Our Employee Benefits team has received a large number of questions relating to Workplace Pensions in the last week, and we thought it would be a valuable exercise to share our understanding of the current position for employers. The follow- ing Q&A Guide is in line with our current understanding of the expectations set out by The Pensions Regulator (TPR).
Can the employer put their scheme on a contribution holiday?
The Pensions Regulator (TPR) have confirmed that they expect employers to continue making contributions into their scheme, and we would encourage any employers to do so if they can.
What should employers do if any members want to stop paying contributions?
Members can stop/restart their contributions at any time.
Automatic enrolment rules also give employers the option of stopping their contributions, if members decide to stop making contributions. However, if it’s an occupational scheme, they’ll need to check the scheme rules, and for any other scheme – the contracts of employment as they may have a legal obligation, which means they need to continue paying the contributions. As an employer it is illegal to induce or coerce employees to opt out of a workplace pension scheme.
What should employers do if any members stop paying into their pension, but they want to continue paying in contributions?
If the member’s contribution stops, employers will need to stop deducting contributions from their salary.
Similar to the previous question, employers will need to check to see if there are any conditions that apply to minimum/matching contribution amounts.
Do employers need to make pension contributions if employees take unpaid leave?
If the employer is not paying any salaries, then they wouldn’t need to make any pension contributions.
However, the government have introduced a support measure for employers known as the Coronavirus Job Retention Scheme to help them retain their employees. We’re expecting employers will continue paying the employees they’re retaining in the normal way, which also allows contributions to continue being paid into the scheme. Any payments the government make as part of this scheme, will be paid to the employer. We understand the available grant will be based on the following criteria:
80% of (gross salary + Employer NIC + minimum AE Employer pension contribution) subject to the £2500 monthly cap*
The grant will not fund further Employer NIC or AE Employer pension contributions on any top-up salary paid by the employer.
*Gov.Uk – Guidance/Claims for wage costs through the Coronavirus Job Retention Scheme – 26th March 2020
What we do not know at this time is how this will impact backdated pension contributions and any members that need to be re-instated back into the scheme.
If employers need to reduce salaries, do they still need to make pension contributions?
If the salary has been reduced, any pension contributions the employer makes, should be based upon the revised salary. It’s important employers check that any reduced pension contributions are still in line with any specific arrangements they have with employees. Many employers will be using qualifying earnings as their definition of pensionable pay. If employees’ earnings fall below the lower earnings threshold (£6136 for 2019/20 tax year) in a pay reference period then you will not need to make a pension contribution on their behalf.
*Lower earnings threshold expected to be £6240 in the 2020/21 tax year subject to parliament approval.
If employers are taking on any new employees, should they still enrol them into the scheme?
Yes. Until TPR provide any other advice around new joiners, employers should continue to enrol (or re-enroll at the 3 year cyclical period) any new employees into the scheme in the normal way. This would include an employee who wishes to opt in.
Should employers continue making pension contributions if members are off sick?
Yes. Employers will need to continue deducting contributions from the members’ salaries. Statutory sick pay is part of the qualifying earning rules for automatic enrolment.
If the current situation means that employers cannot make their pension contributions on time, what are their options?
We appreciate that current circumstances will be challenging for employers, however until TPR confirms otherwise, employers should try to make their pension contributions as soon as they can.
If any employers are concerned about how they can continue to meet their ongoing duties, we suggest they speak to TPR.
Can the employer change the certification basis of their scheme?
If the scheme’s contribution basis meets the statutory minimums, then, yes, they can change the scheme’s basis. If they decide to make the change, they’ll need to:
• let their pension provider know
• keep a record of this in case TPR ask for evidence in the future
• tell their employees
What happens if employers need to let some of their employees go either short term or long term?
Under the Coronavirus Job Retention Scheme, all UK employers will have access to support measures. It’s designed to help them continue paying
their employees’ salaries during these times, and hopefully avoid having to let some of their workforces go.
If employers do need to let their workforce go, they’ll need to follow the normal rules and process for termination of employment, make any final payments into their pension scheme and complete the notification of leaving process on the scheme.
There is more information regarding guidance for employers and the support available on the Covid19: support for business Gov.uk website by clicking on the following link: www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
If you have any queries, please contact Verlingue Employee Benefits Consultant Stewart Neale on 07557 740300
or firstname.lastname@example.org who will be happy to help you.