Employers must explain any defined contribution scheme contribution changes to furloughed workers, according to recommendations from Arc Pensions Law partner, Vikki Massarano.

Massarano noted that employer pension contribution amounts, and what they are based on, must be “clearly and properly covered” in furlough agreements.

She also warned that, in order to adhere to auto-enrolment requirements, contribution rates might need to be changed if they are going to be covered by the Coronavirus Job Retention Scheme (CJRS), while certain scheme rules could also require changes.

Massarano's advice comes a day after analysis from the Resolution Foundation predicted that more than nine million employees could find themselves furloughed under the government scheme.

Furthermore, The Pensions Regulator (TPR) published updated guidance to employers this morning, explaining that auto-enrolment duties "continue to apply as normal", but that there are some flexibility in place.

Employees who might be particularly vulnerable at present include those who are part of salary sacrifice schemes, who could be receiving just 80 per cent of their already depleted earnings under the CJRS.

Massarano stated: “Employees are likely to expect their employer to pay the sacrificed contributions over in full – and may not look kindly on any employer delay or failure to do so.

"HMRC has confirmed that Covid-19 counts as a “life event” for salary sacrifice – but if an employee stops participating in salary sacrifice, the amount the employer can recover under the CJRS won’t change.”

While TPR has extended the time for notifying it of late payments from 90 days to 150 days, Massarano urged against complacency on this issue.

“This state of affairs is unlikely to last forever – particularly if an employer has deducted money from its employees’ pay and not handed that over to the pension scheme or provider,” she said.

In order to ensure that contributions can be paid promptly, Massarano recommended that employers certify their in-house systems work properly and are accessible for administrative staff who might be working remotely, while employers who use a third party should check that their systems are robust enough.

Employers also need to consider death benefits, with Massarano advising that they check death in service policies “to see if they exclude deaths during a pandemic, or deaths when a person is not actively at work”, as they could otherwise unexpectedly “find themselves with a liability to pay a benefit and no insurance to cover it”.

Other recommended measures include setting up new email addresses for furloughed employees who are also trustees of occupational schemes, as this would allow them to keep up with trustee correspondence without appearing to work during their period of leave.

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