The current economic conditions are having a huge impact on us all, however it’s at times like this when we can support our clients and provide the guidance they need.
We have put together some Questions and Answers about what employers or employees may need to consider at this time in relation to meeting the Auto Enrolment Pension obligations.
Can the Furlough Grant be used to cover pension contributions?
Employers must pay at least the minimum AE employer pension contributions on behalf of their furloughed employees. But they can only claim back the minimum AE employer pension contributions on the earnings paid.
The minimum mandatory employer contribution is 3% of income above the lower limit of qualifying earnings (which was £512 per month until 5th April and is £520 per month from 6th April 2020 onwards).
The employer will also need to consider their employment contracts, any scheme rules and communicate with their employees before they make any changes to the contribution levels
What if the employer’s scheme operates on a salary exchange basis?
Updated guidance from the Government makes it clear that the salary for calculating the grant should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.
HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contracts are updated accordingly.
Can an Employer put their Pension 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.
However, if the employer is concerned about whether they can meet their ongoing duties, we would suggest they speak to TPR but we are also here to help.
Members can stop their contributions at any time and should inform their scheme provider and Employer.
If an employee stops their contribution, automatic enrolment rules do allow employers to stop making their contributions.
If the member and/or the employer want to re-start the contributions, this can be done and again the member should inform the scheme provider and Employer of their intentions.
Getting in touch with TPR
If you need to get in touch with TPR you can do so through their website.