Furloughed Employees and Pension Contributions

Woman looking out window on phone

Last weekend HMRC published revisions to its guidance on the Coronavirus Job Retention Scheme (CJRS), providing further details on the extent to which the HMRC grant would cover the pay and benefits of furloughed employees.

If you are not already familiar with the key features of the CJRS (How many of us had to look up the term “furlough” a few weeks ago?) please refer to the excellent publication “Coronavirus Job Retention Scheme: UK Government Issues Further Guidance” issued by our Labor & Employment team.

The rules regarding the payment of pension contributions for a furloughed employee are still not entirely clear (and we are expecting further guidance, which may influence our interpretation of those rules) but the key elements are set out below. Continue Reading

COVID 19: Emerging Investment Risks for Pension Schemes

Businessman workingDaily policy initiatives by governments across the world who are desperate to avoid the worst ravages of an economic recession are fuelling a lot of the volatility in public markets with which investors are now sadly familiar. However, many pension funds have significant private market exposures through alternative investments. Those holdings are not immune to government intervention and pension funds should note the sometimes unexpected effect of policy changes.

The Pensions Regulator’s COVID 19 guidance on 27 March advised pension scheme trustees to “Review and manage specific risks which may now exist within their portfolios …eg concentrations of risk and/or exposures to deteriorating sectors/credits”.

This blog provides further detail on some emerging investment risks. Continue Reading

COVID-19: UK Employee Share Schemes

Employee retention is a high priority for businesses grappling with the profound impact of the coronavirus disease 2019 (COVID-19). Employee share schemes remain a versatile and valuable way to retain important employees.

However, many may not have considered the unexpectedly adverse tax consequences that some of the UK government’s business support measures (including, for example, the Coronavirus Job Retention Scheme (CJRS)) could have on employee share schemes.

Two areas of particular concern are:

  1. The employee ‘commitment of working time’ requirement for Enterprise Management Incentive (EMI) options, and
  2. Existing scheme provisions dealing with employees who leave the business or are made redundant

In both cases, a failure to carefully consider, and then navigate, the complexities of both scheme rules and tax law, before making or communicating decisions, could lead to a loss of valuable tax advantages.

Our helpful note provides more detail on the issues to be aware of and and sets out some practical steps for businesses to mitigate the risks.

Assessing the value of pensions promises – parent company guarantees

Guarantee Stamp

The Pensions Regulator’s 27 March guidance emphasised the need for trustees of defined benefit pension schemes to engage with their sponsoring employers to understand the implications of the COVID-19/Coronavirus pandemic for their scheme’s employer covenant. Where employers seek reduced or suspended contributions, although the focus will naturally be on the scheme’s direct participating employers and ensuring there is no leakage in terms of dividend payments or other outflow, trustees should not neglect any parent company guarantors in their assessment of the covenant. Continue Reading

Top 10 Employee Benefits Issues in a Slowing Economy

Plan BCoronavirus disease 2019 (COVID-19), commonly known as the “coronavirus” has raised many challenges for businesses. Among those challenges are the variety of employee related issues being raised. In addition to complying with various employment laws, including the new emergency leave laws and tax credits (see our blog), employers also have to consider the impact on their employee benefit plans. From privacy concerns related to sharing employee COVID-19 information to employee access to retirement funds, COVID-19 creates many questions for human resources professionals.

Our alert (Top 10 Employee Benefits Issues in a Slowing Economy) was prepared by a cross-functional team of privacy, labor and employment and ERISA/employee benefits specialists with the intent to provide a list of some of these concerns to start the discussion regarding the COVID-19 impact on employee benefits.

PPF Puts in Place Practical Policies

The Pension Protection Fund (PPF) has issued what might be the first of several coronavirus announcements. The first announcement provides information for trustees who are seeking to certify or re-certify contingent assets before the 31 March deadline. With immediate effect, trustees who are required to submit hard copy documents with their contingent asset certification/re-certification, should instead scan and send copies of those documents to information@ppf.co.uk. The file size needs to be less than 10MB. If you need to split the documents in order to achieve an acceptable file size, you should make clear that the documents are linked. Continue Reading

COVID-19 Pensions Business Planning

Woman using laptop surrounded by paperwork

Whether you are more in the Mary Poppins or Corporal Jones camp when it comes to dealing with unexpected emergencies like the Coronavirus outbreak, the choice between taking minimal precautions for continuing business operations as normal and panicking is not very palatable. Pension fund operations are highly complex and, just like their counterparts in the commercial world, involve the integration of many parties who to some degree all rely upon each other to keep a basic service (of paying pensions) going. With different organisations adopting different strategies to cope in the current crisis, what should pension funds be doing? Continue Reading

The Early Bird Catches The Worm

In October 2019 pension trustees’ investment duties were expanded. Further changes will take place from 1 October 2020, which will affect defined benefit (DB), defined contribution (DC) and hybrid pension schemes. In order to be in a position to comply with those duties, trustees will need to take action now. Trustees not only need to revise their statement of investment principles (SIP) (again) and publish it but also need to report on how they have implemented their policies. The implementation report may need to include a description of trustees’ activities before 1 October 2020. Continue Reading

Taxation of UK Termination Payments: Don’t be an April Fool

With most employer’s minds currently focused on the upcoming changes to the IR35 regime, it’s important they do not forget about forthcoming updates to the tax treatment of termination payments which are also due to take effect next month.

Employer’s NIC on Termination payments

Currently, the only tax on termination payments made to employees to compensate them for their loss of office is income tax where the payment exceeds £30,000. The tax charged is payable on the excess. From 6 April 2020, as well as income tax on payments exceeding the threshold, employer’s Class 1A National Insurance contributions (NICs) will also be due. This additional cost should be taken into account when negotiating settlements and will need to be reported through the PAYE/Real Time Information process.

Employers should note that the NICs liability will not apply to any termination awards paid after 5 April 2020 in respect of employment which was terminated before 6 April 2020. Employers intending to dismiss an employee and paying a termination payment in excess of £30,000 may therefore want to ensure the termination date falls before 6 April, as this could result in a significant NICs saving.

Continue Reading

Ticket to Accreditation – Choices for Professional Pension Trustees

Buses in busy traffic

It turns out that accreditation systems are like buses – you wait patiently for what seems like ages, and then two come along at once.

Many in the pensions industry were surprised by the Pensions Management Institute’s (PMI) announcement on 13 February that it has launched an accreditation system for professional pension trustees. This followed press reports on 11 February that the Association of Professional Pension Trustees (APPT) would be launching its accreditation programme in April. (This was originally planned for last summer.) Both of these programmes will follow the standards published by the Professional Trustee Standards Working Group in 2019.

The PMI’s accreditation will be open for applications from 24 February. The APPT has not yet confirmed the date from which it will accept applications, but the press has reported that this will be in April. Continue Reading

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