Am I entitled to early retirement due to ill health?

Early retirement due to ill health is possible, but how will you secure an income when you decide to not work anymore? This is a crucial decision.

Depending on the terms and conditions of your pension, you might be eligible to access your pension money earlier than usual. Financial stability and security is possible when you can no longer work anymore because of poor health.

You should weigh your options carefully. Which will it be for you?

What is ill-health retirement?

If you get ill and unwell before your retirement age, and you're suddenly unable to work you might be eligible to access your retirement funds early.

As of 2021, you can access your State Pension at 68 and private pension at 55. If you need to retire early and reasonably can't work further, you are entitled to your pension earlier than the set retirement age.

You will have to check with your pension provider as there are rules and regulations that have to be followed in regards to receiving your pension earlier than most people, such as working a minimum amount of years. You should also be able to provide medical proof of your condition that prevents you from working and earning a salary.

Can I claim my State Pension early due to ill health?

Unfortunately, this is not possible, even if you can prove that you are medically unwell to work and unable to financially support yourself further in the future. Fortunately, there are some benefits, such as Statutory Sick Pay (SSP) or Universal Credit that you can access to help you during this difficult period.

Can I get an ill health pension from a defined benefit scheme?

Depending on your pension provider and the regulations around receiving your pension, you might be able to receive your pension under a defined benefit scheme.

A defined benefit pension scheme is a way of paying into your workplace pension. Payments into your pension pot under this scheme are based on your final salary or your career average salary. You know exactly how much pension income you will be getting during your retirement.

Under this type of scheme, if you take your pension early, usually the amount of money you get is reduced because you won't have as much time to invest in this pension pot.

Can I take the whole pension pot?

Under this scheme, you might also be able to withdraw your whole pension pot. This is called a trivial lump sum and you are eligible for it mainly due to early retirement and ill health.

You can withdraw a trivial lump sum due to ill health only if the value of your combined pension schemes is not over £30,000. A trivial lump sum also requires you to be eligible for it based on the rules explained here. There is a tax implication to this trivial lump sum withdrawal, with the first 25% of the lump sum amount allowed to be drawn tax-free. The remaining 75% of the amount is taxed at your marginal tax rate. Further information on tax implications can be found here.

Can I get an ill health pension from a defined contribution scheme?

Yes, if your pension provider and the rules they've set allow it. You need to contact them to find out what your rights are.

Early retirement due to ill health, if supported by medical proof, is usually accepted as a reason to start taking your pension earlier than usual.

You need to prove that you are:

·         Physically or mentally unable to work anymore

·         There is no further treatment or medication that could treat you and help you get back to work.

You fill out a form and then the pension scheme’s medical examiners will decide if you qualify for an early pension. In such a case you would normally have the same options and tax treatment for taking your money as you would normally have at the age of 55.

If you’re terminally ill (serious ill-health), it is possible for you to take a lump sum tax-free - check with your pension provider for more details.

How about voluntary redundancy rather than early pension?

Voluntary redundancy is different to a pension and it could be a valid option for you if you need to retire early.

Take into consideration that you need to:

·         Speak to your employer and agree on an amount that represents the value of your work as well as on an amount that is suitable for the remainder of your time until you get your pension

·         Look into the tax arrangements on your redundancy pay as regulation states that only £30,000 is untaxed.

·         Budget the money very carefully for it to last until you start receiving your pension.

You need to be very careful and aware of your decision as this is the point where you define your financial future. Are you going to accept a pension or a voluntary redundancy?

How about a pension annuity?

Pension annuity is another solution to your financial woes when it comes to stopping work early or being unable - physically and mentally. An annuity is a financial product and insurance contract by pension providers that guarantees a certain amount of income for a set period of time, depending which package you purchase.

There are several types of pension annuities to consider such as:

·         Lifetime annuity - which guarantees you an income for a lifetime

·         Temporary annuity - which guarantees you an income for a fixed amount of time

·         Or enhanced annuity - a higher income due to illness or short life expectancy.

