We will use your email address only for sending you newsletters. Please see our Privacy Notice for details of your data protection rights.
Pension saving is vital for many people in the quest to enjoy a comfortable retirement. Among the most important streams of pension income are workplace arrangements, which see employers contribute towards a person’s savings. From April 2019, the minimum an employer can pay is three percent of a person’s salary, with the employee contributing five percent of their salary.
Auto-enrolment rules have meant millions more people are now signed up for a pension, however the impact of COVID-19 means there are important rules to bear in mind.
Under furlough rules, from this month, employers must meet the National Insurance and pension contributions of the staff they employ.
The government will still cover 80 percent of furloughed staff’s salary up to £2,500.
This means pension contributions will have to be calculated based on the amount of pay which is actually received – in many instances the 80 percent furlough pay.
But if calculations are carried out incorrectly, it could lead to a lose-lose situation for all involved.
Firms may have to put in extra work to rectify the situation, and employers could potentially be disadvantaged if their companies do not take action.
There are also hefty penalties both for incorrect employer pension contribution claims, and for furlough fraud, whether intentional or not, – which could potentially be connected.
Thankfully, HMRC allows for corrections, but under the Finance Act these must be carried out within 90 days of any new claim.
How women could be inadvertently damaging their State Pension sum [INTERVIEW]
This group of women could be facing a damaged pension pot – here’s how [INSIGHT]
Backto60 women wait to hear landmark verdict on State Pension age [UPDATE]
Karen Tasker, audit partner at accounting firm RSM, commented on the issue which could be faced.
She said: “This will become a greater issue as the furlough scheme reaches its end, with reduction of the grant and flex furloughing adding another layer of complexity.
“This issue is particularly complex when it comes to salary sacrifice arrangements.
“Some employers may not appreciate that furlough pay should be based on post-sacrifice pay and this is what the government grant will be based on.
“HMRC has confirmed that the full grant should be paid in money to the employee and cannot be used towards benefits provided through salary sacrifice schemes, including pension contributions.”
Furlough rules are changing as the scheme draws to a conclusion.
Under the new outline laid out by the government, employers will now be required to take on additional financial responsibilities for their workers.
The agreement will shift in September, with the government meeting 70 percent of salaries up to £2,187.50.
Employers will then have to take on the 10 percent cost up to £312.50.
Finally, in October, the government support will drop to 60 percent, up to £1,875.
Companies will take on 20 percent up to £625 as the scheme finally closes.
The government has resisted calls to extend the furlough scheme beyond the October deadline.
It was originally intended to finish in June, but was stretched out due to popular demand.
The Prime Minister, Boris Johnson, and the Chancellor Rishi Sunak, however, have said it is time to restart the economy, and that furlough cannot last forever.
Source: Read Full Article