The Government has confirmed that grants to pay the wages of workers who are “furloughed” during the coronavirus pandemic will also cover employer auto-enrolment pension contributions.

Chancellor, Rishi Sunak, announced last week the Coronavirus Job Retention Scheme as a temporary scheme open to all UK employers for at least three months, starting from 1 March 2020.

The Government has stated employers can use a portal to claim for 80% of the usual monthly wage costs for furloughed employees’ – or employees on a leave of absence – and that it expects the scheme to be up and running by the end of April.

The maximum grant for furloughed employees is £2,500 per month, and the Government has now confirmed it will pay minimum auto-enrolment contributions based on the furloughed salary.

AJ Bell senior analyst, Tom Selby, commented: “It is good news for both workers and employees that the Job Retention Scheme is being extended to cover auto-enrolment pension contributions. This sends a clear signal about the importance of retirement saving and will help limit the impact of the Covid-19 crisis on people’s retirement outcomes.

“The financial impact on those furloughed will depend on the extent to which their employer is willing to pay any wages over and above the Government grant level.

“For example, someone earning £50,000 who is moved onto the minimum furloughed amount of £2,500 a month – equivalent to £30,000 a year – will see their employer and employee contributions drop significantly for a limited period of time.

“Someone earning below £30,000, meanwhile, should only see a 20% reduction in their pension contributions, while those who have the extra 20% of wages made up by their employer should be unaffected.

“Either way, provided this is only for a few months it shouldn’t make a material difference to people’s retirement outcomes.”

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