Coronavirus – frequently asked questions

For customers, employers, trustees and intermediaries

Back to results

We’re here to support you and rest assured we’re doing everything we can to keep our services running as smoothly as possible. We also want to help answer some of the questions you may have about the impact of the coronavirus – these fall into five categories as outlined below:

  • Office closures – affecting all three Aegon UK sites from 24 March 2020.
  • Market volatility – the coronavirus outbreak and its effects on the markets.
  • Pension scams - how to keep your investments safe
  • Protection - answering your questions.
  • Pensions - guidance for intermediaries and employers.

The value of an investment can fall as well as rise and investors could get back less than they originally invested.

Please remember that we can't give you financial advice. If you're unsure what to do please speak to a financial adviser. If you don't have a financial adviser, you can find one on the Money Advice Service website.

Office closure questions

Yes, all Aegon offices are currently closed in line with government coronavirus guidance. Aegon staff have been asked to work from home at this time. 

The closure of our offices was something we anticipated, and we have detailed plans in place to minimise the impact on our customers while ensuring our employees remain as safe as possible.

Most of our services are unaffected by the office closure. Our phone lines are open Monday to Friday and online services are available 24 hours a day. Please go to the contact us page to see the best ways of getting in touch.

Please be reassured that we're prioritising key tasks such as ensuring we make payments out to customers and investing monies sent to us. There's no need to send us a reminder of your request – we'll be in touch shortly.

While the offices are closed it may take longer than usual for us to get back to you. We ask for your understanding and apologise for any inconvenience this may cause. 

We’re responding to email queries 8:30am – 5:30pm Monday to Friday, our phone lines are open Monday to Friday, and you can access our website and online services 24/7. Please visit our contact us page to see the best ways of getting in touch.

Our offices will reopen when government guidance allows this, and on condition that there are no additional local factors that make it sensible to keep one or more of our offices closed for longer.

We’ve implemented business continuity plans so we can continue to serve our customers, and we will prioritise critical requests at busy times. 

Our phone lines are open Monday to Friday, all of our online services are operating as normal and we’re dealing with enquiries and transaction instructions online. You can find more about how to contact us online.

We’ll respond as quickly as we can, but wait times may be longer than usual while our offices are closed. We ask for your understanding and apologise for any inconvenience this may cause. To help manage demand, we’ll prioritise the most critical activities (such as deposits, withdrawals and investment instructions).

There's no need to send us a reminder of your request – we'll be in touch shortly.

Our phone lines are open Monday to Friday and you can also contact us online at any time.

While the offices are closed it may take longer than usual for us to get back to you. We ask for your understanding and apologise for any inconvenience this may cause.

There's no need to send us a reminder of your request – we'll be in touch shortly.

We’ll continue to post updates to our dedicated coronavirus website and we’re doing everything we can to maintain our service to you. 

If you’re registered for an online service, please login in the usual way or visit our contact us page to find the right place to log in. You can use secure messaging in your online account to send us queries or instructions about your account.

If you’ve lost or forgotten your password, a reset link can be found on the login page for each product. 

If you’re not registered for an online service, you can register via the links on our contact us page.

If you’re having difficulty using our online services (including setting up or activating a new account online) or if you need to get in touch for any other reason, you can also submit a query online or by email using the details on the contact us page.

Were urging all of our customers to be vigilant at this time as the current market uncertainty makes financial scams more likely. Guidance on how to protect yourself against pension scams is available.

We’re doing everything we can to maintain our service to you, and the best way to get in touch in the current circumstances is by using our online forms. 

You can find out how to do this on the contact us page of our website. 

Please be reassured that we're prioritising key tasks such as ensuring we make payments out to customers and investing monies sent to us. There's no need to send us a reminder of your request – we'll be in touch shortly.

You can continue to do business with us online, at any time, and all critical services will continue to operate. Our phone lines are open Monday to Friday.

