The decision by the Chancellor to extend furlough pay until September is good news for workplace pension and will help protect people’s longer-term savings.
The pension industry has welcomed this decision, which is expected to be announced by Rishi Sunak’s in his Budget speech later today.
Under the furlough scheme the government effectively pays 80 per cent of furloughed workers full wage up to £2,500 a month, with employers only obliged to pay NI and pension contributions.
Similar to last summer, employers will be expected to start paying more of their employees’ wages from July as the economy opens up.
Over 11 million employees have benefitted from this Coronavirus Job Retention Scheme since it started in March 2020, with 8.9 million workers using it in May 2020.
There are currently 4.7 million employees currently on furlough, with 41 per cent of employers currently using the scheme.
Aegon’s head of pensions Kate Smith says: “With the extension of this scheme many of these workers might otherwise have faced redundancy at the end of April.
“Jobs and pensions are inextricably linked. A further extension of the job retention scheme is good news not only for jobs but also for pension saving as furloughed employees will continue to receive employer contributions as long as they don’t opt-out of their workplace pension.
“The job retention scheme has meant that workplace savings has been remarkedly resilient. The true impact will only be known once the support thaws and melts away altogether.”