COVID-19 job retention scheme to cover AE contributions

The government has confirmed that the coronavirus job retention scheme will include provisions for pension contributions.

Under the scheme, employers are able to claim 80 per cent of an employees’ monthly wage costs, up to a maximum of £2,500.

The updated guidance clarified that this will also be inclusive of any associated employer national insurance contributions and minimum automatic enrolment employer pension contributions.

Further guidance on how employers should calculate their claims for minimum automatic enrolment employer contributions will be issued before the scheme goes live.

Furloughed employees will also continue to be subject to deductions, such as national insurance and auto-enrolment contributions for qualifying earnings.

Commenting, Aegon pensions director, Steven Cameron, said: “We warmly welcome confirmation that the grants businesses can claim for furloughed employees will include an allowance for the 3 per cent minimum employer auto-enrolment contributions, as well as employer NI liabilities on up to £2,500 a month.

"This will alleviate any pressure to suspend auto-enrolment contributions which even for a short period might have undermined the huge success of auto-enrolment to date.

"Importantly, it also avoids affecting individuals’ longer term finances. Individuals will be expected to pay their minimum contributions from ongoing pay and while they can opt out, this would mean losing valuable employer contributions."

He added: “While employers paying above the minimum will not be able to claim back these additional amounts, including the auto-enrolment minimum in job retention grants is a very welcome demonstration of the importance the government places on ongoing retirement savings.”

The Pensions Regulator (TPR) confirmed earlier this month that employers would be expected to continue to meet their auto enrolment duties throughout the pandemic, with further TPR guidance published this week emphasising this.

The government also published updated guidance to pension scheme administrators this week, including guidance on rent holidays and issues obtaining 'wet signatures'.

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