, examining what’s happening, when the changes are coming in, and what your business needs to do to stay compliant.

National Minimum Wage and National Living Wage Increases

In accordance with the recommendations of the Low Pay Commission, National Minimum Wage (NMW) rates are increasing for employees and apprentices in every age group.

For the 2018/19 tax year (starting April 1st), the changes are as follows:

  • National Living Wage (25+): Up 4.4% or 33p, from £7.50 per hour to £7.83 per hour
  • NMW (21-24): Up 4.7% or 33p, from £7.05 per hour to £7.83 per hour
  • NMW (18-20): Up 5.4% or 30p, from £5.60 per hour to £5.90 per hour
  • NMW (16-17): Up 3.7% or 15p, from £4.05 per hour to £4.20 per hour
  • Apprentices: Up 5.7% or 20p, from £3.50 per hour to £3.70 per hour

There has also been an increase in the Accommodation Offset (the amount employers can deduct from wages where they provide accommodation. This is up 9.3% or 60p, from £6.40 per day, to £7.00 per day.

Future NMW increases

Although we do not have any firm commitment from the government in terms of next year’s minimum wage increases, the government has set out a medium term target for the National Living Wage at £9.00 per hour by 2020.

However, 2017 forecasts from The Office for Budgetary Responsibility (OBR), suggests that the government will miss this target, and that the National Living Wage (25+) will be set at around £8.75 by 2020. The OBR factored in slower than predicted growth in the UK economy when calculating that figure, and it is subject to change.

April 6th – Pension Contribution Changes

If your business runs an automatic enrolment pension scheme, the minimum contributions will have to go up on 6th April 2018. This will have an impact on both employers and employees.

Currently, the total minimum contribution is 2% of qualifying earnings – with employers having to contribute a minimum of 1% towards this figure.

From 6th April, the total minimum contribution will be 5%. Employers will have to pay a minimum of 2% towards this figure, with the staff member paying the balance to hit the 5%. Employers can choose to pay more if they want to. They can even cover the whole amount, meaning that employees will not have to contribute at all if they do not want to (although they may choose to).

Future Pension Contribution Changes

The rise in pension contribution levels is part of a wider programme of long term increase. Next year, the minimum contribution levels will increase again. From April 2019, the employer minimum contribution will be 3%, with the total minimum contribution levels rising to 8%.

These new April 2018 and April 2019 rules apply to qualifying auto enrolment schemes, but not to Defined Benefit (DB) pension schemes. In addition, if your business runs a self-certified auto-enrolment scheme, the changes may be different.

Further information about specific pension contribution changes can be found at

Advice and recruitment support from Prestige

At Prestige, we specialise in helping businesses to recruit the right personnel they need to achieve their commercial objectives. We’re also fully committed to ensuring that all our candidates are treated fairly, and that pay meets or exceeds the latest National Living Wage and National Minimum Wage regulations.

For additional information about how we can help your organisation source the right talent your business needs – please get in touch with your local office today.


Posted: Mon 26 Mar 2018
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