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Personal Finance: I’ve been furloughed, what happens to my pension contributions?

PUBLISHED: 06:00 15 April 2020 | UPDATED: 09:36 15 April 2020

Richard Ross of Chadwicks on what furlough means for your pension contributions. Picture: Chadwicks/Getty

Richard Ross of Chadwicks on what furlough means for your pension contributions. Picture: Chadwicks/Getty

Chadwicks/Getty

Richard Ross, director of wealth managers Chadwicks, on what furlough means for your pension.

Although being furloughed is very much better than being made redundant, many will be finding their drop in earnings difficult to manage and be looking for ways to save money.

Stopping pension contributions can seem like a painless way to boost your income.

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Following the introduction of automatic enrolment, all employees must now be enrolled into their workplace pension scheme.

The government sets minimum levels of contribution from both the member and their employer, although many schemes pay more than the minimum.

For smaller businesses the schemes are typically individual pension plans brought together under a group umbrella to ease administration.

The Pension Regulator has confirmed that pension contributions should continue for employees who are furloughed.

If you remain in the scheme, your employer must continue to make their contributions.

As an employee, you have the right to stop your contributions and opt-out of the scheme at any time; if you decide to stop your contributions your employer will no longer be under any obligation to continue their contributions and most will also stop paying in.

Any money you’ve already built up in your pension will remain, but nothing will be added to it.

If you do opt-out, you may have to wait before your employer accepts you back in the scheme.

Every three years your employer must re-enrol anyone who has previously opted-out.

At the very worst, you would need to wait until the three-yearly re-enrolment date to re-join the scheme.

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You should consider carefully before deciding to opt-out. Your pension is a valuable benefit and your contributions will be enhanced by both tax relief and your employer’s contributions.

A danger is that once you have stopped saving for your retirement it is easy to keep putting off restarting.

If you are saving more than the scheme minimum then a route to consider is to reduce your contributions rather than stop them all together.

As we start to emerge from this crisis, it is clear life is going to be very challenging for many small businesses.

While it is illegal for your employer to try to persuade you to leave the scheme, if you see your employer is struggling there is nothing stopping you from taking the initiative and volunteering to suspend your membership.

Please note legislation is subject to change. This does not constitute investment advice and is for information purposes only.


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