Official figures show that the amount of money saved into defined contribution workplace pensions fell sharply after the first national lockdown.

Figures released by the Office for National Statistics (ONS) revealed that, in the three months to the end of June 2020, employee contributions fell 11% and employer contributions dropped 5%.

The reduction in contributions suggests many employees voluntarily opted out of their workplace pension due to financial difficulties as a result of the Covid-19 pandemic.

Another possibility is that furloughed workers' priorities changed and they favoured diverting money to accessible savings, rather than a pension.

When the furlough scheme was first introduced, the government covered employer contributions on furloughed wages into defined contribution workplace pensions. This ensured employer contributions continued to be paid into furloughed workers’ auto-enrolment pensions until 31 July 2020.

However, from 01 August 2020, the furloughed staff pension contributions were no longer covered by the government as part of the furlough scheme.

Kate Smith, Head of Pensions at Aegon, said:

“Employer auto-enrolment duties continued for all eligible employees, including furloughed employees, so the good news is contributions continued to be paid during this time for many.

“But the impact of lower furloughed wages and job losses has been demonstrated with this dramatic drop in contributions.

“Alarmingly, these figures represent just the start of a trend, as furlough has continued and job losses are increasing.

“The longer-term impact of this could put a massive dent in people’s retirement plans and their ability to save for the future.”

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We can provide a review of the employee benefits package you provide your workforce, including your group pension scheme. We can also deliver financial advice clinics to your workforce to help with their financial management and planning. Give us a call today on 01483 205890 to find out more.