Coronavirus & Pensions: Automatic Enrolment & DC pension contributions
On the 9th April 2020 (updated 17th April 2020) The Pensions Regulator (TPR) published additional guidance for employers operating Defined Contribution (DC) pension schemes.
The new guidance can be found at the following link: Automatic Enrolment and DC pension contributions: COVID-19 guidance for employers
The above guidance is in addition to that already published in March by TPR. Howden Employee Benefits & Wellbeing’s thoughts on the previous document can be found in our update dated 27th March 2020.
So is there anything important in the new guidance?
We would encourage all employers to read and understand the new document, as it deals directly with the Automatic Enrolment (AE) duties that continue to apply even in the midst of the challenges of the COVID-19 pandemic.
In particular, we would like to highlight three important points for employers to consider in this respect:
1) Re-Enrolment Duties continue to apply:
Many employers will be approaching the three-year anniversary of their initial (AE) staging or duties start date. On each such three-year anniversary a process of re-enrolment and re-declaration is required to comply with Auto-Enrolment duties. For more information on this process please see this link.
The Pensions Regulator now makes it clear that this process must continue, even if some or all employees are being placed on furlough, and regardless of whether employee remuneration is being funded via the Government’s Coronavirus Job Retention Scheme.
However, TPR does emphasise the continued option to postpone the employer’s re-enrolment duties to a more appropriate date for up to three months after the three-year anniversary date. For full details of this option please use The Pension Regulator’s re-enrolment date tool.
2) Reducing Employer Pension Contributions:
The new guidance also clearly sets out how it might be possible for an employer to reduce contributions to a pension arrangement.
It is, however, worth emphasising that the employer cannot legally reduce its contributions below the statutory minimum required. The only exception to this is where the employer contribution is an entirely voluntary one (for instance where the employee is not paying his/her statutory minimum contribution) and the employer is, therefore, making a contribution not required under the Auto-Enrolment legislation.
It may, however, be possible to reduce higher levels of employer contributions to the statutory minimum level. It is important to note that such a decision should be carefully considered, as various factors including contract law, scheme rules, trust law, collective agreements with Trade Unions and other bodies, and consultation requirements might still apply. We would, therefore, urge employers considering this action to seek advice before taking such a potentially significant decision.
It is also worth highlighting that the Government has instigated various support options to help employers with their finances during this very difficult period for the nation. In particular, we would like to remind employers of the support offered regarding employer pension contributions available under the Coronavirus Job Retention Scheme. For more details please see this link.
Finally, and not least, TPR emphasises that employers currently struggling to meet their pension commitments should speak to their pension scheme provider in the first instance to explore whether there is the flexibility to change the due date for payment, or whether the provider can offer assistance in paying contribution over a longer period.
3) Easement of consultation requirements:
In (2) above we noted the requirement under pensions legislation to consult on certain changes (such as reducing employer pension contributions). This only applies if the employer has 50 or more employees.
The consultation period is usually a minimum period of 60 days. However, The Pensions Regulator recognises that this might not be appropriate at present, and has therefore suggested an easement in this requirement until at least 30th June 2020.
The easement only relates to furloughed staff where a claim is being made under the Coronavirus Job Retention Scheme, and full details of the requirements to be met are set out under “Employer consultation requirements” of the TPR guidance.
Please visit Howden’s new coronavirus hub for the latest information regarding COVID-19 & Employee Benefits provision.
Please note: All details are based on Howden Employee Benefits & Wellbeing’s understanding of the guidance as at 21st April 2020.
Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.