How do pension contributions work under the Coronavirus Job Retention Scheme (CJRS)?

The CJRS has been extended. The government will pay 80% of wages up to a cap of £2,500 for staff on furlough, but the scheme doesn’t cover employer National Insurance and pension contributions.

If you’re using the CJRS, you should continue to run your payroll and continue contributing to your employees’ pensions at the regular agreed amount. You can find more information about the scheme on the government’s website, including a step-by-step guide to claiming and a calculator.

It’s important you continue contributing to your employees’ pensions and assess your workforce each pay period. Remember your re-enrolment duties remain the same whether your staff are working or on furlough.

Employees should continue to pay contributions as per the legal minimums, or whatever is set out in their contract. Read more about what to do if your employee asks to reduce or stop their contributions.

What contributions do employers need to pay?

  • Contributions should continue at the same rate as before. You should continue to work out contributions based on the amount the employee is being paid even if they are part furlough/part-time working.
  • You should continue to apply the earnings threshold if you’re using qualifying earnings to work out pension contributions. If the employee’s earnings fall below the lower earnings threshold (£520 per month), contributions may not be necessary.

The Pensions Regulator has provided guidance for employers that use salary sacrifice/exchange on their website.

What happened in July 2020?

From July, employers could bring furloughed employees back to work on a part-time basis as long as the employee was furloughed for 3 consecutive weeks before the end of June 2020.

This change meant:

  • You should have continued contributions at the regular agreed amount.
  • Only employer pension contributions for the hours the employee had been furloughed for could be claimed under CJRS. Therefore, you were responsible for paying full contributions on the hours they’d worked.
  • Employees should have continued to contribute based on their full pay (regardless of hours actually worked).

What happened in August 2020?

Since 1 August 2020, employers have no longer been able to claim minimum employer pension contributions under the CJRS. So, both the employer and employee must continue to pay at least the minimum contributions in full.

Pension contributions under CJRS Before 1 July 2020 July 2020 1 August 2020 onwards
Employer contributions Could be claimed up to the minimum AE contribution levels Could only be claimed on the hours the employee is furloughed, up to the minimum AE contribution levels  

Cannot be claimed

Employee contributions Payable in full, deducted from employees’ wages (including furlough pay). Cannot be claimed under CJRS

What’s happening from July 2021?

From 1 July 2021, the government will begin phasing out CJRS, with the scheme ending on 30 September 2021. The government will slowly pay less towards employees’ wages, expecting employers to make up the difference.

  May June July August September
Government contribution: wages for hours not worked 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 60% up to £1,875
Employer contribution: employer National Insurance contributions and pension contributions Yes Yes Yes Yes Yes
Employer contribution: wages for hours not worked No No 10% up to £312.50 20% up to £625 20% up to £625
For hours not worked employee receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month

When the scheme ends, employers will need to decide to either:

  1. bring employees back to work on their normal hours
  2. reduce employees’ hours
  3. terminate their employees (normal redundancy rules apply to furloughed employees).

If the employer chooses the third option, employees’ pension pots will remain invested with us until they decide to take their money from the age of 55 (proposed to increase to 57 from 2028) or transfer their savings to another pension provider.

Need more help?

More information about the CJRS and pension contributions can be found on The Pensions Regulator’s website.

Find out what to do if you’re struggling to make pension contribution payments.

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