The most common process of purchasing an annuity is by withdrawing a 25% lump sum tax-free from your pension, and with the rest of the pension money in your pot you buy a lifetime annuity and you secure an income for the rest of your life.

As you're looking to retire early due to illness, an enhanced annuity could be a great decision for you too.

This type of pension annuity provides a safety net around your financial future. Because, for instance, if your pension that you contributed into based on a defined benefit scheme runs out, you are suddenly left without an income at an old age. But with an annuity, you are financially secure for life.

Consider other sources of income

Are there any other ways you can secure an income? You can stop working full-time relatively early but have an income that is not based on your pension. For instance you might consider part-time work at home where it is more flexible, not full time and a more relaxing and easy way of working.

Self-employment could be a good option for you, since you would be able to work from the comfort of your own home.

Instead of resorting to receiving your pension early, you could secure an income by working less hours if possible and if your health permits it.

Which is the best option for you?

Take the time to really evaluate your options before retiring early. Check the rules of your pension provider's pension scheme. Consult a financial advisor for legal and financial guidance, if you're not sure which option is the best for a stable financial future.

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How Do I Find My Pensions With A NI Number?

Pensions are a topic we should all be aware of. It finances our future self, after all.

It is very common for people to lose track of their pension pots or, worse, to not even be aware that they have one! In the UK, there is £20bn of unclaimed pension money today and it’s only going to grow due to auto-enrolment and people frequently changing jobs.

People do not realize that it is important to let their pension provider know when they change their address. They also do not realize that they have a separate pension pot with each employer, and when they change jobs, they get a different pension too.

There are several ways you can find your lost pension with your NI number. This number is a unique number to you for the purpose of tax and NI contributions reporting. Of course, basic contact details are essential as well, but the NI number is the most important one to have in hand.

How do I find out if I have a pension from an old job?

As there are three types of pension

• A State Pension
• A personal pension
• A workplace question

It is important that you check whether you have unclaimed money for all three.

You are entitled to a State Pension when you’ve been employed in the past and made National Insurance contributions. If you haven't paid taxes before and instead earned a salary below the tax threshold, you are not entitled to a State Pension. Therefore, you need to look at your past payslips to figure out whether you've made NI contributions.

It is worth noting that the value of your State Pension is set to a maximum of £179.60 per week, as of 2021. All you have to do is determine whether you are entitled for it - based on NI payments and an age threshold of 68.

In terms of a personal pension pot, you'll be aware if you have one as it was arranged by you - or from your employer for you. It's a rare occurrence that someone forgets their personal pension as it resembles a personal savings account. However, if it is lost, it is possible to find it by providing your contact details and your NI number to your pension provider.

Lastly, you can find out if you have a pension from an old job by:

• Contacting your previous employers
• Contacting your pension providers
• Using the Government's pension tracing service.

It is better if you can provide as much detail as you can to track your pensions, but it is also possible and easy to find your pension with just your NI number.

Contact your past employers and pension providers

Your past employers can inform you on who your workplace pension providers are in order to trace your pension pots from each job you've had in the past. By providing your NI number and your contact details, you'll find out who your pension provider is and what your unique pension number is.

Then, you are able to contact these pension providers individually, trace your pots and start earning your pension.

Government pension tracing service

This service has been set up by the Government to help people who have lost track of their pensions easily find them - or even discover new pots that they were not aware of! To trace your old pensions through HMRC you need to have at hand the name of your past employer or your past pension provider.

However, some consider this service considerably outdated as you can only find out the contact details of your pension providers - which might be wrong in some cases. You need to contact each pension provider yourself, or even find their correct details, and locate your pension pots as well as their value.

How Raindrop can help you

While the Government's pension tracing service does a superficial job in finding your lost pensions, Raindrop’s service goes to many lengths to find your pensions; not just the contact details of the providers.

Raindrop is not a faceless service. We are here to help you sort out your financial turmoil, plan your retirement and manage your money - starting from finding your old pensions together.

To use Raindrop's pension tracing service, all you need is your NI number and some basic information. We pride ourselves in providing an easy and straightforward pension finder that does not need too much information from you in order to trace your pensions.

