Managing your workplace pension scheme during the Coronavirus

We understand that many businesses are facing serious challenges at the moment and are having to change their priorities and practices. We want to help you continue to manage your workplace pension effectively and we’ve put together some useful information below.

This is based on the latest guidance from The Pensions Regulator (TPR) and all the answers are correct as of March 25 2020. We’ll update this information when it changes.

Click on any of the questions below to go directly to them:

 

I’m paying staff using government grants of up to 80%. Do I still need to deduct pension contributions?

Yes, TPR has advised that all usual pension contribution deductions apply – even if you’re using grants to pay up to 80% of wages to keep staff on payroll. This includes meeting the statutory minimum pension contribution, paying at least 3% as an employer.

You can also choose to top this up to cover your employees’ contributions.

Will grants under the Coronavirus Job Retention scheme cover pension contributions?

Yes. These grants are intended to support business and their employees by covering up to 80% of the costs of employment up to an overall cap of £2,805 for each employee. That includes wages, plus employer’s National Insurance contributions and the minimum employer pension contribution of 3% of qualifying wages required under automatic enrolment.

Will these cover amounts beyond the automatic enrolment minimum?

No. In the interests of simplicity, the government has aligned the grants with the 3% minimum contribution required by employers under automatic enrolment. If employers contribute above this amount and will continue to do this for furloughed staff, they won’t be able to claim for these additional contributions.

Is the government going to take further action to reduce employer costs by suspending automatic enrolment?

The government has decided wage subsidies to assist with the costs of employment are the best way to support businesses and employees, without negatively impacting on individuals’ financial future when we come through this crisis. This situation is being kept under review.

Can I pay employees, but not deduct pension contributions?

If you’re still paying your employees, then you’re still required to make the deductions as normal. You must continue to meet the statutory minimum of 8% contributions, paying at least 3% as an employer.

If you’re paying some staff, but not others, simply amend the relevant contribution amounts, gross pay and pensionable earnings columns to ‘0’ for those employees who haven’t been paid. Then upload the file as normal.

If you’re not paying any staff, please log on to Gateway and select the ‘Null submission’ option for the relevant payroll.

You should keep your Direct Debit active – there’s no need to cancel it.

Can I pause pension contributions or take a pension payment holiday?

No. If you’re paying employees, you must continue to make employer contributions (a minimum of 3%) and deduct employee contributions (5%) to meet the minimum requirement of 8%.

Where you’ve already paid staff and deducted contributions, you’ll need to continue to upload your pension data and allow the collection to be made.

Click here to see guidance above on how to manage contributions if you’re paying some employees and not others.

I’m not paying employees for the time being, what do I need to do?

If you’re paying some staff, but not others, simply amend the relevant contribution amounts, gross pay and pensionable earnings columns to ‘0’ for those employees who haven’t been paid, then upload the file as normal.

If you’re not paying anyone, please log on to Gateway and select the ‘Null submission’ option for the relevant payroll.

You should keep your Direct Debit active – there’s no need to cancel it.

Should I cancel my Direct Debit?

No. Please keep your Direct Debit active – there’s no need to cancel it.

Click here to see guidance above from previous questions on how to manage your contributions.

I’m suspending my business and activities. What do I need to do about pension contributions?

If you’re paying some staff, but not others, simply amend the relevant contribution amounts, gross pay and pensionable earnings columns to ‘0’ for those employees who haven’t been paid, then upload the file as normal.

If you’re not paying any staff, please log on to Gateway and select the ‘Null submission’ option for the relevant payroll.

I’ve already submitted my pension data, but I don’t have the funds available to pay the contributions. What should I do?

TPR has been explicit that it expects employers to continue making contributions to workplace pension schemes.

Can I encourage employees to opt out of or take a break from our workplace pension scheme?

No. You mustn’t advise or encourage employees to opt out of your workplace pension scheme. This could be considered an inducement and would be a breach of your legal duties. We’re obliged to monitor this and report any such incidents to TPR.

Will I be reported to TPR for unpaid contributions?

Yes, we’re still required to report employers for failed payments. However, this reporting will now take place once contributions are 150 days late rather than 90 days. 

TPR has published the following statement: “We know this is a challenging time for everyone and we recognise the strain this is putting on employers. We will take a proportionate and risk-based approach towards the enforcement of decisions, in light of these challenging times, with the aim of helping to get employers back on track and supporting both employers and savers.”

Where staff are being paid normal pension deductions still apply. This includes both employee and employer contributions.

You can read TPR’s full statement from March 20 here.

A member is asking to pause contributions. What should I do?

Members can ask to stop their pension payments (cease contributions) and leave active membership at any time. If they do, you’ll stop contributing for them at the same time.

Members who choose this option will be automatically re-enrolled at their employer’s next re-enrolment date. This occurs once every three years.

These members can choose to rejoin at any time before automatic re-enrolment too.

Is the government going to reduce automatic enrolment contributions made by individuals?

No. The government anticipates that individuals will continue to make contributions from their wages to help them to save for retirement, but there remains the option for them to opt out or cease saving if that’s right for them at this time.

Is Statutory Sick Pay included as part of qualifying earnings for the purposes of a workplace pension?

Yes. Automatic enrolment legislation requires Statutory Sick Pay (SSP) to be treated as part of qualifying earnings.

During sick leave, pension contributions paid by both employers and employees are based on the employee’s actual earnings. 

So unless the contract of employment or the workplace pension scheme rules offer more generous terms, both employer and employee contributions will decrease if sick pay is less than normal pay. 

What are qualifying earnings?

Qualifying earnings are earnings of between £6,240 and £50,000 made up of any of the following components that are paid to employees:

  • salary
  • wages
  • commission
  • bonuses
  • overtime
  • statutory sick pay
  • statutory maternity pay
  • ordinary or additional statutory paternity pay
  • statutory adoption pay.

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