I am writing to inform the House of the steps this Government is taking to support pension savers, pension schemes, trustees, employers and existing pensioners during the Coronavirus pandemic.
General Pensions Levy
On 31 March 2020, the Government revoked the planned increase in the general pensions levy on occupational and personal pension schemes that was due to take effect on 1 April 2020. The levy recovers funding provided by the DWP in respect of the core activities of The Pensions Ombudsman, and part of the activities of The Pensions Regulator and the Money and Pensions Service. These measures will result in an estimated £4.9m of savings for the private pensions sector.
We will now be focused on reviewing the structure of the levy and engaging with industry, at the appropriate time, on the best way forward on levy funding.
Coronavirus Job Retention Scheme
Key to supporting both businesses and pension savers is the Coronavirus Job Retention Scheme (CJRS) which offer an unprecedented package of support for businesses. This scheme has been designed to be as straightforward as possible, ensuring it aligns with and works for most business practices.
Under this scheme, the grants available to employers will support business by covering up to 80 per cent of a furloughed worker’s regular salary, capped at £2,500 per month. Additionally, these grants will also cover employer pension contributions into registered pension schemes on behalf of furloughed employees for any workplace pension scheme. Employers can claim up to the minimum employer pension contribution of 3 per cent of qualifying earnings required under employers’ automatic enrolment duties, even if it’s not an automatic enrolment pension scheme.
By easing the burden of workplace pensions for employers with furloughed staff we are helping them better manage costs during the crisis whilst supporting long-term saving for the future. The measures recognise the importance of protecting the hard won improvements in retirement provision for millions of savers achieved through automatic enrolment.
The CJRS went live on 20th April and claims can be backdated to 1st March where workers have already been furloughed. Information on the scheme can be found here:
To help support employers, the Pensions Regulator has detailed guidance on its website here:
We are continuing to work closely with the pensions industry to explain the detail of the CJRS scheme and to help providers take a pragmatic approach to disruptions to workplace pensions experienced by their clients.
Defined Benefit Schemes
The Government also recognises that these are challenging times for Defined Benefit pension schemes. The current scheme funding regime, overseen by the Pensions Regulator, is sufficiently flexible to cope with the current situation and the Regulator’s guidance published on 27 March sets out specific easements to its regulatory regime in recognition of the difficulties that some schemes and sponsors may have in the context of the current emergency. This can be found at:
The best possible protection for members of Defined Benefit schemes is a strong profitable employer, and with the existing flexibilities and easements there is no reason why a pension scheme should push an otherwise viable employer into insolvency.
In the event where a sponsoring employer does become insolvent, and the scheme is not well enough funded to secure full benefits, the Pension Protection Fund, which is well equipped to weather market turbulence, will pay members compensation.
The Pensions Regulator has already set out its expectations of trustees of both Defined Benefit and Defined Contribution pension schemes and for employers and administrators, including the key risks they should focus on. The Regulator has confirmed that it will take a proportionate and risk-based approach towards compliance and enforcement decisions during these challenging times, with the aim of supporting employers, providers and savers.
Pension Scams and Transfers
The Government is committed to protecting savers during these unprecedented times and we are working with regulators to identify additional ways to support and safeguard individuals. At present, there is no robust evidence to suggest that savers are making hasty decisions to transfer pension funds or are being targeted by fraudsters. However, we are continuing to work closely with The Pensions Regulator, the Financial Conduct Authority (FCA), the Money and Pensions Advisory Service (MaPS) and pension providers to identify any new trends or issues and will take proportionate action if required.
In addition, we have supported the collaborative approach the Pensions Regulator, the FCA and MaPS have taken, communicating to savers to use MaPS, Pensions Wise or the Pensions Advisory Service channels for guidance before making decisions about retirement to protect people against scams. Furthermore, MaPS has produced information and guides to support individuals in making decisions about their money, debt and pensions at this challenging time. This includes reiterating that where appropriate Pension Wise guidance sessions can help an individual to understand their options fully. This can be found at :https://www.moneyadviceservice.org.uk/en/articles/coronavirus-what-it-means-for-you
Access to State Pension and benefits for people asked to shield themselves
There are approximately 900,000 users of the Post Office Card Account (POca) system for accessing their pensions or benefits. These POca customers ordinarily need to leave the house to access payments at the Post Office. The Department has worked closely with the National Shielding Service which is contacting clinically vulnerable citizens who have been advised by NHS England to shield as a result of the Coronavirus pandemic.
We launched a new service on 10th April through which we have contacted 27,000 citizens who have POca accounts and we considered who may need support to access their Benefit or State Pension payment.
The Department has worked tirelessly to identify those older, vulnerable customers who urgently require help to access their payments. For those needing help, DWP Visiting Officers are able to discuss a number of options available to customers over the phone and we have worked closely with Post Office Ltd to provide contact free cash payments by Royal Mail Special Delivery to support the most vulnerable, with guaranteed next day delivery. This cash service adds to a range of measures we are using to support these individuals shielding at home.
In November 2019 the Government announced measures to increase most state pension rates by 3.9% in line with the annual growth in earnings, at the same time as announcing an end to the benefit freeze.
This meant that on 6 April 2020 the full rate of the basic State Pension increased from £129.20 to £134.25 per week and the full rate of the new State Pension increased from £168.60 to £175.20 per week - with working age benefits uprated by inflation. This was the largest increase in state pension in eight years.
This statement has also been made in the House of Lords