The government’s furlough scheme has hit pension contributions by 25%, higher than the 20% wage cut the scheme offers, according to research by Now Pensions.
The pension provider revealed the effect of furlough had reduced pension contributions by a quarter, due to the mathematics of the system, meaning the first £120 of weekly pay is not pensionable.
The research explained a worker that was earning £400 per week before furlough would have received £8.40 in pension contribution from their employer, but under furlough this falls to £6, a reduction of more than a quarter.
A further impact of the furlough scheme on pensions showed 250,000 more people have been forced into the net pay anomaly band. Those impacted by the anomaly lose out on up to £64 of take home pay every year due to the way in which their contributions are calculated.
The basic rate tax relief available to members of schemes who do not pay income tax - which could boost a net contribution of £2,880 to a gross £3,600 - is not available to those in net pay arrangement schemes.
Director of policy Adrian Boulding said: "It's becoming extremely visible that women are being hit harder this pandemic when it comes to their finances and will continue to be disproportionately impacted as the economic crisis unravels. It seems to be an accident of the system, but by excluding the first £120 per week from pension contributions, the furlough scheme has caused a big reduction in contributions going into worker's pension plans.
"The way the maths works, this reduction is largest for those on low pay or part time work, and as these are often women it is widening the gender pension gap."
He added: "The net pay anomaly is a quirk of the tax system which the Conservative Party included a review into in their 2019 general election manifesto. We are urgently calling for the government to not ignore this tax kink which is hurting our lowest earners and becoming a growing problem as more people's livelihoods and jobs are hit by the pandemic."
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