6th April 2020

Pensions Q&A – supporting employers through challenging times

By Aston Lark
couple discussion

As COVID-19 has made rapid and drastic changes to working practices, employees will have many questions regarding their employer’s financial obligations, including the status of their pensions.

In conjunction with Royal London and The Pensions Regulator (TPR), we’ve compiled answers to some of the most frequently asked questions to help employers support their employees during this time.

Please note, this information is based on our current understanding of the position for employers. We will keep monitoring the latest advice from the Government and TPR and provide any updates.


Can employers put their scheme on a contribution holiday?

The current steer from the Department for Work and Pensions is that they’re keeping the situation under review, however, they believe the Job Retention Scheme is the best way to help employers with the costs of employment including a minimum level of pension contributions.

If employers are concerned about whether they can meet their ongoing duties, we suggest they speak to TPR.


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.


What should employers do if any members want to stop paying into their pension?

Members can stop their contributions at any time.

Automatic enrolment rules do allow employers to stop making their contributions, but they’ll need to make sure this is done in line with any scheme rules if it’s an occupational scheme, or any previously agreed processes if it’s an automatic enrolment scheme. 

If the member and/or the employer want to re-start the contributions, this can be done, but again it will need to be in line with any agreed processes.


What should employers do if any members stop paying into their pension, but they want to continue contributions?

If the member’s contribution stops, employers will need to stop deducting contributions from their salary. 

Similarly, employers will need to check to see if there are any conditions that apply to minimum/matching contribution amounts. From this, they will need to ensure they update their schedules to reflect the new contribution.


Do employers still 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.


If employers need to reduce salaries, do they still need to make the 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.


Can employers 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 us know as well as keep a record of this in case TPR asks for evidence and they’ll also need to let their employees know.


If the 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 any new employees into the scheme in the normal way. 


If the current situation means employers can’t make their pension contributions on time, what are their options?

We appreciate that current circumstances will be challenging for employers, however until TPR tells us otherwise, employers should try to make their pension contributions as soon as they can.

If employers are concerned about whether they can meet their ongoing duties, we suggest they speak to TPR.


What happens if employers need to let some of their employees go either short 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 workforce go.

If employers do need to let their workforce go, they’ll need to follow the normal rules and processes for terminating employment, make any final payments into the pension scheme and complete the notification of leaving process on the scheme.

There’s more information about the Government’s scheme available online.


What information is available for scheme trustees?

To help trustees meet their ongoing responsibilities, TPR has issued a guidance note

 


What will be the impact on various pension schemes?

If any employers do find themselves in the position where they need to make changes to their pension scheme, it’s best to get in contact with your Aston Lark representative to assess next steps. The most likely changes that may occur will be:


Members taking unpaid leave

If this happens, employers will need to speak to their Aston Lark representative so that their pension scheme can be updated to show that these members have stopped paying contributions. When contributions are ready to be restarted, they’ll need to go back into the dashboard and update the status.


Employers changing their scheme certification basis

This would depend on the structure of the scheme, so please speak to your Aston Lark representative to see what is available.

Some schemes would keep a record of the change and the new scheme’s basis. We’d also make the employer aware that any projection information they or the member will receive will be impacted, including:

  • Dashboard
  • Member illustrations
  • Yearly statements
  • Mobile app

The Group Customer Service teams will carry out a review with the employer following six months and, if they want to continue with qualifying earnings on a permanent basis, then we will make the necessary changes to the scheme.

For any further queries, please contact the Aston Lark Employee Benefits team on 020 7543 2833 or email employeebenefits@astonlarkeb.com.


Useful links

If you need to get in touch with TPR or pass on their details, here are their contact details.

Further information on Government support for businesses can be found here.

Further information regarding ‘furloughed workers’ can be accessed here.