Please be reassured that we're prioritising key tasks such as ensuring we make payments out to customers and investing monies sent to us. There's no need to send us a reminder of your request – we'll be in touch shortly.

We’ve stopped all business travel to comply with UK government guidelines. Where possible, we’re rescheduling meetings to take place via teleconferencing over platforms such as Skype. Our relationship management teams are still available to support employers and advisers, and should be your first point of contact if you have any enquiries.

We’re prioritising customer queries so that we respond to the most urgent first, and we’re working hard to minimise the impact on you. While the offices are closed it may take longer than usual for us to get back to you. We ask for your understanding and apologise for any inconvenience this may cause.

There's no need to send us a reminder of your request – we'll be in touch shortly.

Detailed instructions on how to do this can be found on the contact us page of our website. 

Where we outsource a service, we ensure that the appropriate business continuity planning is in place with our partners in the event of an Aegon, or third party, interruption. This is detailed in our business continuity plan, which is aligned to both Business Continuity Institute Good Practice and the Aegon Group requirements.

Market volatility questions

The global spread of the coronavirus has been an important contributor to the recent volatility in equity (company shares) markets. Markets tend to react to uncertainty, so as new cases arise and the situation evolves, it’s likely that global markets will be impacted further – potentially for a prolonged period of time. This impact could be both positive and negative at different times as market confidence evolves.

The value of many investments has fallen significantly since the start of the coronavirus outbreak, and there may be further falls as Covid-19 continues impact the economy. When markets fall like this, you may be tempted to withdraw your money to protect it. This can lead to the investment being sold at a loss that may have been avoided if the investment were held for the long term. You may also miss out on any increases in value in the future if markets recover.

You should speak to a financial adviser in the first instance if you're unsure how the coronavirus outbreak is impacting your investments, or if you should take any action. If you don't have one you can find one on the Money Advice Service website. Please remember that Aegon cannot give financial advice.

This isn’t something we can determine. It’s important that you consider these fund value changes in the context of your long-term investment objectives. Fluctuations in fund value should be expected and, as always, there’s a risk that you may get back less than you invest.

The value of many investments has fallen significantly since the start of the coronavirus outbreak, and there may be further falls as Covid-19 continues impact the economy. When markets fall like this, you may be tempted to withdraw your money to protect it. This can lead to the investment being sold at a loss that may have been avoided if the investment were held for the long term. You may also miss out on any increases in value in the future if markets recover.

You should speak to a financial adviser in the first instance if you’re unsure how the Coronavirus outbreak is impacting your investments, or whether you should take any action. If you don’t have a financial adviser, you can find one on the Money Advice Service website. Please remember that Aegon cannot give financial advice.

Market volatility in the wake of the current coronavirus pandemic has led to increased uncertainty in the UK commercial property market.

This uncertainty has impacted the ability of independent property valuers to accurately assess the value of physical properties. This has resulted in a number of UK commercial property funds being suspended with immediate effect.

This means investors are currently unable to switch out or withdraw money from these funds until such time as the fund manager resumes trading.

Where this affects Aegon insured property funds we’ll contact those affected, their financial advisers, and those responsible for impacted workplace pensions schemes, giving people more detail about what this means for them.

See the full list of affected funds and more information about these suspensions

These portfolios were already defensively positioned before the coronavirus started to impact markets, because we believed the prospects for most major markets were relatively weak. In line with our long-term investment approach, we’re assessing the impact of recent events on equity and bond markets to ensure that our investment portfolios continue to appropriately balance risk and opportunity. We also remain in dialogue with Morningstar, the asset allocation provider for our Core and Select portfolios, about their views in the context of the sharp market movements. They recommend taking a measured approach to analysing changes to the long-term value of assets. We share this view and stress the importance of investors considering current market volatility in the context of long-term investment objectives.

During recent market falls caused by the coronavirus pandemic, the risk-management process has been triggered, meaning Retiready Solutions 2 to 5, and the MI Savings funds, have de-risked (moved some of their assets into cash). As at 30 April 2020, all the funds include more than 56% in cash or cash equivalents. 

