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Pensions in the time of coronavirus: what’s the current situation?

We understand that businesses are facing serious concerns due to the effects of the coronavirus (COVID-19), whether that be apprehension about the future or immediate issues with cash flow, and many are looking for ways to make cutbacks during these turbulent times.

At Vintage, we want to offer support to help you steer your business successfully through this current financial storm and do the best that you can to keep your employees afloat at the same time.

With the budget recently announced, and such measures as the Coronavirus job Retention Scheme introduced, you may be wondering how all this affects pensions – both yours and those of your employees.

We’re here to make sure you have all the help and information you need. If you have any concerns – no matter how large or small – our advisers are here, ready to help.

What if I can’t pay auto-enrolment contributions?
Both you and your employees are still currently required to pay auto-enrolment contributions as normal. If this is not possible, you should contact The Pensions Regulator (TPR). If it is a temporary cash flow issue, the good news is that you have 150 days before you are reported to them, rather than the usual 90 – so there is some extra leeway.

Do I still have to contribute for furloughed staff?
No. As part of the Coronavirus Job Retention Scheme, the 3% minimum auto-enrolment contribution, as well as NI, will be paid by the government along with 80% of an employee’s wage up to £2,500 a month – so you can rest easy that your staff are taken care of.

What if I usually contribute above the minimum 3%?
You may choose to make up the difference above the minimum 3% if you usually pay more, though this is not required.

Can I encourage staff to temporarily opt out of the scheme?

No. Discussions that influence your employee’s decision may be considered inducement, so steer well clear. If a staff member asks your advice, refer them to an independent financial adviser or the TPR.

Can my employees opt out themselves?

Yes. Your employees can decide to opt out at any time, which means neither you nor they will make auto-enrolment contributions.

Can I make temporary changes to the way our company’s pension scheme works?
If you are struggling to continue as agreed with your workplace pension scheme in any way, it may be possible to arrange a temporary change, but this must first be discussed with trustees, administrators and employees, and meet the rules set out by TPR.

What do recent changes in the budget mean for higher earners?
If you or members of your staff have previously been affected by the Tapered Annual Allowance, you may be able to increase your pension contributions now that the government has raised the threshold by £90,000 to £200,000. So, higher earners will be able to reinstate their full £40,000 Annual Allowance if they can pay enough in personal contributions to reduce their Threshold Income to £200,000 or less. This is the first increase since the rules were introduced – finally some good news!

What about lower earners currently losing out?

Nothing has been put in place yet, but a consultation has begun to find a way for low earners below the income tax threshold in net pay arrangements to potentially benefit from a top-up on contributions. This could affect your part-time or job share workers in the future, but you don’t need to think about it at the moment.

I’m approaching retirement, what does that mean for my pension pot right now?
Recent market dips mean many investments have fallen in value, which has affected the majority of pension savings. However, markets historically rebound from such fluctuations, so have a chat with one of our financial advisers about possible short-term and long-term financial plans.

If you need urgent advice, are confused about how the current financial climate affects your responsibilities, or just want to put your mind at ease, get in touch with us today. We understand what disturbing and stressful time it is at the moment and are here to support our clients in every way we can.