Pensions: What's new this week 14 April 2020

CJRS: updated guidance

The government has updated its information about the Coronavirus Job Retention Scheme (CJRS), including further information on pension contributions (see also the Pensions Regulator's (TPR) guidance discussed below) and commentary on the interaction of the CJRS with salary sacrifice arrangements. In summary, the guidance on salary sacrifice is that the reference salary used for CJRS claims will be the post-sacrifice salary (normally as at 28 February 2020); any employer contributions agreed as part of the sacrifice arrangement must be paid as normal, unless the arrangement is ended. HMRC has agreed that Covid-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the employment contract is updated accordingly. Please contact your usual adviser to discuss the issues further if this is relevant to you.

The updated CJRS guidance also covers additional categories of persons, such as office holders. You can read more about the CJRS in this FAQ document by our Employment specialists (please note that this was published before the latest information and TPR's guidance discussed below).

TPR: CJRS, contributions and other easements

CJRS, contributions and consultation

TPR has published guidance on how the pensions elements of the CJRS operate, together with commentary on automatic enrolment obligations, and on consultation requirements where employers wish to reduce DC contributions to the statutory minimum (the press release is available here).

TPR's guidance confirms that where contributions are higher than the statutory minimum (including where these are calculated on basic pay not qualifying earnings), employers will need to pay the ordinary pension contribution, but also perform an additional calculation for 3% of the (capped) qualifying earnings of furloughed staff as part of claiming a grant under the CJRS. The amount of contributions in excess of the statutory minimum will not be funded by the CJRS. Employers operating a DB scheme can calculate and claim the amount of 3% of (capped) qualifying earnings for furloughed staff (but should consider the interaction with other easements provided by TPR – see ʻTPR provides easements on transfers and DRCs, plus further guidanceʼ.

Where an employer proposes to amend scheme rules to reduce employer contributions (for example, to the auto-enrolment minimum), a 60-day consultation requirement applies. However, TPR has said that where all of the following apply, it will not take regulatory action in relation to a failure to consult for the full 60 days:

• The employer has furloughed staff for whom it is making a claim under the CJRS.
• The employer is proposing to reduce the employer contribution to a DC scheme in respect of furloughed staff only.
• The reduced contribution rate for furloughed staff will only apply during the furlough period (i.e. after this, it will revert to the current rate).
• The employer has written to affected staff and their representatives to describe the intended change and the effects on the scheme and furloughed staff.

TPR will maintain this easement until 30 June 2020 (but will keep this date under review). If all of these criteria are not met, TPR expects employers to comply with the full consultation requirements when decreasing employer contributions – this would include where a reduction applies more widely across the workforce, or is not restricted to furlough periods in respect of a worker.

TPR has also asked DC schemes to report late contribution payments at 150 days late (not 90 days) and to disregard the reference to 90 days on the online portal and in relevant codes of practice.

Other regulatory easements

TPR has published further guidance on regulatory easements, setting out a more flexible approach to reporting and enforcement in some areas until 30 June 2020 – TPR will keep this date under review, and will also consider whether to introduce further flexibilities (or restrictions). Its general approach will be based on the following principles:

• Reporting: If a breach will be rectified within 3 months and does not have a negative impact on savers, it does not need to be reported to TPR. Trustees should keep records of any decisions made and actions taken.

• Enforcement: TPR will decide on a case-by-case basis whether to take regulatory action in respect of breaches of administrative and compliance requirements, and will be flexible (granting longer periods to comply, and taking Covid-19 into account).

The guidance sets out TPR's approach in a number of areas including: DB transfer values; Chair's statements; investment governance; and late accounts. Trustees and sponsors should note the following:

• Reporting charge cap breaches: if the cap is exceeded because costs increase temporarily due to Covid-19, this should be reported to TPR (unless the breach is not material). The guidance states that where trustees have taken all reasonable steps to bring charges back within the cap as soon as possible, TPR will take a proportionate response to enforcement.
• Restrictions on employer-related investments: breaches are not covered by reporting easements (normal rules apply).
• Notifiable events: breaches are not covered by reporting easements (normal rules apply).

Other Covid-19 updates

Other Covid-19 developments include:

• The Financial Conduct Authority (FCA) has announced that it is considering how to implement a 12 month deferral of initial margin requirements – some pension schemes had been preparing for these changes in relation to derivatives contracts.
• The FCA has also postponed some changes to its rules, including in relation to pensions transfers, investment pathways and platform switches.

Pensions dashboards: progress report

The Money and Pensions Service (MaPS), has published a progress report on the delivery of pensions dashboards. The report also discusses areas of focus including digital architecture, online identity verification and developing data standards. MaPS has also published two working reports on data scope (containing options for comprehensive pensions coverage across sectors) and data definitions, and will be seeking input on these later in the year.