Coronavirus: The Government knows employers must keep one eye on tomorrow
During this time of huge uncertainty, financial security is at the forefront of many people’s minds. For those running businesses, the focus is understandably on the here and now, ensuring there’s sufficient cash flow and resources to navigate this enormously challenging period.
But employers are also well aware they have to have one eye on tomorrow, as they’re required to keep up with their pension scheme obligations. So we’re determined to do everything we can to help them, working closely with the regulators.
The Government has put in place an unprecedented package speed to support businesses and protect jobs and incomes, including loans, business rate relief, VAT deferrals and grants. Key to this is the support provided by the Coronavirus Job Retention Scheme (CJRS) .
The grants available to employers under this scheme will support business by covering up to 80 per cent of usual monthly wage costs for furloughed workers, capped at £2,500 per month.
And crucially, in addition to wage support and the employer’s National Insurance contributions, these grants will also cover up to the minimum employer pension contribution – or three per cent of qualifying earnings – required under their automatic enrolment duties. This is the case even if it’s not an automatic enrolment pension scheme.
We’ve taken this decision in order to help ease the burden of workplace pensions for employers with furloughed staff. This will help people to carry on long-term saving for the future and it’s important not to lose sight of that during these unsettled times. We will continue to protect the hard-won improvements to retirement provision for millions of our fellow citizens.
With the scheme now live – within a month of being announced – claims can be backdated to 1 March where workers have already been furloughed. The scheme has also been extended until the end of June.
Alongside this, The Pensions Regulator (TPR) has taken decisive action on automatic enrolment compliance and enforcement, reinforcing its commitment to a proportionate approach towards employers, while continuing to safeguard the savings of workers.
We do recognise that some employers sponsoring Defined Benefit (DB) schemes may be struggling to meet contributions towards any deficit. However, we see no reason why an otherwise healthy employer should become insolvent due to requirements to pay deficit reduction contributions during this difficult period.
The DB funding system already has the flexibility to deal with economic shocks, and we would urge any sponsoring employer who is struggling with payments to speak to their trustees in the first instance.
The Government is working closely with TPR to help trustees and employers sponsoring DB schemes to make use of the flexibilities in the framework, and TPR has published guidance to this effect on its website.
We would also like to reiterate the message given jointly by the Financial Conduct Authority, TPR, and Money and Pensions Service, that pensions are a long-term investment and that people should not rush into financial decisions at this time. We recognise that this is a difficult period for many and the volatility of the stock markets may lead people to worry about their pensions. It is important to consider the longer-term implications of any major financial decisions.
We would encourage people to seek guidance or advice and to consider the impacts that decisions made now may have on their income in retirement. The Pensions Advisory Service website provides impartial guidance and people can get financial advice from a Financial Conduct Authority-authorised financial adviser.
For any employers providing Defined Contribution (DC) pensions who are concerned they may not be able to make their contributions, we urge you to speak to your provider.
If you are having immediate difficulties, providers may be able to change payment schedules, or help you put in place repayment plans over a longer period, where appropriate, while your business applies for help from the CJRS.
On the pensions front, our priority, right now, is to support employers and scheme members.
We want everyone to be able to access the help they need. That’s why we’d urge employers to take a close look at the detail of the Government’s whole financial support package – it is there to help you, particularly if you are having problems with cash flow in your business.
There is a Business Support website that helps businesses find out how to access the support that has been made available, who is eligible, when the schemes open and how to apply – https://www.businesssupport.gov.uk/coronavirus-business-support/
Businesses can also call the Business Support Helpline on 0300 456 3565.
It is designed to be as straightforward as possible, so that it aligns with, and works for, the business processes of employers across the economy.
We understand the current situation is an unprecedented challenge for employers, and that is why Government has responded with an unprecedented package of taxpayer support.
We want employers to make use of this help, right now, and we are doing everything we can to ensure that happens.
Our message is clear – we’re in this together and the Government is going to do whatever it takes to get you, your business and your employees through these difficult times.