Pension contributions and the Coronavirus Job Retention Scheme

A number of clarifications on pension contributions to defined contribution (DC) schemes have now been made following the announcement of the Coronavirus Job Retention Scheme (JRS).

Reclaiming pension contributions under JRS

The maximum claim per worker per month is the minimum employer contribution under automatic enrolment (AE) (i.e.3% of qualifying earnings, based on the gross amount of furlough pay).  

What if the employer pays contributions in excess of what can be reclaimed?

Employers who pay pension contributions above the 3% of qualifying earnings minimum must continue to pay contributions at the higher rate during the furlough period, unless they take action to reduce pension contributions to make these cost-neutral during this time.

Reducing employer pension contributions (which cannot be to below the AE minimum) may require a change to the employee’s terms and conditions and therefore require the employee’s agreement. In addition, a reduction of employer contributions is likely to be a “listed change” requiring the employer (with 50 or more workers) to consult on the change for a minimum period of 60 days.  However, the Pensions Regulator has confirmed that it will not take regulatory action against an employer who fails to consult furloughed workers for the full 60 days, if the reduction in employer pension contributions applies only during the furlough period. 

Salary sacrifice

Employers are not able to make salary sacrifice reductions to the gross amount of furlough pay (which is calculated by reference to the post-sacrifice salary/wages) and the full amount claimed from HMRC must be paid across to the worker. If pension contributions are paid under a salary sacrifice arrangement, the employer will therefore have to meet the full cost of these unless the employee agrees to end the arrangement. HMRC has confirmed that COVID-19 could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.


Where an employee chooses to opt of workplace pension provision during the furlough period, the employer is not required to make pension contributions in respect of them. Opting-out must not be encouraged by the employer, and regulatory fines will apply where an employer is found to induce opt-outs.


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