Update from the Pensions Regulator – Covid 19

The Pensions Regulator has issued updated guidance to employers.

Please click here for the direct link and further commentary.

The regulator said its guidance is part of its package of measures to safeguard pensions through these unprecedented challenges.

It said it is reminding employers they continue to have AE responsibilities – but noted it would “take a proportionate approach to any enforcement decisions in light of the current pressures”.

The regulator also highlighted flexibilities that were available to employers during this time.

It said, while the minimum correct contributions must continue to be made on time, the period in which schemes must report payment failures has been extended from 90 days to 150 days to give trustees and providers more time to work with employers to bring payments up to date.

TPR has also written to providers asking them to be as flexible as possible when agreeing contribution payment dates.

It said employers can additionally access information, which will be updated again in due course, about the government’s Coronavirus Job Retention Scheme which allows them to claim back minimum AE employer contributions for furloughed staff.

TPR head of automatic enrolment Joe Turner, said:

“These are unprecedented times and we are acutely aware of the pressure employers are now under. While employers continue to have responsibilities, we are weaving in as much flexibility as possible to help employers and protect savers.

We are continually reviewing and updating our guidance to respond to the challenges as they unfold. Further guidance will be published shortly outlining in more detail what employers can expect from us in the weeks and months ahead.”

The TPR employer guidance includes:

  • Information about the government’s Job Retention Scheme
  • What employers need to know about payroll
  • Maintaining AE pensions contributions
  • Information for employers paying more than the minimum AE contributions
  • Re-enrolment responsibilities and flexibilities
  • What employers must do if staff ask to opt out or reduce their contributions

The new rules would allow employers to reduce their contributions into certain workers’ defined contribution pensions to the statutory minimum without the normal process of consultation.

Under existing rules, firms who employ 50 or more workers would have to consult for sixty days before decreasing contributions.

The TPR has indicated in the new guidance that in particular circumstances it will ‘not take enforcement action’ where employers reduce contributions but do not follow the consultation rules.

These circumstances are where four tests are all met:

  • The employer has furloughed staff for whom a claim is being made under the Coronavirus Job Retention Scheme
  • The contribution reduction is for furloughed staff only
  • The reduction is for the period of the furlough only
  • Affected staff (and their representatives) have been notified of the change and the effect it will have

The TPR continues to encourage employers to consult as far as possible, but will not take action provided that the four tests above are met.

Under the Job Retention Scheme, employers are only reimbursed for the legal minimum level of pension contributions and many employers will have been contributing more than this, leaving a funding gap. In normal circumstances, employers would have to spend a couple of months consulting about a reduction in contributions but these are not normal circumstances. It seems proportionate to allow employers to reduce contributions just for furloughed staff and just for the length of the furlough.

This easement doesn’t apply to non-furloughed staff. Employers must continue to consult for at least 60 days if they intend to reduce their contribution rates. If employers fail to do this, TPR will take regulatory action, including demanding backdated contributions at the higher level and issuing fines.

This is a pragmatic and proportionate easement in these extremely challenging times for employers who have made the decision to furlough their employees.

This regulatory easement ends on 30th June, but the regulator will keep this under review.

Rachel Legg is Dafferns Wealth Limited’s Independent Financial Adviser – please get in touch if you need help or advice.

Dafferns Wealth Limited is an Appointed Representative of Insight Financial Associates Limited which is authorised and regulated by the Financial Conduct Authority, FCA number 458421.