17.3% of furloughed workers increase pension contributions amid Covid-19

Nearly one fifth (17.3 per cent) of furloughed workers in the UK have increased their pension contributions since the onset of the Covid-19 pandemic, according to GlobalData’s 2021 UK Life & Pensions Survey.

The research also found that more than three-quarters (78.3 per cent) of furloughed workers made employee contributions of at least 6 per cent, which is higher than the 5 per cent minimum employee rate required for workplace pensions.

In contrast, less than two-thirds (63.7 per cent) of full-time employees made contributions of at least 6 per cent, with this figure falling to 54.8 per cent amongst part-time employees and 42 per cent amongst the self-employed.

However, full-time employees were found to have enhanced their pension contributions since the onset of the pandemic, with GlobalData suggesting that this may be as a result of costs saved from a lack of commuting amid the lockdowns.

In particular, 12.1 per cent of full-time employees stated that they had increased their pension contributions 'somewhat', whilst a further 4.1 per cent had increased them 'significantly'.

The biggest improvement, however, was amongst furloughed staff, as 13 per cent increased their pension contributions 'somewhat', and 4.3 per cent increased them “significantly”.

Furthermore, just 8.7 per cent decreased their contribution 'somewhat' and no members of this subset saw significant decreases.

Around 13.9 per cent of part-time employees saw a decrease in their pension contribution, with 3.1 per cent reporting a significant decrease, while 11.9 per cent of full-time employees saw a decrease, 4.3 per cent of which was considered a significant decrease.

GlobalData senior insurance analyst, Beatriz Benito, commented: “When the Covid-19 pandemic first hit, the industry feared that a wave of furloughed employees would opt out of their pension schemes as their financial situation changed.

“This would have had serious connotations as around 11.6 million jobs have been supported by the furlough scheme since it was launched.

“However, GlobalData’s survey has highlighted that a large percentage of furloughed workers have in fact increased their contributions, despite their drop in wage.

“The rise in pension contributions may be because some furloughed employees are better off financially as a household. For example, their outgoings could have fallen due to less socializing and commuting, or simply because they are paying more attention to their expenses."

Benito also suggested that other furloughed individuals may be aware that they could be losing out on the actual amount they contribute each month and may have voluntarily tried to make up this loss by increasing their personal contributions - or may have been advised to do so by a financial adviser.

“Unfortunately, pension contributions for employees on furlough have been based on their reduced wages rather than their full, pre-pandemic salaries," she added.

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