LGA frequently asked questions for employers on Covid-19
Can employers delay or pause paying employee contributions?
No, regulations confirm that employee contributions must be submitted to the administering authority in line with the timescales in the Pensions Act 1995. That is, by either the 22nd (where they are paid electronically) or the 19th of the month following the last day of the month in which the contributions are deducted.
If an employer fails to submit employee contributions on time, paragraph 148 of TPR Code 14 states that where:
"the scheme manager has reasonable cause to believe that the failure is likely to be of material significance to the regulator in the exercise of any of its functions, they must give notice of the failure to the regulator and the member within a reasonable period after the end of the prescribed period".
Please email the Fund at the earliest opportunity if your organisation is likely to encounter difficulties in paying employer pension contributions.
A member is on emergency volunteering leave, on what pay are employer and employee pension contributions determined?
Employer pension contributions will be based on assumed pensionable pay (APP). Employee pension contributions will be based on the amount of the employee's actual pay during emergency volunteering leave (EVL). All scheme discretions (administering authority and employing authority) should operate in the same way as if the member were receiving normal pay.
An active member is seconded as part of the emergency staffing to the NHS. How does this affect their pension benefits?
If any LGPS members are seconded on emergency staffing to the NHS, their pension benefits continue on the same basis as before the secondment.
Is furlough pay pensionable?
Yes, furlough pay is pensionable pay under the regulations. Employee and employer contributions should be deducted based on the actual pay the furloughed employee receives. Assumed pensionable pay does not apply.
Can employers reclaim pension contributions from furlough pay?
Employers can only claim pension contributions for furloughed employees up to the minimum required for automatic enrolment.
This is 3% of income above the lower limit of qualifying earnings which:
- is £512 per month until 5 April 2020
- will be £520 per month from 6 April 2020 onwards
How will furlough pay affect pension build up?
Members will continue to build up CARE pension based on the actual pay they receive. If the furlough pay is less than their normal pay (because the employer chooses not to top up pay to 100%), the pension they build up will also be less. They can choose to buy additional 'extra' pension to make up for the pension lost during this period. The employer is not obliged to split the cost with the member but can choose to do so.
Final salary benefits are usually calculated using the pensionable pay earned in the year before leaving the scheme. However, one of the two previous years' pay is used, if higher. This should prevent final salary benefits from being detrimentally affected if the member's pay is reduced due to being on furlough.
How will being on furlough leave affect a member's death in service benefits?
Assumed pensionable pay (APP) is used in the calculation of the death grant and any survivor benefits if a member dies in service. APP is usually calculated using the average pensionable pay the member receives in the three months before the pay period in which they die.
If a member receiving reduced furlough pay dies in service, employers should make use of the provision in the regulations that allows them to substitute a higher pay figure to reflect the pensionable pay the member would normally have received.
When determining the employee contribution rate on 1 April 2020, should furlough pay be used?
Yes, if furlough pay forms all or part of a member's pensionable pay it should be used to determine the employee contribution rate on 1 April 2020.
Regulations in England and Wales and Northern Ireland provide that where there is change to employment, or a material change, during the year, the employer may make a further determination and reallocate a member to a different band. The employer must notify the member if they reallocate a member to a different band.