Issues affecting all schemes

The Pensions Regulator has issued further COVID-19 guidance. This is summarised below.

COVID-19: tPR issues salary sacrifice guidance for large employers

tPR has published new guidance on calculating pension contributions under a salary sacrifice arrangement for furloughed employees. It has also updated its guidance for trustees on DC scheme management and investment.

The new guidance sets out examples of the interaction between salary sacrifice and grants from the government's Coronavirus Job Retention Scheme (CJRS). It also contains practical points for employees and trustees to ensure the administration of salary sacrifice arrangements is done correctly.

The guidance confirms that any grant payable to an employer under the CJRS does not change an employer's usual pension contribution obligations or processes. As the operation of a salary sacrifice arrangement is a contractual one, separate from any obligations under the scheme's governing documents and the auto-enrolment requirements, the first step is for an employer to consider their contractual obligations.

The guidance confirms that COVID-19 counts as a life event which means changes can be made to salary sacrifice arrangements subject to amending existing contracts of employment. The guidance also addresses the factors employers will need to consider if an employer wants to reduce their contribution to the auto-enrolment statutory minimum, including where this may involve an amendment to the scheme's governing documents.

Where an employer self-certifies because its scheme meets the alternative auto-enrolment statutory minimum contribution requirements, the guidance states that employers may be able to change their scheme rules to match the auto-enrolment statutory minimum employer contributions based on qualifying earnings. It notes that employers can choose to end the current certification period early under the certification rules. However, as this is likely to lead to a reduction in the employer contribution then the same list of factors as arise when considering a reduction of employer contributions to the auto-enrolment statutory minimum should be considered.

COVID-19: tPR guidance on communicating to members during COVID-19

This guidance includes:

  • Trustees should keep members informed about changes, delays or a disruption to member services.
  • Communicating with members when they request a transfer or to access benefits. This includes giving warnings about the risks and implications of their chosen decision, for DC benefits.
  • For DB to DC transfers:
    • a request to issue a specific template letter where members request a transfer value quote.
    • a statement that trustees should actively monitor the number of requests for CETV quotes received, which advisers are supporting the members' request and a request to contact the FCA if there are unusual or concerning patterns.
  • A reminder that where a DB transfer value is more than £30,000 and members want to transfer benefits to a DC scheme, they are required by law to take advice from an authorised financial adviser.
  • A request to warn members about the implications of stopping pension contributions or opting out.
  • A reminder of the role that trustees can play in helping to prevent scams.
  • A request that trustees who are communicating with members (for example when sending benefit statements) should highlight:
    • what current market volatility might mean to members retiring over different future time periods.
    • the need to think carefully and consider getting investment advice before switching funds in the current market (to avoid crystallising losses).
    • the danger of scam activity in the current climate.
    • free impartial guidance is available from the Pensions Advisory Service.

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Originally published May 28, 2020.

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