Govt to pay AE contributions for employers participating in Kickstart Scheme

The government will pay the minimum employer automatic enrolment (AE) pension contributions for workers hired under its new Kickstart Scheme.

The initiative, announced in today’s (8 July) Summer Statement, will provide £2bn to create six-month work placements aimed at those aged 16-24 who are on Universal Credit and are “deemed to be at risk of long-term unemployment”.

The government confirmed that the funding will cover 100 per cent of minimum wage for 25 hours a week, plus the associated employer national insurance (NI) contributions and minimum AE contributions.

Minimum wage for 21-24 year olds rose to £8.20 on 1 April 2020, which would result in annual wages of £10,660 a year for those in the Kickstart Scheme, meaning they would meet the earnings threshold for AE.

However, AE only applies to workers aged over 22, so those under the age of 22 in the Kickstart Scheme will not be legally required to be auto-enrolled.

Commenting on the announcement, Aegon pensions director, Steven Cameron, said: “It’s great to see the Chancellor again support AE by allowing employers who take on new employees under the Kickstart Scheme claim not just earnings costs but also their NI contributions and employer minimum AE contributions.

“While it is only those aged 22 and over who an employer needs to auto-enrol, this is a great way of kickstarting not just employment but saving for retirement.”

Applications for the scheme will open next month.

The Chancellor, Rishi Sunak, said that the package of measured announced, titled a ‘Plan for Jobs’ was the second part of a three-phase recovery plan to secure the UK’s economic recovery from coronavirus.

Industry experts have predicted that today’s statement has come prior to more significant pension changes that may be announced in the Autumn Budget.

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