Coronavirus: Automatic enrolment and pension guidance for employers

The Pensions Regulator (TPR) have provided guidance for employers on their duties towards automatic enrolment and pensions during the coronavirus outbreak.

Automatic enrolment duties

Employers automatic enrolment duties (including re-enrolment and re-declaration) continue to apply as normal. This is the case whether your staff are still working or are being furloughed as part of the Coronavirus Job Retention Scheme.

If you are a new employer, you can postpone your duty to assess new or newly eligible staff (and therefore make pension contributions) for up to three months.

If you are struggling to complete your re-enrolment duties on the third anniversary of your staging date or duties start date due to the coronavirus pandemic, you can choose a date up to three months after your third anniversary to assess your staff. 

Maintaining pension contributions

If staff choose to reduce their contribution level, opt out or cease active membership of the scheme, your scheme rules may allow you to reduce your employer contributions or retain them at the current rate. However, you must not encourage this option.

Any member of staff who reduces their contribution below the statutory minimum, opts out, or ceases active membership, must be put back into the pension scheme at the next re-enrolment date provided they meet the criteria for re-enrolment. They can also choose to opt back in to pension saving before the re-enrolment date.

If you think you may not be able to make your pension contributions, contact your provider to see whether there is flexibility to change the due date for employer contributions or pay contributions over a longer period.

Coronavirus Job Retention Scheme

The government’s Coronavirus Job Retention Scheme (CJRS) includes the employer’s statutory minimum AE contribution. If you make a claim for a grant, you will also be able to claim the employer pension contribution on those wages up to the level of the statutory minimum employer pension contribution.

The Pensions Regulator are working with HM Treasury and the Department for Work and Pensions to feed into the scheme’s guidance on the pensions element of the grant. Clarity in this area include:

Does the payroll processes and pension contributions remain the same?

Your normal payroll process still runs as usual and you and your furloughed staff’s pension obligations remain unchanged. If employers do not use banded qualifying earnings, you will also need to calculate 3% of the qualifying earnings of your furloughed staff as part of the process for making the claim for the total grant under the scheme. This is in addition to your existing pension contribution calculation in payroll.

What if I pay more than the statutory minimum contribution?

If, for whatever reason, you are paying more than the AE statutory minimum contribution, the excess will not be funded by the CJRS. You should continue to make the correct contributions due under the scheme and in this case will have to pay a proportion of the pension contribution cost yourself.

Can I reduce the employer contribution to the statutory minimum

If you use a DC pension scheme and your employer contribution under your scheme is more than the statutory minimum, you may be able to decrease it to the statutory minimum. However, you cannot legally reduce your contributions to below the statutory minimum. There are a number of factors you should consider when deciding to decrease the employer contribution.

What about employer consultation requirements?

Before you decide to decrease the employer contribution you must carry out a consultation (if you have at least 50 employees) in accordance with a number of rules, including the minimum period of consultation of 60 days. However, TPR will not take regulatory action in respect of a failure to consult for the full 60 days if certain conditions apply. This regulatory easement will be maintained until 30 June 2020, but they will continue to review the situation.

What if the employer contributions is less than the AE statutory minimum?

If an employer’s pension contribution is below the AE statutory minimum employer contribution, the employer may only claim the amount paid or due to be paid to the pension scheme. This is because grants for pension contributions can only be claimed provided the employer will pay the whole amount claimed to a pension scheme for the employee as an employer contribution.

Read the full TPR guidance

If you would like to discuss the above or any other pension planning needs for individuals or companies, please get in touch with a member of our Financial Advisers team.