The perfect storm?
A post-furlough pension review for women

The new Job Support Scheme is coming into play on Sunday, with the government hoping this wage-subsidy scheme will encourage companies to bring back more employees. Women have arguably experienced the brunt of COVID-related job uncertainty – so, for female workers returning from furlough in November, now is the perfect time for a pension health-check!

It’s undeniably been a tough year – from health and financial worries to missing our friends and family. But when it comes to employment, women have experienced the full force of the uncertainty caused by the pandemic – they were more likely to lose their jobs or see a pay cut during the crisis, and also they likely faced the added pressure of unpaid but essential work.1 Even before the pandemic, women often assumed the lion’s share of household and caring responsibilities, with a hit to their earning and long-term saving power.2

But there is another hidden worry that women may not be thinking about, particularly if they’re no longer in work, have been furloughed or have been working reduced hours: the impact that lockdown has had on their retirement pots.

With tomorrow marking the end of the Job Retention (furlough) Scheme – and with more people therefore expected to return to work in November as part of the government’s new Job Support Scheme (JSS), we look at why now is the time to check-in on the state of your workplace or personal pensions.

Small change, big impact

Since April, the Job Retention Scheme has been covering 80% of salaries up to £2,500 per month for furloughed employees, and has been replacing 3% of employer pension contributions for those earning between £520 and £2,500 per month.

With the reduction in their salary, many women who were furloughed will typically have only been making 80% of their usual monthly pension contributions.

Women are already behind men in the pay stakes, and face a gender pension gap as well. So what might seem like a relatively small change to your earnings could be yet another negative impact on your ability to save adequately for retirement.

And this will impact a significant proportion of working women – and men. As you can see from the numbers below, in September 9.6 million jobs were furloughed.3

Heading back to work?

In September, Chancellor Rishi Sunak announced the Winter Economy Plan, a raft of new measures that aims to ward off the threat of mass unemployment after the withdrawal of the Job Retention Scheme.

The headline scheme for workers is the Jobs Support Scheme (JSS), which is essentially a wage subsidy scheme similar to the one that exists in Germany – this will replace the furlough scheme and comes into play on 1st November. The JSS will pay a portion of worker’s wages, as long as their employer is prepared to offer them at least a third of their typical hours, which the government hopes will encourage employers to bring back more employees…

Checking in

With this in mind, if you’re a female worker who has previously been furloughed but are returning to work in November, it’s important to give your retirement savings a health check-up.

In some cases, employees’ contracts have been changed because of furlough, including a possible reduction in the level of pension contributions paid by the employer. Your employer is under no obligation to reinstate this, so it’s critical that you check your contract. Request any amendments and ask for changes to be reconsidered in the future, as this reduction will have a huge impact on your retirement pot.

If you’ve temporarily opted out of your pension scheme to save some cash, opt back in as soon as you’re able. Compounding plays such a large part in retirement planning, and any missed contributions will have consequences well into the future.

Mind the gaps

If you’ve left work, for example because you’ve been made redundant or need to look after the children so that your spouse can concentrate on their job, do make sure that you’re continuing to pay National Insurance contributions. It may be that your reduced family income means that you’re now eligible for child benefit. Even if your income is above the £50,000 threshold, this is an important way to ensure that you don’t miss out on National Insurance credits to protect your State Pension entitlement.

You may have been lucky enough to find a new role; in this case, make sure to discuss your pension with your new employer in order to understand how it plays into your long-term planning for retirement. And don’t forget to keep track of your old pensions. If you do have redundancy pay left over at this point, consider using it to top up missed contributions.

Riding out the storm

As we have seen, COVID-19 is the “perfect storm” of financial, emotional and time pressure – and is even more so for women. With female workers already facing a significant gender pension gap when they reach retirement age, it is clear that we shouldn’t let the pandemic widen that gap even more.

The uncertainty caused by COVID-19 presents the opportunity to check-in on the state of your workplace or personal pensions, re-evaluate your financial priorities and talk openly about your financial ambitions. It’s also important to seek out expert support when renewing your financial choices.

Do you need to review your options? Give us a call on 01444 244551.

Your St. James’s Place Partner can help you take stock of your existing pension savings and help you to start closing that gap. Get in touch today.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested.


1 “Women bear brunt of coronavirus economic shutdown in UK and US”, University of Cambridge, April 2020
2 “Women shoulder the responsibility of ‘unpaid work’”, ONS, 2016
3 – HMRC data about the Coronavirus Job Retention Scheme