We understand how time-consuming and stressful it is to try and locate all your pensions. But we are here for you at every step; you can call us as well as get regular updates during the tracking process - only human interactions with a company that wants to help you.

With a click of a button, our simple technology allows our customers to transfer all their pension pots in one place. You are now able to see your saved money and be in control.

Pensions are already an intricate matter, but Raindrop makes it easy and stress free!

What should I do to make sure I don't lose my pension?

It is a very common issue to lose a pension - you are not the only one.

Whenever you change address or job, your pension provider also changes. To ensure that you don't lose track of them, you should:

• Inform your pension provider that you moved house and changed address
• Keep a note of all your pension providers and pots throughout your career or you can give yourself peace of mind and trust Raindrop.

Raindrop gives its customers reassurance not only by consolidating all pensions in one place but also by providing 24/7 balance visibility of your pensions. You can keep track of all your pots in one place and never have to worry again about the whereabouts of your life savings.

Find your old pensions with Raindrop

It is never too late to take control of your financial future and start planning your retirement. In fact, it should be done as soon as possible.

With Raindrop you have a clear picture of where your hard-earned money is saved. This allows you to plan your financial future even better, and become financially stable.

Our simple online dashboard will ensure you are always on top of your retirement finances.

Trick or Treat on National Pension Tracing Day?

Here’s a scary thought for you, this Halloween.

Somewhere out there may be a pot of gold, possibly worth thousands of pounds, with your name on it. If you can’t find it, you’ve lost it forever.

This Sunday, 31st October 2021, the streets will be full of people out trick or treating, collecting bags full of sweeties.

The organizers of the first ever National Pension Tracing Day hope that you’ll also use the day to begin searching for something much more valuable than candies.

They want you to start looking for that lost pot of gold with your name on it - otherwise known as a pension that your employer paid into years ago, but that you’ve lost track of.

Right now there’s believed to be over £19 billion in those lost pots of gold. The average value of each pot is £13,000. That’s real money, sitting in Pension Funds that have become disconnected from people like you.

If missing out on thousands of pounds that are rightfully yours is a scary thought, use this National Pension Tracing Day as a prompt to take action.

‍Blow the cobwebs off your employment history

‍“Think of it like buried treasure,” said one of the people who initiated National Pension Tracing Day.

And they’re right - that’s just what it is. Years ago one of your old employers may have buried treasure on your behalf. They may have given you a map, in the form of some rather dull paperwork, but you’ve lost it.

That happens a lot. And it’s happening more often, now that more and more employers are paying into pensions for their staff.

The Department for Work and Pensions calculates that as many as 50 million pensions could become lost in the coming years. That’s 50 million treasure troves, waiting to be discovered.

Does one of them belong to you? It’s time to blow the cobwebs off your job history and start searching for what might be out there for you.

‍How could I lose something so valuable?

‍It may seem incredible that so many people have lost track of cash that could make a real difference to their retirement years. Imagine what a few hundred pounds every month, for life, could pay for? It would cover a host of household expenses, giving you more cash for the little luxuries in life.

If you think it’s unlikely that anyone could forget about being entitled to this money, remember there’s over £19 billion already waiting to be claimed.

How did it become lost? It’s surprisingly easy. You move house and you forget to inform the pension provider. Easily done when the pension relates to a job you left years before.

Maybe you’ve mislaid the paperwork that you were given when you left that job, because it wasn’t clear to you what it meant. Unfortunately, older pension documents don’t usually carry big, bold messages saying, “Don’t lose this - it’s worth a lot in the future.”

It’s surprisingly easy to lose track of an old pension. Which is why there’s a need for a National Pension Tracing Day?

‍What’s worth more - trick or treat, or pursuing a pension?

‍Here are some more scary Halloween thoughts.

Four out of ten people have never bothered to look for old pensions they may be entitled to.

A quarter of those people will never bother, because they think it’s too much hassle!

All these people are ignoring the chance to claim money that’s rightfully theirs. Money that could make a significant difference to the comfort of their retirement.

Those billions in ‘lost’ pension funds aren’t actually lost. The cash is sitting in the bank accounts of pension companies. Those companies want to reconnect that money with those it belongs to. That could include you.

