The Government will cover employer contributions into AE pensions if businesses have to furlough staff, according to a statement by the Department of Work and Pensions.
The DWP confirmed firms claiming grants under the job retention scheme will get an additional allowance to cover their minimum AE contributions. They will also get additional help to ensure employer national insurance continues to be paid.
However these payments will be based on the lower furloughed wage.
The DWP said this would offer businesses hit by the Covid-19 shutdown support, without them needed to suspend AE plans which would have a detrimental impact on their employees’ financial future.
Aegon pensions director Steven Cameron says: “We welcome the 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 of 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.”
Cavendish Ware associate director Roy McLoughlin adds: “In these uncertain times it is vital to try and keep valuable benefits running as close to normal.
“Whilst we would call upon the regulator to look at more flexibility in terms of SME pension arrangements this news is extremely welcome. Employers are quite rightly pointing out the flexibility that is being offered in so many other areas of trading but there seems to be frustration that prior too this pensions seem to have been left in the dark.”
Individuals will be expected to pay their minimum contributions from ongoing pay and while they can opt out, this would mean they lose valuable employer contributions – which are now being subsidised by the Government.
Cameron 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.”