TPR updates on pensions during the pandemic
Christine Scott reports on recent TPR updates prompted by the COVID-19 pandemic.
A few weeks ago ICAS, ICAEW and the Pensions Research Accountants Group published guidance to support pension schemes and their auditors address the challenges they may encounter due to the COVID-19 pandemic. The guidance focuses on the preparation of scheme annual reports and audited financial statements.
At the time of publication, we were aware that things were likely to change pretty quickly, and this has now proven to be the case. The Pensions Regulator (TPR) has published updates on the UK government’s Coronavirus Job Retention Scheme (CJRS) and reporting deadlines and duties.
In addition, TPR has published a reminder that employers’ automatic enrolment duties remain in place.
Employers’ auto-enrolment duties
Employers’ auto-enrolment duties continue to apply as normal, including the payment of contributions, re-enrolment duties and re-declaration duties. This is the case even where employees are furloughed as part of the UK government’s CJRS.
Many smaller employers are approaching or carrying out their first re-enrolment of staff. TPR will continue to write to employers with information and support about how to meet these duties.
TPR recommends that employers approaching their first re-enrolment assess their staff on the third anniversary of their staging date or duties start date. Postponement cannot be used at re-enrolment.
However, TPR recognises that employers may struggle to complete their re-enrolment duties on the third anniversary of their staging date because of the COVID-19 pandemic. Where this is the case employers can choose a later date, up to three months after their third anniversary, to assess their staff.
There is a re-enrolment date tool on TPR’s website to assist employers choose a suitable re-enrolment date.
The CJRS and pension contributions
The CJRS will be an area of complexity when it comes to ensuring that the pension contributions for furloughed staff are calculated correctly and paid into the pension scheme on time.
Employers can claim an amount equivalent to the statutory minimum auto-enrolment employer contribution, based on each employee’s reference pay under the CJRS until the end of July 2020.
TPR guidance on pension contributions and COVID-19 clarifies that where employer contributions above the statutory minimum are normally paid, these must continue to be paid into the pension scheme under scheme rules. Therefore, employer top-up payments into the scheme may be required, including where salary sacrifice arrangements are in place.
On 29 May, the Chancellor announced that the CJRS is to close on 31 October and set out details of how it will operate from 1 July onwards. This includes the ability to partially furlough staff. This allows employers to bring back staff to work some of their normal hours, with funding still available within the rules of the CJRS to fund the remaining hours.
This will add complexity to pension contribution calculations. Updated guidance from TPR to assist schemes, administrators and payroll providers has been published following the Chancellor’s announcement.
From August onwards, the CJRS won’t cover employer National Insurance Contributions (NICs) or employer pension contributions to any extent.
Further information about how the UK government will wind down the CJRS is available on the UK government's website.
TPR reporting deadlines and reporting duties: changes to COVID-19 easements
Due to COVID-19, TPR announced easements in relation to certain reporting deadlines up to 30 June 2020 and to the reporting of breaches in relation to those requirements.
TPR has now revised its stance on easements beyond 30 June.
From 1 July, reporting duties under Code of Practice 01: Reporting breaches of the law will largely resume, for example for:
- Suspended deficit repair contributions (DRCs) where pension trustees will need to submit a revised recovery plan or report missed DRCs.
- Late triennial valuations and failure to agree a recovery plan.
- Failure to prepare audited accounts.
There is one exception to the resumption of reporting duties: providers will continue to have 150 days to report the late payment of contributions (other than DRCs); normally TPR requires information on late payments within 90 days. This easement will be reviewed again at the end of September 2020.
Failure to prepare audited financial statements
TPR will now accept delays to the preparation of audited financial statements to 30 September 2020. This will give a bit of leeway to trustees, accounts preparers and auditors where 31 December 2019 financial statements have yet to be signed off.
However, as referred to above, failure to prepare audited financial statements within seven months of the end of the reporting period will be reportable to TPR from 1 July 2020.
Failure to prepare chair’s statements (defined contribution schemes only)
Chair’s statements received by TPR will not be reviewed until after 30 September.
Any chair’s statements submitted before this date will be returned unread and this should not be taken as an indication that the statement complies with the requirements.
TPR has no discretion about the imposition of fines where the chair’s statement has not been prepared on time. However, it is not clear from TPR’s latest update if potential fines for non-compliant chair’s statements will be avoided or just delayed.
As schemes with deadlines for finalising chair’s statements before 30 September will not be aware of any deficiencies until after 30 September, it is optimal that schemes prepare compliant chair’s statements by the statutory deadline.
The chair’s statement must be included within the scheme’s annual report, along with the audited financial statements, but it can be prepared and signed off separately.
Professional Development courses that may be of interest to you
An introduction to the audit of pension schemes
This course will provide an introduction to the issues to be considered during the completion of the audit of a pension scheme.
Pension Scheme Accounts following FRS 102 and SORP – a half-day course
The course will consider the impact of the changes in pension scheme accounting and the experience gained to date on issues arising in complying with FRS 102 and the revised SORP.