Whether or not you’re giving some time to trick or treating this Halloween, you should seriously consider giving some time to starting a search for your possible lost pension.

The organisers of the National Pension Tracing Day have even given you some extra time to do that. They’ve selected the only day in the year with 25 hours, because it’s the day the clocks go backward. That’s an hour you can invest in treasure hunting.

‍Start your pension treasure hunt today

‍If all these lost pensions are like buried treasure, where do you get a treasure map?

You can start by looking through any old paperwork from your old employers. There could be some clues in there.

Alternatively, you can try an online pension tracing service. The government has launched a free service to help you on your way. The service helps you find contact details for a lost pension. Click here to start the process.

Another option is the Money Helper service from the Money and Pensions Service. They provide a useful step by step guide to tracing and finding lost pensions. Click here to access this free online service.

Raindrop also offers a pension finding service, to help you reconnect to that company or personal pension that you've lost track of. The service makes it easy for you to rediscover money that’s sitting out there with your name on it. We also combine those pensions into your overall pot, ensuring that you won’t lose track again, because they are all in one place.

Once your pensions are combined, there is an all-in annual management fee like any other UK pension provider. You can read more about our fees here.

We will ask you to set up an email address and password, so we can keep you informed about the results from using our pension finding service via email and in your personal online dashboard.

As with all investing, capital is at risk. Ref: 6487

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New Pension Option for Self-Employed Workers

Raindrop has been developed by a group of city professionals and tech entrepreneurs and has the backing of Resolution Compliance which is regulated by the Financial Conduct Authority.

It offers investment options which allow users to choose a pension plan designed to be invested in a way that meets their desired retirement date. Pension savers have access to funds from global investment manager Blackrock.

Raindrop also provides a pension AI bot service which can assist with finding old pensions, even for customers with minimal information on their old plans, and consolidate them into one pot.

Marco Ross, Raindrop’s chief executive, said: “Self-employed workers have long been forgotten when it comes to the current and complex pension’s landscape. We know that there are many barriers for people in saving for their future and few solutions that solve them, until now. We also know from recent research that the pandemic has had a big impact on the ability of self-employed people to save and they want to do so flexibly.

“Raindrop goes much further than what is currently available in that it has been developed specifically for the millions of self-employed workers across the country, but also provides one easy-to-use platform to empower them to plan and save for their retirement in a way that suits their circumstances.”

The new platform can be set up in less than 10 minutes and allows millions of savers who are self-employed, but who have been left out of benefits of auto-enrolment, to directly invest in a pension in a way that suits them.

Savers also have the option to flexibly adapt their pension payments whenever they want, opting for regular or one-off payments, or pausing contributions.

A recent report by the UK government-backed pension scheme, Nest, revealed that more than 80% of self-employed workers don’t have a pension.

Philip Fortis, Raindrop’s chief product officer, said: “Raindrop is flexible, secure and smart and works for every freelance or self-employed worker, from accountants and plumbers to architects and vets. As well as bringing together all the important aspects of pensions for self-employed people into one, easy solution, Raindrop empowers people to pick a pension plan based on the date they want to retire.”

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Retirement Planning

Your Retirement Options

With a defined contribution pension scheme like the one we’re developing, under our retirement planning service, you can typically start drawing benefits from your 55th birthday. The value of your pension depends on how much you contributed and how your investments have performed over time.

When you come to choose how you want to take the money from your pension, you have a range of choices.

Since the Pension Freedoms reform was introduced in 2015, defined contribution pensions effectively give you complete freedom to take money from your pension at retirement in any way you choose.

For instance, you could:

• Take a tax-free lump sum and convert the rest into a regular income like a salary
• Taking a tax-free portion and the rest as flexible income whenever you need it  
• Taking individual lump sums (including the whole pot) whenever you wish
• Mix-and-match these options as you please

Regardless of the method you choose, the first 25% of your withdrawal tends to be tax-free with the rest subject to tax at your marginal rate.  

