COVID-19: Pension scheme implications and options

We understand the strain that COVID-19 is causing for UK businesses and their employees. PES keeps abreast of government and regulatory announcements and liaises with leading pension providers to understand the latest changes and industry practice.

Our understanding of the latest position from the Department for Work and Pensions (DWP) is summarised below.

  • The Coronavirus Job Retention Scheme is intended to support eligible businesses by providing a refund of up to 80% of a furloughed employee’s salary (capped at £2,500 per employee month). The scheme is also intended to cover employer National Insurance (NI) Contributions, and the minimum employer pension contribution of 3% of ‘qualifying earnings’ required under automatic enrolment (AE).
  • An employer may choose (need) to make other arrangements with staff, such as reducing pay (for example to 50% of normal salary), but the Pensions Regulator would expect AE contributions to continue as a minimum.
  • If a business is carrying on its operations as usual, AE (or other contractual pension contributions) continue unchanged.
  • If an employer falls into arrears, the current AE rules require missed contributions to be made up as soon as possible – typically a ‘recovery plan’ would need to be agreed with The Pensions Regulator (TPR) without delay.
  • If a business ceases trading, no further AE contributions (if payments up to date) would be payable, but if a scheme was in arrears before it ceased trading then there may be a claim on the assets of the business in respect of missed contributions (as is normally the case).
  • Employers should check employees’ Contracts of Employment to ensure that any planned changes are not in breach of any contractual obligations.


As a result of a salary reduction, some employees may request that their pension contributions cease temporarily. Whilst not to be encouraged, this is permissible.  The employee’s request should be retained on file and the pension provider/Adviser notified in advance.

If an employee chooses to opt out of an employer’s pension scheme altogether, this must be managed in the usual way, ie the employer must retain the opt out request on file and re-enrol the employee at the next re-enrolment date.

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PES Financial Services advisors are registered individuals of Bluefish Financial Services Ltd, FCA reference 801833. The Financial Conduct Authority (FCA) does not regulate employer advice for workplace pensions and auto enrolment. Premier Employer Solutions provide high quality impartial information and guidance but not FCA regulated advice. Any information you use or guidance you follow is at your own risk. We do not make recommendations on workplace pension default funds but will work with relevant third parties if this is required. There may be a separate fee for this service.