Pensions legislation and case law update: the latest developments week ended 16 April 2021

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This week’s digest includes updated guidance from the Pensions Regulator on the payment of pension contributions for furloughed employees and a funding update from the Pension Protection Fund.

The Pensions Regulator updates DC pension contributions guidance following extension of CJRS 

The Pensions Regulator (the Regulator) has updated its Covid-19 guidance on automatic enrolment (AE) and defined contribution (DC) pension contributions to incorporate changes to the Coronavirus Job Retention Scheme (CJRS) which has been extended to September 2021. The CJRS currently grants 80% of wage costs of furloughed employees, falling to 70% in July and 60% in August and September (subject to a monthly cap), with employers expected to make up the difference to 80%.

CJRS payroll processes

The guidance makes clear that when paying furloughed staff tax, national insurance and pension contributions should still be deducted. Employer pension obligations also remain unchanged under the scheme. Employers were able to claim up to the statutory minimum AE pension contribution on wages included in claims before 1 August 2020. However, for claims starting on or after 1 August 2020 employers are not able to claim for the employer pension contribution on furlough pay.

The guidance explains that if employers have reduced the pay of furloughed staff to 80% (subject to the £2,500 cap) and they are not working part-time during the furlough period, then employers should run their payroll as normal on this reduced amount of pay in July, August and September 2021. However, if employers have chosen to top up furloughed staff’s pay, or the staff member is working part-time during the furlough period, then employers should run payroll as normal using the total amount of pay. 

AE duties for furloughed staff 

The guidance goes on to explain that AE duties apply as normal for furloughed staff including re-enrolment duties. Employers must assess AE eligibility based on the amount of money being paid to furloughed staff. This means that if pay has been reduced any assessment would be based on this reduced amount. Employers can use postponement which postpones putting newly eligible staff into a pension scheme (and therefore the requirement to make pension contributions) for up to three months. 

Similarly, automatic re-enrolment duties will continue to apply as normal. However, employers approaching the third anniversary of their staging date can choose a date up to three months after this anniversary to assess staff. The guidance notes that the reduction in pay for some furloughed staff might mean that they no longer meet the criteria to be put back into the pension scheme. These staff would next be assessed for re-enrolment in three years. However, they can ask to be put back into the pension scheme before this time should they wish to do so. 

The Regulator has published the automatic enrolment declaration of compliance report

The Regulator has published its monthly report on automatic enrolment compliance. The report, derived from information submitted by employers, details that as of March 2021 10,457,000 eligible jobholders were automatically enrolled. 

PPF 7800 Index shows increase in surplus

The PPF 7800 Index setting out the latest estimated funding position on a section 179 basis as at the end of March 2021 of the eligible 5,318 defined benefit schemes shows that: 

  • the aggregate surplus increased over the month to £34.2bn from a surplus of £14.6bn at the end of February 2021;
  • the funding ratio increased from 100.8% at the end of February 2021 to 102%; and
  • the deficit of the schemes in deficit reduced to £144.3bn from £154.4bn at the end of February 2021.

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