Once you start drawing benefits the pension is said to be 'crystallised'; you can still contribute to your pension but will have a lower annual allowance (known as the Money Purchase Annual Allowance (MPAA)). Also note that if the total value of your pension pot exceeds the lifetime allowance of £1,055,000 (for 2019/20) you will face additional charges when you draw any money above this level.

The two main ways to draw benefits from your pension are annuities and income drawdown. Let's explore each in turn.

Annuity: Regular Income

With an annuity you convert your pension pot into a guaranteed income, much like a salary. In other words, you buy an annuity using your pension pot.

The income may be guaranteed for a number of years or until your death, depending on the terms of your annuity. You can also specify other conditions such as whether the income passes on to your spouse or your dependents upon your death.

When you choose to take your pension as an annuity, you can normally take the first 25% of your pot as a tax-free lump sum (known as the Pension Commencement Lump Sum (PCLS)). You take the rest as an annuity which is taxed at your marginal tax rate.

Remember that once you have chosen an annuity you can’t switch to income drawdown.

Income Drawdown: Flexible Payments

When you come to take your pension benefits, your second option is income drawdown.

With income drawdown you take income from your pension pot as and when you choose while the rest remains invested in the pension pot.

There are two types of income drawdown:  

• Flexi-access drawdown (FAD) – here, you take income as and when you please (including as regular income, which makes it similar to an annuity but with more flexibility). You can also take the first 25% of your pot as a tax-free lump sum if you wish.
• Uncrystallised Funds Pension Lump Sum (UFPLS) – here, you take lump sums out of your pot when you need them. With this method there is technically no tax-free 25% lump sum upfront, but every time you take out a lump sum the first 25% is tax-free with the rest taxed at your marginal tax rate.

Overall, income drawdown is generally more flexible and you can withdraw sums when you need them, including the whole pot in one go should you wish. You can also buy an annuity with any unused part of your pension pot.

Self-Employment Income Support Scheme

The Self Employment Income Support Scheme or SEISS is a government relief scheme for the self employed. Owing to the coronavirus pandemic and its severe implications on businesses, Chancellor Rishi Sunak on 26 March 2020 announced the SEISS as a relief measure in the form of grants for eligible self employed people in the United Kingdom. As of 24 May 2020, 2.3 million claims had been made for the grants, worth a total of £6.8 billion.

With millions of self employed individuals across the UK, guidelines for eligibility and the application process for the SEISS are much needed. The criteria for the eligibility and information regarding the grants are stated below.

‍Who is eligible for the Self Employment Income Support Scheme? 

• Self employed individuals, including members of partnerships, are eligible if they have:
• Submitted their Income Tax Self Assessment tax return for the tax year 2018-19
• Continued to trade in 2019-20
• Intend to keep trading in 2020-21
• Carried on a trade which has been adversely affected by COVID-19
• Average self employed trading profits of no more than £50,000 and at least equal to their non-trading income

‍How can one confirm if they are eligible for the SEISS?

Before you test your eligibility for the SEISS, you will need your:

• Unique Taxpayer Reference
• National Insurance Number

Once you have these details, you can simply visit the HMRC website and within minutes confirm your eligibility

When can I apply and what is the available grant?

After allowing access to the first grant on 13 May 2020, Chancellor Rishi Sunak extended the SEISS to a second and final grant in an announcement on 29 May 2020. The eligibility criteria for both the grants are the same.

First Grant

Applications will close on 13 July 2020. Those eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single installment covering three months’ worth of profit, and capped at £7,500 in total.

Second and Final Grant

Individuals will need to confirm that their business has been adversely affected by coronavirus when applying for the second and final grant. An individual does not need to have claimed the first grant in order to be eligible for the second and final SEISS grant.

Applications for the Second Grant will open in August 2020. HMRC will make further information available on 12 June 2020. Eligible individuals can claim a taxable grant worth 70% of their average monthly trading profits, paid out in a single installment covering three months’ worth of profit, and capped at £6,570 in total.

Does the SEISS grant have to be paid back to the HMRC?

The SEISS is a taxable grant that has to be declared in your Self Assessment Tax Return. Specifically, you will need to declare the same as an income and pay taxes in 2020/21 tax year.