The aim of the funds’ de-risking process is to cushion investors from the worst effects of a sharp and sustained fall in markets. However, this doesn’t mean the funds won’t fall in value. The funds de-risk when their volatility reaches a fixed ‘trigger point’, which is higher for the higher-risk funds in the range. 

To try to keep the funds within their target volatility ranges, the funds will typically de-risk by around 20% at a time, though the underlying fund provider, BlackRock, has the discretion to increase or decrease this amount depending on circumstances.

The fund’s risk management process may mean it misses out on potential growth, particularly if markets bounce back quickly after a fall, or if it de-risks when markets are still growing.

In line with our long-term investment approach, we’re assessing the impact of recent events on equity and bond markets to ensure that our investment portfolios – including our default funds – continue to appropriately balance risk and opportunity. While we can’t predict what markets will do next, we stress the importance of investors considering current market volatility in the context of their long-term investment objectives.

Most default funds reduce exposure to riskier stocks and shares as retirement approaches, with the aim of preparing savings for retirement. This may help to protect those close to retirement from some of the worst of the market falls. However, it may also mean that savers miss out on gains should markets rebound. 

We would encourage you to speak to a financial adviser if you’re at all unsure about whether your investment in a scheme default fund is right for you. If you don’t have a financial adviser, you can find one on the Money Advice Service website. Please remember that Aegon cannot give financial advice.

Recent falls in the stock market will mean that, if you’re primarily invested in stocks and shares, you will have seen your pension pot fall in value at a point when you may need to generate an income from those savings.

If you’re about to retire and were planning to buy an annuity, you may face additional challenges as the 0.1% bank base rate (correct as of 8 May 2020) has meant that annuity rates have also fallen.

The value of many investments has fallen significantly since the start of the coronavirus outbreak, and there may be further falls as Covid-19 continues impact the economy. When markets fall like this, you may be tempted to withdraw your money to protect it. If you sell when the market is down you will likely suffer a loss in the value of your investments and might miss out on any increases in value in the future if markets recover.

If you need money in the short-to-medium term and have savings that could be used, you may want to consider taking some money from those alternative sources if possible, rather than to realise losses from any investments.

If you need or want to cash in your investment you could lose our significantly in the longer term, so you may want to consider only cashing in what you need. The government has announced a range of measures to offer support for people during the coronavirus outbreak. You may want to investigate whether you're eligible for this support before withdrawing money from your investments.

While there’s no guarantee, around if and when fund values and annuity rates will bounce back, you may be able to choose when and how much income you wish to take.

If you’re about to retire we’d encourage you to speak to a financial adviser about your options. If you don’t have a financial adviser, you can find one on the Money Advice Service website. Please remember that Aegon cannot give financial advice. 

Withdrawing savings following a sudden downturn can be tempting, and doing so may prevent further losses if markets continue to fall. However, this strategy could also mean you miss out on gains if markets rebound. Timing market withdrawals can be difficult to get right, so we recommend that you speak to your financial adviser in the first instance for questions about your investment decisions. If you don’t have a financial adviser, you can find one on the Money Advice Service website. Please remember that Aegon cannot give financial advice.

There’s a cash facility associated with Aegon Retirement Choices, One Retirement and Aegon Platform accounts. It’s designed to support the management of investments and the payment of charges. It isn’t intended as a long-term savings vehicle. Interest on that account is 0.05% below the Bank of England base rate. There isn’t a cash facility associated with other products. 

In addition, many of our products also offer cash and near-cash funds. 

You can see the range of cash investments available on the fund list relevant to your product:

Please note, there are no cash investments available to direct Retiready investors, although other low-risk investment options are available. 

Aegon is a well-capitalised, financially stable organisation that has a strong trading history. As a result, our risk of insolvency is very small. However, were this to happen, any investments held with Aegon would be treated in one of two ways, based on their type.

