Legislation has been moving at a pace and not always fully comprehensive. However, things are now being made somewhat clearer by HMRC, The Pensions Regulator (TPR) and The Department for Work & Pensions (DWP). It is fair to say things will probably change further so this is our best understanding and interpretation of the current rules.
What is the current Department for Work & Pensions / The Pensions Regulator position?
We recognise that the impact of the coronavirus is placing considerable strain on businesses across many sectors. The large pension providers (Scottish Widows, Aegon, The Peoples Pension etc.) are in dialogue with Government and Regulators to determine whether any changes to current industry practice are required. Our understanding of the situation at present is as follows:
- The Coronavirus Job Retention Scheme is intended to support business and their employees by covering up to 80% of the wages of ‘furloughed’ employees, up to £2,500. This now includes employer, national insurance and pension payments (3% of qualifying earnings) totalling up to £2,805 per employee under automatic enrolment.
- Where a business has made alternative arrangements with employees, such as voluntary pay cuts, we would expect automatic enrolment contributions to continue based on the reduced salary applying to each pay reference period.
- Where a business is operating as normal, we would not expect any such changes.
- Where an employer falls into arrears, the current rules require that missed contributions be made up at a future date. A recovery plan would normally be agreed with The Pensions Regulator at the earliest point but in the current circumstances we expect arrears will be addressed at a later date.
Reporting of late payments
The Pensions Regulator adopts a risk based approach to contribution monitoring so that its resources are focused on sectors or employers which it deems to represent the greatest level of risk to pension provision. The economic backdrop has changed significantly as a result of the global pandemic and we expect TPR to be adapting its approach to reflect current and future conditions. We’ll update you as and when we understand more.
In the meantime, if you have any concerns with regards your firm’s ability to maintain pension contributions, you should contact TPR. The pension providers who act as administrators normally have a duty to inform the regulator where pension contributions have been in arrears for 90 days. This obligation has been relaxed in light of the current crisis and providers will now only be required to notify arrears after a period of 150 days.