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Workers need explanation of UK pension contribution changes if furloughed

Employers must explain any defined contribution scheme contribution changes to furloughed workers. Employer pension contribution amounts, and what they are based on, must be covered in furlough agreements.

Also, in order to adhere to auto-enrolment requirements, contribution rates might need to be changed if they are going to be covered by the Coronavirus Job Retention Scheme (CJRS), while certain scheme rules could also require changes.

It is predicted that more than 9 million employees could find themselves furloughed under the government scheme.

The Pensions Regulator (TPR) published updated guidance to employers, explaining that auto-enrolment duties “continue to apply as normal”, but that there are some flexibility in place.

Employees who might be particularly vulnerable at present include those who are part of salary sacrifice schemes, who could be receiving only 80% of their already depleted earnings under the Coronavirus Job Retention Scheme.

HMRC has confirmed that Covid-19 counts as a “life event” for salary sacrifice – but if an employee stops participating in salary sacrifice, the amount the employer can recover under the Coronavirus Job Retention Scheme won’t change.

The Pensions Regulator has extended the time for notifying it of late payments from 90 days to 150 days

In order to ensure that contributions can be paid promptly, employers should certify their in-house systems work properly and are accessible for administrative staff who might be working remotely, while employers who use a third party should check that their systems are robust enough.

Employers also need to consider death benefits, including death in service policies to see if they exclude deaths during a pandemic, or deaths when a person is not actively at work, as they could otherwise unexpectedly find themselves with a liability to pay a benefit and no insurance to cover it.

Other recommendations include setting up new email addresses for furloughed employees who are also trustees of occupational schemes, as this would allow them to keep up with trustee correspondence without appearing to work during their period of leave.

If you live in the USA we can give advice by phone, email or Skype.

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