In the highly unlikely event that you were to suffer direct loss from Aegon going insolvent, if you’re invested in Aegon insured funds (i.e. funds whose names typically start with ‘Aegon’ or ‘Scottish Equitable’) you’d be able to claim under the Financial Services Compensation Scheme (FSCS). The maximum level of compensation for investments is 100%. This includes insured pensions, annuities and whole of life contracts such as life cover and investment bonds.

Where you’re invested in collective investments such as OEICs and unit trusts (including our own LF Aegon OEICs), the assets invested into these funds are held completely separately from Aegon’s own corporate assets and are ring-fenced from them in the unlikely event that Aegon were to become insolvent. The maximum level of compensation for investments is 100% of the amount invested up to a maximum of £85,000. This amount applies per person, per fund manager.

You can find out more about this on the FSCS website.

Aegon is a well-capitalised, profitable business which has been trading strongly.  

Our capital strength is reflected in our A+ ratings from both S&P and Fitch, which demonstrate our position as a financially resilient business.

The Solvency II Directive, issued by the European Union, states solvency capital requirements and aims to coordinate the laws and regulations of EU members as they relate to the insurance industry. Aegon’s capital position is still comfortably above the Solvency II capital requirements. With a diversity of earnings generated from pensions, investments and protection, Aegon has both the business model and financial resources to cope with what could be an extended period of market volatility. We proactively mitigate the impact of market volatility with hedging strategies that protect our revenues.

No material adverse impacts on claims ratios have been observed from the coronavirus at this point, nor has any material credit rating migration been observed.

Aegon UK benefits from being part of a large, diversified international group with significant resources and financial strength. The Aegon Group has revenue-generating investments of €898 billion1 and almost 29 million customers, figures which illustrate our global scale and stability.

1As at 31 December 2019.

Pension scams questions

Unfortunately the current market uncertainty makes financial scams more likely. It doesn’t matter if contact is made by post, email, text or telephone – you should be increasingly wary of anything pension-related that arrives unexpectedly. If you’re in any way uncomfortable, the safest thing to do is to hang up the phone, delete the message or ignore the mail. Be careful about using the ‘unsubscribe’ option in emails as this could alert fraudsters that they’ve got the correct contact details for you. 

If you do decide to act on a letter or speak to someone who has called you about your pension, it’s important to remember that you’re in the driving seat. You can take control of the situation. 

Don’t:

  • give out your personal information if contacted unexpectedly;
  • be rushed into anything, take time to think;
  • sign anything unless you fully understand what you're signing up to, and 
  • let anyone into your house unless you’re sure they're genuine.

Do:

  • research any firm that contacts you;
  • check the FCA warning list;
  • get yourself regulated financial advice;
  • take your time over financial decisions, and
  • assess the tax implication of any decision you make.

Read more on how to protect yourself from pension scams.

Protection - questions

In line with Government advice, we’ve now moved to a fully working from home model. Please be assured that we’re working to maintain all of our core services.

Our phone lines are open Monday to Friday - please visit our contact us page for full details of how to get in touch with us.

We’re aware of the impact the coronavirus pandemic is having on both our personal and business lives.

It is possible to make changes to your protection policy, however as we’re not authorised to provide financial advice, we recommend that you speak to a financial adviser before doing this.

To support you through this time, we may be able to offer to defer your policy payments by up to three months. If this is something that you think could help you maintain your cover during this challenging time, please contact us as soon as possible to keep your cover in place. 

No – we want to reassure you that we’ve made no changes to our claims philosophy. This means that if you die or meet the definition for one of our critical illnesses as a result of coronavirus, we’ll assess your claim in the usual way.

Protection - additional information for intermediaries

  • You can continue to quote, apply and track all in-progress applications using our protection online service, and access all the protection documents and literature you’ll need in our protection document library
  • Our phone lines are open Monday to Friday - please visit our contact us page for full details of how to get in touch with us.

Please remember that our relationship management teams will continue to be available to support you.

