EPN603 - Pensionable earnings and Contributions for members placed on furlough

Audience

  • HR directors/managers
  • Finance directors/managers
  • Payroll leads
  • Pension leads
  • Any staff who either submit monthly interface data, or manage a shared service or payroll provider who submit monthly interface data to the Scheme Administrator (MyCSP)

Summary

This EPN provides important information regarding pensionable earnings and contributions of members who have been furloughed and may be affected by the Government’s Coronavirus Job Retention Scheme. 

Actions

  • You must arrange for your payroll provider to deduct contributions and to provide the Scheme Administrator with the required data (as described below).

Timing

  • Immediate

Detail

1. The Coronavirus Job Retention Scheme means, if an employer and employee both agree, the employer might be able to keep the employee on their payroll if they’re unable to operate or have no work for them to do because of coronavirus (COVID-19).

2. This is known as being ‘on furlough’. Under the Coronavirus Job Retention Scheme rules, employers can pay 80% of a furloughed employee’s regular wages through the Coronavirus Job Retention Scheme (up to a monthly cap of £2,500) and can choose to ‘top-up’ between the 80% covered by the Coronavirus Job Retention scheme and 100% of the employee’s regular wages.

3. This EPN provides information about the pension implications, but please note that the Coronavirus Job Retention Scheme does not apply to the Civil Service, and eligibility for other organisations depends on how staff costs are funded. The Coronavirus Job Retention Scheme will therefore only be appropriate to a limited number of employers covered by the Civil Service pension arrangements.

For Awareness

4. Under the Civil Service Pension Scheme rules/regulations, for members whose pay is not being topped-up and is therefore temporarily reduced to 80% of its normal level, their pensionable earnings will be similarly reduced. This means that both employer and member contributions will be based on the 80% pay that the member actually receives. Similarly, their pensionable earnings (for the purposes of calculating benefits) for this period will be the 80% figure.

5. The effect on member benefits will be relatively small:

  • The final salary calculation under the classic, classic plus and premium schemes looks back over several years for the highest figure, so it is possible that a higher amount than the temporarily reduced earnings will be used to calculate benefits.
  • The earnings used in the death benefit calculation similarly looks back over a number of years; therefore, the temporarily reduced pay may not be included when calculating any benefits due.
  • The career average nature of the nuvos and alpha schemes means that temporarily reduced earnings will only lead to a limited reduction in pension accrual for a short period.
  • Likewise, slightly reduced contributions will only be payable to partnership pension account for a limited time and are unlikely to have a significant impact on the pot being built up.

Action for employers: contributions to be deducted by your payroll provider

6. You must instruct your payroll provider to deduct member contributions based on the earnings actually paid to the member.  Employer contributions should similarly be based on earnings actually paid.

Action for employers: changes to your Monthly Interface

7. When providing your Monthly Interface to the Scheme Administrator, you must do the following for any employee whose regular pay is reduced as a result of being furloughed.

a) Supply the revised salary and any applicable revised pensionable allowance information with a start date equal to the start of the period of furlough.

b) Ensure the year to date employee contributions and earnings supplied take account of the revised salary and pensionable allowance information.

c) Ensure that for any employee on an assumed pay absence immediately before being furloughed, assumed earnings and actual scheme contributions are based on the revised salary and pensionable allowance information.

8. Important: you must not provide a service history break to report the period of furlough.

9. If you have any questions with regards the interface actions detailed in this EPN, please contact your Interface Analyst at interfaceteam@mycsp.co.uk   

10. More information about the Coronavirus Job Retention Scheme can be found on the GOV.UK website (opens in a new window).

Contacts

If you have a question about the distribution of EPNs, or would like to receive them in a different format, please contact EPN@MyCSP.co.uk.

You can find electronic copies of the Employer Pension Guide, all current EPNs and forms in the Employer section of the Civil Service Pensions website.

This notice is for employers and should not be issued to scheme members.

Members can find information about their pension by visiting the member's section.

Feedback