In the wake of the Coronavirus crisis there are many questions that employers across the world face. Whether that is what help is available to them, or what impact the global pandemic will have on their employees, here at Dataplan we are dedicated to providing the most up to date information and advice for employers.
This post will address specific questions regarding Auto Enrolment Pensions and what employers should be doing about their employee’s schemes during the Covid-19 outbreak. As always for more personal advice our dedicated Corporate Pensions Team are happy to help, to find out more please visit our consultancy services.
Q: Can I cease making employer contributions during the Coronavirus outbreak?
Guidance provided by The Pensions Regulator (TPR) is very clear in stating that employers must continue to keep up with contributions to pension schemes in line with their current commitments. It has also been clarified that contributions for both employees and employers must be remitted to the pension scheme within the normal timescales – no additional allowance has been made in response to the pandemic.
Q: Is there any help available for employer pension contributions?
In the case of furloughed workers (where employers are claiming 80% of the employee’s salary under the Coronavirus Job Retention Scheme or ‘CJRS’) it is worth noting that employers are also able to claim the employer NI contributions and minimum statutory employer pension contributions (currently) 3%.
However, you are restricted to claiming 3% of qualifying earnings, even if your employee’s pensionable salary is based on basic or gross pay.
If you are paying more than the statutory minimum the excess will not be funded by CJRS, you can only claim 3% and you therefore will have to pay a proportion of the pension contribution yourself.
Q: Is there any help available for employee pension contributions?
As has been stated by TPR employers must continue to contribute to the pension scheme in line with their current commitments which includes employee contributions.
Employee contributions are to be deducted at the same percentage, so in the case of employees who are on furlough leave and are only receiving 80% of their normal salary the contribution amount will be reduced in line with this.
However, employees do have the choice to cease active membership of their pension scheme which would stop both employer and employee pension contributions until the employee decided to re-join the scheme. It is extremely important to note that employers are under no circumstances to encourage their employees to do this – the legislation remains unchanged on the fact that employers cannot advise or persuade their employees to leave a pension scheme.
Q: Since COVID-19 is having an impact on the stock market, what does this mean for pension values?
As can be expected with the scale of global crisis the stock markets have been significantly affected even before the virus was declared a global pandemic. As such it is expected that the volatility of the stock market, which is set to remain so for some time, may be concerning to some employees.
For employees who are a long way off from retiring and in a defined contribution scheme it is reasonable to expect that there will be time for their pension pot to recover. Since pensions are long term investments making decisions based on what is happening short term is risky.
For employees who are looking to retire in the near future and are not already lifestyling funds (where funds are automatically switched to lower risk investments as they near their retirement date) it is worth suggesting that they obtain professional advice from a qualified and regulated financial advisor. You can find an advisor through Unbiased or Citizen’s Advice.
Q: What will happen if I make a late payment to the scheme?
Since TPR has not relaxed the rules on the payment of contributions in response to the outbreak the normal deadlines and penalties for failure to comply will apply.
For inadvertent breaches and as a result of the pandemic TPR have advised that they will make a proportionate and risk based approach towards enforcements.
We strongly advise that you pay contributions as you are committed to within the normal dates. However, if non-payment is unavoidable we recommend that you immediately self-report to the TPR to let them know what is happening.
Q: What should I do about keeping my pension records up to date?
In light of the current Coronavirus outbreak we recommend that you take the time to make sure that your records are up to date, for example encouraging all of your employees to make sure that their Expression of Wishes are up to date.
For more information and advice for employers regarding the Covid-19 crisis we have put together a series of helpful blog posts with updated information and legislation. Our most recent post ‘Updated Furlough & Coronavirus Job Retention Scheme Guidance from HMRC’ details a string of updates, or for a more comprehensive breakdown of the scheme you can visit ‘Coronavirus Job Retention Scheme – What we know so far.’
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