Yes - we're requesting routine medical evidence, including general practitioner reports (GPRs), medical examinations, nurse screenings, and saliva and blood tests.   

Due to government lockdown restrictions, the availability of electrocardiogram (ECG) tests continues to be limited. It also may not be possible to offer face-to-face appointments in Scotland, Wales and Northern Ireland until government restrictions are relaxed.

Where it’s not possible to arrange nurse screenings or medical examinations, or where clients are uncomfortable attending face-to-face appointments, we can look at alternative medical evidence such as a GPR. However, this may restrict the amount of cover we can offer for applications where we need more than one piece of evidence.

You can find full details of our routine medical evidence requirements in our Underwriting limits guide.

No – we don’t currently have plans to increase or decrease our underwriting limits.

Yes – for applications already submitted to us that we’re waiting for medical information for, you can email us at dedicatednewbusiness@aegon-service.co.uk to ask us to reduce the benefit amount. We’ll cancel existing requests for medical information and won’t chase them. Please don’t submit a new application to us as this will cause further delays.

Our email system and the way we deal with data internally is secure. However we’re unable to ensure the security of emails before they reach us. Please consider this when sending us sensitive information.

Yes – we’ve added a new medical question to our application to understand your clients’ personal circumstances in relation to the coronavirus. This allows us to identify those who have tested positive, are having to self-isolate because they’re displaying symptoms or have been in contact with someone who has or is suspected to have coronavirus. You’ll have to answer this for all new applications across all our protection benefits.

Yes – you should continue to tell us of any changes to your clients’ circumstances between the date they answered the application questions and the start date of their policy to make sure your clients’ cover is valid.

Yes - our immediate cover facility is available to help you get full cover immediately in place for up to 60 days, while we request any routine medical evidence.

Read our Immediate cover facility factsheet to find out more.

Yes – if your client meets all of the usual free cover criteria, as outlined in our Key features of Personal Protection, and the cause of their claim is as a result of coronavirus, we would pay their claim.

No – as explained in our key features documents, accidental death benefit only covers death as a result of an accident. Therefore, coronavirus isn’t covered.

No - unfortunately due to coronavirus developments overseas, we're currently unable to offer cover if the insured person is resident outside the UK.

Pension questions

This information is for intermediaries and employers only.

No. The Department for Work and Pensions (DWP) has confirmed that the minimum contributions required under automatic enrolment will not be suspended during the coronavirus crisis, although it plans to keep the situation under review as the crisis develops. This means that employers should continue to pay their own and forward their employees’ contributions to their scheme provider in the normal way. 

There are special provisions for furloughed employees (that is, those whose employment has been temporarily put on hold). If an employer is claiming for assistance from the Government to cover wages under the Coronavirus Job Retention Scheme, they can claim for 80% of a furloughed employees’ usual monthly wages up to a cap of £2,500 per month. On top of this amount they can claim the associated employer’s National Insurance contributions and 3% of qualifying earnings for minimum auto-enrolment employer pension contributions. 

The DWP has confirmed that they anticipate employees will continue to make contributions from their wages (whether they are working normally or on furlough) to help them save for retirement. However, they acknowledge that employees have an option to choose to stop paying although this is likely to result in the cessation of employer contributions too.

Minimum contributions required under automatic enrolment have not been suspended, so employers should continue to pay their own and forward their employees’ contributions to their scheme provider in the normal way. You can find out more in the ‘Have auto-enrolment contributions been suspended?’ question above.

The Pensions Act 2008 includes safeguarding rules to protect employees from being taken out of a qualifying pension scheme unless they make that decision for themselves. If an employer takes any action that results in active membership of a qualifying scheme ceasing for a jobholder, the employer has a duty to immediately re-enrol the jobholder back into a qualifying scheme from the day after active membership ceases.

Therefore, an employer should not request a contribution holiday for any of their scheme members, unless they are simply facilitating a request from the employee themselves.

