In reaction to the impact of the COVID-19 Pandemic, the UK Government announced a range of measures to help the UK economy through a very difficult period.
What is the Coronavirus Job Retention Scheme?
One of the measures announced is the Coronavirus Job Retention Scheme. This was intended to run for at least three months from 1 March 2020, but was extended to run until the end of June on the 17th of April 2020.
The scheme offers to cover 80% of the wages of furloughed workers and is capped at £2,500 a month per employee. Employer auto-enrolment pension contributions (based on 3% of qualifying earnings) and employers’ National Insurance contributions are covered in addition. Any payment received under this scheme is still assessed for income tax and National Insurance contributions.
Employees impacted are designated as “furloughed workers” and must be notified of this change. It will be necessary to submit information to HMRC about these employees through a new online portal, which is being worked on at present.
Importantly, to qualify for the scheme, employees are not legally allowed to undertake any work for their employer while they are furloughed.
Am I still classed as an employee?
Yes. This means that pension contributions and other contractual benefits will continue to apply.
Will my pension contributions change?
The Pensions Regulator confirmed on 9th of April 2020 that pension contributions could change, as long as your employer continues to comply with auto-enrolment legislation, subject to pension scheme rules. If you would like more details on this, please contact Brunsdon by e-mail – firstname.lastname@example.org.
This change would be a temporary one, with contributions returning to their usual level once the furlough period ends.
Can I stop contributing, and restart when I return to work?
Yes, subject to pension scheme rules and other governing documentation – You may choose to reduce your contribution level (if the scheme rules allow this) or opt out or cease active membership of the scheme if should you decide that is right for you at this time. If you would like more details on this, please contact Brunsdon by e-mail – email@example.com. We would highlight that if you cease contribution for a period, you may miss out on employer contributions.
Can I access my pension savings now?
Yes, as long as you are 55 years or older. It is important that we highlight that if you access your pension savings flexibly (which would include taking a taxable withdrawal from your pension – but not taking purely the tax free cash sum), then the total amount that can be paid tax-efficiently into money purchase registered pension schemes will be restricted to £4,000 per year. If you (and your employer combined, if applicable) contributed more than this, a tax charge would be payable.
It would be possible to access part of your pension savings and not be impacted in this way – please contact us if you would like to understand more.
What will happen to other employee benefits?
There will be no change to your other benefits, such as life assurance, income protection or healthcare insurance – these will continue to be provided subject to the normal terms and conditions of the scheme.
Can I still use Employee Assistance Programmes?
Yes – and we recommend that you do so. This provides lots of helpful information that may be useful now – for example, the legal and financial support helpline.
Where can I get more help?
Further information regarding the Coronavirus Job Retention Scheme and the wider implications of the COVID-19 pandemic can be found online at https://www.gov.uk/coronavirus
If you would like further information or advice, please contact Brunsdon Financial on:
The information provided does not constitute advice or recommendation. Any information regarding tax treatment is based on our understanding of current tax law and HM Revenue and Customs’ practice, all of which may be subject to change. Your personal circumstances may also impact on tax treatment.