Government confirms Covid-19 Job Retention Scheme applies to auto-enrolment pensions

•    The Government has confirmed grants to pay the wages of workers ‘furloughed’ during the Coronavirus crisis will also cover employer auto-enrolment pension contributions (https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme)
•    Government will pay minimum auto-enrolment contributions based on the furloughed salary; maximum grant for furloughed employees is £2,500 per month
•    Someone earning £50,000 and contributing the auto-enrolment minimum in 2020/21 who is furloughed on £2,500 a month will see their monthly pension contributions fall from £291.73 to £158.40
•    Someone on average UK earnings of around £30,000 who is furloughed will see their monthly pension contributions drop by 20%

Tom Selby, senior analyst at AJ Bell, comments: 

“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.”

How being furloughed could affect someone earning £50,000 in 2020/21 paying in the automatic enrolment minimum (8% of relevant earnings)