We explained last week that we appreciate that many of our readers are busy responding to the rapidly evolving challenges of the coronavirus disease 2019 (COVID-19) and have limited capacity for addressing other pensions issues. We are therefore providing you with a brief weekly summary of key legal and regulatory developments relevant to occupational pension schemes, with links for further information.
The Pensions Regulator (TPR) issued funding and investment guidance for trustees of defined benefit schemes on 27 March. This sets out TPR’s expectations for trustees completing actuarial valuations, receiving requests for financial easements from sponsoring employers, and responding to the challenges posed by current market conditions, including in relation to transfer requests. Generally, TPR will be operating various “regulatory easements” until 30 June 2020, and “will continue to consider…whether more specific flexibilities or restrictions are required”. Separate guidance considers the sponsoring employer’s perspective. Investment guidance for trustees of defined contribution schemes also addresses the need to review member communications.
HMRC has now published two sets of guidance on how the Coronavirus Job Retention Scheme will operate:
The guidance confirms that the grant from HMRC will cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary, or £2,500 per month, plus the associated employer National Insurance contributions (NICs) and minimum automatic enrolment employer pension contributions on those wages. Employers can chose to provide top-up salary in addition to the grant, but employer NICs and the automatic enrolment pension contribution on any additional top-up salary will not be funded through the Coronavirus Job Retention Scheme. Nor will any voluntary automatic enrolment pension contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (the lower limit of qualifying earnings is £512 per month until 5 April, and will be £520 per month from 6 April 2020).
The Coronavirus Bill (mentioned in our previous weekly update) became the Coronavirus Act 2020 on 25 March 2020.
A number of rates and allowances affecting pensions will increase from 6 April. This includes the Lifetime Allowance, which will increase from £1,055,000 to £1,073,100, and the lower end of the automatic enrolment band, which will increase from £6,136 to £6,240 (the upper end of the automatic enrolment band, and the earnings trigger will remain the same).
The government has issued new regulations revoking the increase to the general levy. The general levy recovers the funding provided by the Department for Work and Pensions to TPR (in part), the Money and Pensions Service (in part) and The Pensions Ombudsman (in full). The government had previously announced that there would be a 10% increase in the levy from April 2020. Due to the coronavirus crisis, this increase will no longer happen this year, and a wider review is planned for 2021.
HMRC has announced that in order to assist trustees and businesses affected by the current situation, it is content that any arm’s length commercial decision relating to a registered pension scheme, including a rent holiday on commercial premises held as a pension scheme asset, will not give rise to an unauthorised payment charge and can be agreed without an independent valuation taking place.
We are beginning to see extensions to the deadlines for responding to various consultations. The Pensions Administration Standards Association has extended the deadline for its consultation on DB (defined benefit) Transfers: Code of Good Practice, to 30 September 2020. We are also expecting TPR to extend its consultation on the DB Funding Code of Practice. The current deadline for responses is 2 June 2020.
If you would like specific advice on any of these issues, or on anything else, please contact a member of our Pensions team.