You can read more about the safeguarding rules in The Pensions Regulator’s detailed guidance.

If the employer is reducing contributions for furloughed employees, The Pensions Regulator (TPR) has confirmed a temporary easement where it won’t take any regulatory action if employers don’t consult for the full 60 days, so long as:

  • The employer has furloughed employees for whom they are making a claim under the Coronavirus Job Retention Scheme.
  • The employer is proposing to reduce the employer contributions for their Defined Contribution scheme in respect of furloughed employees only. For employees not furloughed, the existing pension contribution rate will continue to apply.
  • The reduced contribution rate for furloughed employees will only apply during the furlough period, then will revert to the current rate.
  • The employer writes to their affected employees and their representatives to describe the intended change and the effects on the scheme and their furloughed employees.

TPR recommends that employers carry out as much consultation as they can. This regulatory easement is due to last until 30 June 2020, but will remain under review. If all of the above criteria are not met, TPR expects employers to comply with the full consultation requirements.

You can read more in TPRs latest guidance on Automatic enrolment and pension contributions: COVID-19 guidance for employers.

Where an employer wants to reduce contributions for employees who are not being furloughed, the normal requirements for consulting will continue to apply, as described below. However, if an employer is facing financial difficulty, which would be exacerbated by the consultation process or length of the consultation period, they can approach TPR to waive or relax any of the consultation requirements. TPR may agree if it is satisfied that it is necessary to do so in order to protect the interests of the scheme members. TPR have not indicated whether the current coronavirus crisis is justification for waiving the normal consultation requirements.

Where the employer has 50 or more employees (not the number of scheme members), they should consult on any reduction in employer contributions. Before the consultation actually starts, the employer must give written information about the proposed change to affected members and to any of their representatives who will be consulted (e.g trade union, elected representatives). Affected members are active or prospective members who would be affected by the change (deferred members and pensioner members do not need to be consulted).

The information provided must:

  • detail the number of prospective and active scheme members upon whom the change will impact;
  • describe the proposed change and how it will affect the scheme and its members;
  • be accompanied by any relevant background information;
  • indicate the timescale over which the change will be introduced;
  • allow, in particular, the affected member’s representatives to consider, study and give feedback to the employer of the impact of the change on members.

The employer must tell the parties being consulted when the consultation will end, and any deadline for the submission of written comments. The consultation period must last at least 60 days.

The consultation can be regarded as complete if no responses are received by the end of the consultation period.

You can find out more about consultation by employers in our dedicated FAQ, however, any employer who is considering consultation should seek legal advice, if required.

The Pensions Regulator (TPR) has amended some of its rules on reporting late payments from employers to workplace pension schemes to focus on the more serious cases during the coronavirus crisis. It’s important to note there is no change in the employer’s responsibility to pass on both their own and their employees’ contributions to the pension provider on time, as agreed. 

Providers and trustees remain responsible for monitoring and challenging late payments but, for a temporary period during the crisis, will have more time and discretion on how to resolve late payments issues. Contributions must always be paid as they are, after all, part of an employee’s reward package, and should not be held on to by employers for other purposes. 

Ordinarily late payments are reported using the regulator’s portal once they are 90 days late. This will now be extended to 150 days. There are other rules for persistent late payers and where fraudulent activity is suspected, when reporting happens sooner. 

Pension providers will continue to report cases where the employer becomes insolvent, fraudulent activity is suspected, where outstanding contributions are £100,000 and above and where previously unpaid contributions have been resolved.

TPR has a range of enforcement tools at their disposal, but their aim is to educate and support employers in becoming compliant. Under normal circumstances, if an employer is late in complying with their auto-enrolment duties, TPR expects the employer to put their employees in the position they should be in as soon as possible. This means paying the backdated employer contributions and ensuring that the backdated employee contributions are paid as well – either by the employees, or the employer can choose to pay them on behalf of the employees.

