Employers will be required to resume the payment of minimum workplace pension contributions to furloughed workers from August.

Chancellor, Rishi Sunak, announced that the Coronavirus Job Retention Scheme will continue until October, but the government will begin phasing in a shared cost arrangement with employers from August.

The scheme allows employers to furlough their employees with the guarantee that the government will pay 80 per cent of their wages, up to £2,500 a month, as well as their National Insurance and pension contributions.

Employers will be required to pay minimum pension contributions of 3 per cent and National Insurance contributions from August, before the government reduces its salary payment down to 70 per cent, up to £2,190, in September.

In September, employers will have to pay the remaining 10 per cent of salary under the Coronavirus Job Retention Scheme, as well as National Insurance and pension contributions.

The government will then reduce its salary payments under the scheme to 60 per cent, up to £1,875, in October, with employers required to pay the other 20 per cent, before the scheme is phased out completely at the end of October.

Commenting on the announcement, Aegon pensions director, Steven Cameron, said: “It’s welcome news that as we transition to a shared cost furlough scheme, affected employees will continue to receive pension contributions into their workplace pension on top of up to 80 per cent of their salary.

“It would have been all too easy for the Chancellor to have forgotten about workplace pension contributions for furloughed employees, but that would have had long term negative impacts for the retirement prospects of many millions.

“The government will be hoping this gradual move to sharing of costs gives a further incentive, if needed, to get businesses back up and running, where safe to do so, while protecting employees’ incomes and pensions where not.

“Compared to current arrangements, by October employers may be paying up to £928 for furloughed employees whose pre-furlough earning were £3,125 or above per month.”

Pensions and Lifetime Savings Association (PLSA) director of policy and research, Nigel Peaple, added: “Since the introduction of the Coronavirus Job Retention Scheme, the Treasury has given vital support to furloughed workers’ pension contributions that have no doubt eased financial hardship and anxiety for the millions affected.

“However, this support will cease from 1 August. While this will place some financial strain on employers, we recognise that the support under the furlough arrangement needs to be reduced over time, and this multi-step plan should give most employers and schemes time to plan and adjust.”

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