Covid-19 Pension guidance

As part of The Pensions Regulator’s (TPR) package of measures to safeguard pensions through the Coronavirus pandemic, they have published Covid-19 guidance for employers.

In these uncertain times, employers may have questions about their pensions duties. The Pensions Regulator (TPR) have published guidance for employers outlining the actions they need to take and answering common questions such as:

  • Have my workplace pension duties changed?
  • Do I have to continue paying pension contributions?

TPR expects employers to continue to make the correct pensions contributions for their staff and they will continue to monitor this closely.

The guidance includes information about Government’s support for employers, questions around payroll processes and pension contributions, flexibilities around re-enrolment, what employers must do if staff ask to opt out or reduce contributions, as well as guidance for new employers.

Summary of points:

New employers
New employers should continue to assess staff and put them into a pension scheme if they are eligible. They can also use a process called postponement which postpones their duties to assess new or newly eligible staff – and therefore to make pensions contributions – for up to three months.

Maintaining contributions
We know these are challenging times in terms of cashflow and resources. TPR expects employers to continue to make the correct pensions contributions for staff and they are monitoring this closely. If an employer is concerned they will struggle to make their pension contributions, they should contact their pension provider in the first instance to check if there is flexibility to change the due date for payment of employer contributions to a future date. Or, providers may also able to help the employer plan to pay contributions over a longer period. Employers can also consider using the government support packages, which are there to help with cashflow.

What to do if staff ask to stop paying contributions
Some staff may choose to either reduce their contributions (if the scheme rules allow this) or opt out or cease active membership of the scheme, if they decide that is right for them at this time. However, employers must not encourage or induce them to choose this option. If staff choose to reduce their contributions, the scheme rules may allow the employer to reduce their employer contributions or retain them at the current rate.

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 so that they have the opportunity to re-start saving. Staff can also ask to opt back in to pension saving before that date, if they wish.

Many smaller employers are approaching or carrying out their first re-enrolment of staff. TPR will continue to write to employers with information and support on how to carry out their re-enrolment duties and re-declaration of compliance.

Employers cannot use postponement at re-enrolment. However, if they are struggling to complete their re-enrolment duties on the third anniversary of their staging date or duties start date due to the coronavirus pandemic, they can assess staff at a later date up to three months after the third anniversary of their staging date or duties start date.

Automatic enrolment (AE) duties for furloughed staff
As with all other staff, AE duties for furloughed staff apply as normal, and employers will assess them based on the amount of money they are paid. This means that if an employer has agreed to reduce their pay, they will be assessing them based on the reduced amount.

If a member of staff meets the criteria to be put into a pension scheme, they must be enrolled whether they are furloughed or not. Or, employers can also use postponement which postpones putting newly eligible staff into a pension scheme for up to three months. If a postponement period ends during the furlough period, and the member of staff meets the criteria to be put into a pension scheme, the employer cannot use postponement again and must put them in.

If a worker turns 22 during the furlough period and their earnings mean that the criteria to be automatically enrolled are met, the employer can put them into their pension scheme or delay putting them into the pension scheme for up to three months by using postponement.

The effect of reducing the furloughed member of staff’s pay may mean that they will never meet the criteria to be put into a pension scheme during the furlough period. When their pay increases after the furlough has ended, the employer must continue to assess them and enrol them if they are eligible.

More information
More information, including technical guidance for employers and their advisers can be found on TPR’s COVID-19 pages.

TPR are continually reviewing and updating their guidance to respond to developments as they unfold and employers should check this guidance regularly. We want to ensure employers have the support and up to date information they need as they navigate the challenges ahead.