However, due to the impact of the coronavirus, TPR have asked scheme providers to look for more flexible processes and arrangements to allow an employer to pay what is due. Arrangements such as payment plans may be appropriate as they will still allow the correct contributions to be paid, but over a longer time.

TPR provides more information about non-compliance and their enforcement powers.

No. Employers mustn’t encourage their workers to opt-out or cease active membership of their pension scheme, or go on a contribution holiday, at any time. They would face steep penalties from The Pensions Regulator (TPR) if they did so. You can read more on the penalties TPR can impose on their webpage ‘What happens if I don’t comply?’, and more about safeguarding individuals in TPR’s detailed guidance – see the section on Inducements on page 8.

Some employers may continue to make contributions if a jobholder ceases or reduces their own contributions.  Employees should speak to their employer to find out their options. 

No. The employer duties under the Pensions Act 2008 remain unchanged, so new workers should be assessed as normal and auto-enrolled where required. Employers have the option of deferring assessment of new workers for up to three months under the existing rules (known as ‘postponement’), so this gives some flexibility. The Pensions Regulator has detailed guidance on postponement, if you require further information.

If a jobholder wants to reduce contributions below the minimum required, or stop them altogether, they’re effectively ceasing active membership of a qualifying scheme. This means their employer can also stop contributing, although they can continue to contribute if they wish to.

If the worker wishes to re-start contributions at a later date, and is still classed as a jobholder at that date, they can opt back into the scheme. If they do this and pay the minimum contribution required, the employer is also required to re-start paying minimum contributions. An employer is not obliged to allow the jobholder to opt-in if they have a previous opt-in within the last 12 months, but can if they want to.

The answer to this is unclear at present. Where a jobholder stops contributing, or starts paying less than the minimum required, they’re deemed to have ceased active membership of the scheme. When this happens, their employer is no longer obliged to pay anything. If the employer chooses to continue to pay 3% of qualifying earnings, based on the furloughed wages, it’s not clear if they’d be able to claim this back, because there’s no requirement under the Pensions Act 2008 for them to pay anything. We’ll update this section once we have clarity on the position.

Employers must not induce their staff to reduce or stop paying contributions. See our answer to ‘Can an employer ask staff to opt-out, cease active membership or go on a contribution holiday during the coronavirus outbreak?’ above.

Jobholders can tell their employer that they want to reduce their contribution at any time. If the new level of contribution, once added to the employer’s contribution is less than the total minimum contribution required for the scheme to be a qualifying scheme, the jobholder is deemed to have ceased active membership of the scheme and the employer is no longer obliged to pay its minimum contribution.

If an employer is claiming for assistance from the Government to cover wages under the Job Retention Scheme, they can claim for 80% of a furloughed employees’ usual monthly wages up to a cap of £2,500 per month. On top of this amount they can claim the associated employer’s National Insurance contributions and 3% of qualifying earnings for minimum auto-enrolment employer pension contributions. However, it’s worth noting the following:

  • Claims for employer pension contributions can only be made if the amount claimed is actually paid as an employer contribution. 
  • It’s not possible to claim for employer pension contributions of more than the amount actually being paid (for example, if an employer is paying less than the minimum required under automatic enrolment due to the employee choosing to pay less). 
  • If a furloughed employee’s salary falls below the lower qualifying earnings threshold (£6,240pa or £520pm for 2020/21), an employer won’t be able to claim any pension contributions from the Job Retention Scheme. This is because 3% of qualifying earnings would be zero as the threshold has not been reached.

Employers who use the Job Retention Scheme can claim for 80% of furloughed employees’ usual monthly wages up to a cap of £2,500 per month. For this calculation, gross salary should be used based on actual salary before tax in the last pay period before 19 March 2020. This can include past overtime, fees and any compulsory commission but excludes dividends, discretionary commission, bonuses, tips, non-cash payments or non-monetary benefits.

Where a salary sacrifice arrangement is in place for a furloughed employee, the post-sacrifice salary that was in payment in the last pay period before 19 March 2020 should be used in the calculation of an employer’s claim under the Job Retention Scheme. 

