Applications open for grants from the Coronavirus Job Retention Scheme
On 20 April the Government’s scheme of financial support for those companies that need to furlough some or all of their staff due to the Covid-19 emergency opened for grant applications. To assist companies, on 17 April HMRC published an employer step by step guide on the application process along with related guidance on how to work out 80% of wages, NICs and pension contributions, which includes an online calculator. And on 20 April it published further guidance on how to claim.
This followed publication of a Treasury Direction on 15 April, which sets out the formal rules of the scheme, including how the claimable pension contribution operates.
The associated employer and employee guidance was also updated on 15 April, mainly to allow for the extension of the scheme so that it covered those employed on 19 March (initially the scheme only supported those employed on 28 February). And on 17 April the scheme, which initially was open for three months and backdated from 1 March to 31 May, was extended to 30 June.
Meanwhile on 13 April, the High Court handed down judgment in relation to the Carluccio restaurant chain in what is thought to be the first furlough case, involving an employer in administration. This has been quickly followed on 15 April by a High Court judgment relating to Debenhams, who are also in administration. These cases concern the interaction of the Job Retention Scheme with insolvency law. We merely note them here as part of the increased knowledge base of the Scheme.
Updates to HMRC guidance explaining the parallel scheme for the self-employed were also published on 14 April.
Comment
It is gratifying to see that the Scheme is up and running so quickly to help so many and that details are being fleshed out. Possibly the most important feature to have emerged in recent days is that it looks increasingly likely that, to successfully make a claim, employers must have obtained the agreement of employees to being furloughed.
Separately, where furloughing goes hand in hand with reductions in employer DC pension contribution rates to, say the auto-enrolment minimum, this could well require employee consent. This may also pose practical challenges.
Other Covid-19 pension announcements
Since last week’s Pensions Bulletin other announcements and posts in the world of pensions influenced by the Covid-19 health emergency include the following:
-
On 15 April, a blog was published by Charles Counsell, Chief Executive of the Pensions Regulator, in which he repeated concerns that fluctuating stock markets could lead to pension savers making a rushed decision that they come to regret. He called for the pensions industry to step up and protect savers using every possible means, pointed to the Financial Conduct Authority’s 7 April pensions and retirement income guidance to the firms that the FCA regulates and urged trustees of occupational schemes to also use this guidance
-
On 16 April the response deadline in respect of the joint HM Treasury / UK Statistics Authority consultation on addressing the shortcomings of the Retail Prices Index was put back from 22 April 2020 to 21 August 2020. This consultation, which was launched with the Spring Budget (see Pensions Bulletin 2020/11), looked to bring the methodology of the CPIH into the RPI at some point between 2025 and 2030. The intention then was for the outcome of the consultation to be known before the Parliamentary summer recess. The Government and the UKSA will now respond to the consultation in the autumn. The delay was accompanied by an exchange of letters, from the Chancellor to Sir David Norgrove, Chair of the UKSA, and from Sir David to the Chancellor, making clear that the reason for the delay is because those who may wish to respond will be focussing on the Covid-19 health and economic emergency
-
On 17 April the Pensions Regulator updated its 9 April published “automatic enrolment and pension contributions” guidance (see Pensions Bulletin 2020/16). The most significant change is the addition of new and separate technical guidance covering the following two areas:
Pension contributions and salary sacrifice
This lengthy part of the guidance, involving four examples, illustrates how the employer of a furloughed employee who had entered into a salary sacrifice arrangement by reference to his or her pension contributions, may need to change its payroll processes, particularly if a reduction in pay has been agreed with the furloughed employee. This is to ensure that all of the grant in respect of the pay element, received from the Coronavirus Job Retention Scheme, is paid to the furloughed employee as money
DC certification
This demonstrates through two examples that, where employers have certified their DC scheme for auto-enrolment purposes on an alternative minimum contribution requirement to that based on qualifying earnings, employer contributions for a furloughed employee can be higher than the amount that can be claimed from the Coronavirus Job Retention Scheme, including the possibility that nothing can be claimed
-
On 17 April the Pensions Regulator also updated its 27 March published DC investment guidance for trustees (see Pensions Bulletin 2020/14), but it seems only to reprise some employer-focussed messages relating to the auto-enrolment guidance above when it was first published, in particular by adding a new section entitled “If your scheme’s employer wants to reduce contributions to a DC scheme”
-
On 17 April the European Insurance and Occupational Pensions Authority published a statement calling on national competent authorities (ie the Pensions Regulator for the UK) to adhere to principles covering five areas in order to mitigate the impact of the Covid-19 emergency on occupational pension schemes and their members and beneficiaries, as well as to avoid pro-cyclical effects on the real economy and financial system
-
On 21 April the Pensions Regulator added to its Covid-19 microsite a link to guidance on how to avoid pension scams. But other than a boxed mention of how the current situation may increase the risk of savers falling victim to a pension scam, the material presented is not new except for two new documents being presented as resource material
-
On 21 April, both Houses of Parliament returned after the elongated Easter recess, but largely in a new virtual format. The sitting days have also been reduced to three days (Monday to Wednesday) per week. With a focus on matters relating to Covid-19, it is not yet clear what progress will be made on the Pension Schemes Bill (see Pensions Bulletin 2020/14) over the coming period
-
On 21 April the Institute and Faculty of Actuaries’ Continuous Mortality Investigation published its second weekly report on mortality data. This latest report shows a continuation in adverse mortality first reported last week (see Pensions Bulletin 2020/16). The number of deaths in this second week ending 10 April of 18,516 was 8,076 (77%) greater than expected, with 6,213 having Covid-19 mentioned on the death certificate.
Comment
Once more, a number of Covid-19 related pensions announcements for the industry to digest, but few that are likely to result in a change in the operation of schemes during this uncertain period.
