Furlough warning as end of scheme set to ‘put savings to the test'

Furlough, or the Coronavirus Job Retention Scheme, has been in place for over a year, protecting the jobs of those who worked for businesses impacted by the ongoing pandemic. With millions of jobs protected by the scheme, it is finally winding down and will come to its conclusion on September 30 – now just three days away. While the Government is shifting its focus towards getting people back into work and supporting them via other means, there remains worry about what the end of the scheme could mean for individuals.

Of particular concern is job security, as businesses under pressure financially could be forced to let go of staff they can no longer afford. This could create a ripple effect amongst the jobs market.

One expert has warned of the personal implications of the end of furlough, suggesting it could put a strain on long-term savings vehicles such as workplace pension arrangements.

Kate Smith, Head of Pensions at Aegon, offered insight on the matter, suggesting that a risk of unemployment could be one of the major hurdles Britons are forced to confront post-furlough.

She said: “While the number of people receiving furlough support has gradually diminished, the latest figures show that there were nearly 1.6million people still in receipt of furlough at the end of July.

© Getty furlough september 2021

“As the scheme winds-up it will put employers, the jobs market and also people’s savings habits to the test.

“It’s as yet unclear whether the re-opening of the economy will mean those still on furlough will have jobs that they can pick back up, or whether their roles are now at risk of redundancy.

“We’ve heard a lot about labour shortages in certain sectors but that doesn’t necessarily mean those out of work will rush into roles they may not want or may be unsuitable for.”

However, as Ms Smith highlighted, despite the turbulence of the last year and a half, many people have continued to save, particularly through long-term vehicles such as a pension.


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She added: “Despite the number on furlough peaking at 8.9 million in early May 2020 and a total of 11.6 million jobs furloughed since the scheme started, workplace pension participation has remained resilient.

“Very few people have opted out of their workplace pension and the already-low ‘opt out’ rates even saw a slight fall over the last year.”

The data is encouraging, particularly for those who are especially keen to secure their financial futures for after they depart the workforce.

Pensions are seen as a good investment for later down the line, and can often grow with compound interest to be worth far more than a person first put in.

© EXPRESS furlough scheme end

It is for this reason Britons are often encouraged to start pension saving as soon and as often as possible to allow their money to build up over a longer period of time.

However, when it comes to saving arrangements, it may not be all good news with the end of furlough.

In fact, there is still a great deal of uncertainty surrounding what the termination of the scheme will actually mean for those who remain on it.

Ms Smith concluded: “Any large rise in unemployment following the wind-up of the furlough scheme could put the brakes on the significant progress of auto-enrolment and workplace pension participation rates.

“Individuals who lose their job not only face a loss of income but will also no longer contribute to their workplace pension, and benefit from ‘free’ money from their employer. Gaps in pension saving will only exacerbate the differences in the financial health of those whose jobs have continued unaffected during the pandemic and those who have faced difficulties.”

At the start of the month, data showed the number of people on furlough had fallen to the lowest level since the start of the pandemic, news which was hailed by the Government.

Around 340,000 people were recorded as moving off furlough across the UK over the course of July. However, as of July 31, there were a total of 1.6million people on the scheme.

Chancellor of the Exchequer, Rishi Sunak, said: “It’s fantastic to see furlough levels at their lowest since the start of the pandemic with young people in particular getting back to work and kickstarting their careers as the UK gets back to business.

“With furlough naturally unwinding and coming to a close at the end of the month we are doubling down on our Plan for Jobs – focusing our support on giving people the skills and opportunities they need to succeed in the jobs of tomorrow.”

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