The Job Retention Scheme allows an employer to claim for employer pension contributions of 3% of qualifying earnings based on the furlough salary. Under a salary sacrifice arrangement, an employer is likely to be required to pay pension contributions that are more than this amount for furloughed employees but they can’t claim the excess from the Job Retention Scheme or reduce an employee’s furlough salary to meet the cost of these additional amounts. It’s therefore necessary to check what the contractual position is for pension contributions and relate this to the salary sacrifice arrangement in place. Salary sacrifice arrangements can be based on a percentage of earnings or on set monetary amounts. Additionally, a scheme may calculate pension contributions from the first £1 of earnings or from the lower qualifying earnings threshold and may not include all elements of pay in the calculation. 

This means that employers with employees in salary sacrifice arrangements may find that they are obliged to pay employer contributions that exceed the amount that they can claim under the Job Retention scheme. 

If pension contributions are calculated as a percentage of pay, then contributions should reduce if an employee’s furlough salary is lower than their normal salary. Where a salary sacrifice arrangement is in place, it’s necessary to do a calculation to work out what pension contributions are due (taking into account the furlough salary and the notional pre-sacrifice salary relating to that) and what can be claimed from the Job Retention Scheme. 

If contractual arrangements for furloughed employees state that a set amount will be sacrificed and paid to the pension scheme, then an employer should continue to pay this amount across as part of the employer contribution. This applies even if this amount is greater than the amount due under the pension scheme rules or governing documentation. 

Salary sacrifice reworks an employee’s remuneration in a more tax efficient manner at no additional cost to the employee or employer but can help generate higher pension contributions or higher take-home pay as a result. Employers can set up a salary sacrifice arrangement by changing the terms of employment contracts with each employee needing to agree to the change. Contributions made via salary sacrifice may be reviewed each year in line with salary increases. Outside of that if an employee wants to opt in or out of a salary sacrifice arrangement, their contract must be altered with each change. It may be necessary to change the terms of a salary sacrifice arrangement where a life event significantly alters an employee’s financial circumstances and this may include: 

  • marriage, divorce or partner becoming redundant or pregnant
  • changes to circumstances directly arising as a result of coronavirus (COVID-19)

For COVID-19, our understanding is that an opt-out could be made by furloughed employees and by employees working normally or on reduced hours or pay who are suffering financial difficulties. 

If an employee chooses to opt out of an existing salary sacrifice arrangement, then the pre-sacrifice position is likely to apply. In other words, this may see the (re)introduction of employee contributions alongside employer contributions. 

It’s also worth pointing out that the claim for wages from the Job Retention Scheme would still be based on the post-sacrifice salary in the last pay period before 19 March 2020.   

An employee continuing to work for their employer might want to opt-out of a salary sacrifice arrangement if it means their take-home pay would increase as a result. For furloughed employees, however, opting-out of salary sacrifice may leave them worse off if employee pension contributions start being deducted from their furlough salary (which may need to happen if the scheme is to remain qualifying). Such employees would therefore lose the benefit of the employer paying their contribution through salary sacrifice. 

As an alternative to putting employees on furlough, an employer may negotiate reduced pay and/or reduced hours with some or all employees. If this happens, it would be necessary to check what the contractual position is for pension contributions and relate this to the salary sacrifice arrangement in place. Salary sacrifice arrangements can be based on a percentage of earnings or on set monetary amounts. Additionally, a scheme may calculate pension contributions from the first £1 of earnings or from the lower qualifying earnings threshold and may not include all elements of pay in the calculation. 

If pension contributions are calculated as a percentage of pay, then contributions should reduce if an employee’s salary is reduced. 

If contractual arrangements for employees state that a set amount will be sacrificed and paid to the pension scheme, then an employer should continue to pay this amount across as part of the employer contribution. This applies even if this amount is greater than the amount due under the pension scheme rules or governing documentation.