‍What about people who work through a limited company from which they take salary and dividends as they are the director as well as the sole employee of that company?

As a sole director and sole employee of a limited company, you aren’t eligible for the Self Employment Income Support Scheme. There are however other options available for such individuals such as the Coronavirus Business Interruption Loans, the Coronavirus Job Retention Scheme, or Universal Credit.

‍Can a sole director of a limited company “furlough” himself or herself under the Coronavirus Job Retention Scheme?

The short answer is yes, you can. As long as you meet the eligibility criteria that HMRC has set out you will be allowed to furlough yourself and apply for the CRJS. However, it is important to note that if you do so, you may be unable to continue to work as you would have furloughed yourself. Please speak to an accountant for further details. 

‍What are the other options available to those who aren’t eligible?

A detailed note of the options available for the self employed apart from the SEISS is mentioned in our blog.

As the COVID-19 pandemic stretches on and more businesses and self employed individuals continue to be affected, more such announcements are expected from the government. We will keep you updated with the latest details on such schemes and benefits through our blogs. Don’t miss updates on our upcoming product by signing up here.

Make sure you are following us on our social media platforms, Facebook, Twitter and LinkedIn to stay up to date with all the latest developments around the schemes announced by the government for the self-employed.

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Six alternative options for people that can’t claim government self-employed income support

The UK government has done a great job in trying to help self-employed people during the current pandemic. Even then, some of their current schemes just haven’t been broad enough to account for the diverse range of self-employed people, leaving many without the help during this time.

If you’re one of the unfortunate people that feels like they’ve been forgotten, there may be other ways to support yourself during this time.

We’ve put together a list of 6 other options that are worth considering:

1. Deter your Self Assessment Income Tax

If you are registered for self assessment in the UK and are struggling to pay your second tax payment due 31 July 2020, you can choose to defer it to 31 January 2021.

You don’t need to inform HMRC as they’ve announced there will be no penalties or interest charged for this.

Once you’ve got enough cash to pay off your tax bill you can simply make the payment any time between 31 July 2020 and 31 January 2021.

If you’re still struggling to pay off your tax after 31 January 2021 you can get in touch with HMRC’s Time to Pay Service to talk through other options.

Know more about the process to defer your self assessment income tax

2. Defer your VAT Payments

All UK registered businesses have the option to defer their VAT payments that were due between 20 March 2020 and 30 June 2020.

Once again, there are no penalties or interest charged if you choose to do this, however the deferred VAT must be paid on or before 31 March 2021.

3. Universal Credit

Universal credit is available to anyone in the UK that has taken a hit to their income and needs help covering their living expenses.

You must be ‘gainfully self-employed’ to be able to claim Universal Credit support. This means you’ll have to show (among other things) that:

• Self-employment is your main job or source of income. You can do this by sharing your tax returns, your Unique Taxpayer Reference, business plan, customer lists, or marketing materials etc.
• You get regular work from self-employment
• Your work is organised – this means that you have invoices and keep a regular record of receipts and your accounts
• You expect to make a profit while being self-employed 

Universal Credit include a Minimum Income Floor (MIF), which is an assumed level of earnings to calculate your Universal Credit award. However, this minimum floor has been relaxed for anyone looking to make a claim during the outbreak.

Here is a step by step guide on how to claim Universal Credit

Apply for Universal Credit Now

4. Bounce Back Loan Scheme (BBLS)

The BBLS is a new financial support scheme that allows businesses across the UK to borrow money if they’ve lost revenue or have less cash available due to the pandemic. BBLS is available through a range of British Business Bank accredited lenders and partners including the likes of Barclay’s, NatWest, Santander, RBS and more.

The scheme helps small and medium businesses to borrow anywhere from £2,000 up to 25% of their total revenue with a cap at £50,000.

Key features of the BBLS include:

• You don’t have to pay back any of the loan for the first 12 months
• The interest paid on the loan is set at 2.5%
• You can borrow the money for up to a maximum of 6 years
• There are no early repayment fees if you choose to pay back the loan early as your business recovers

Learn about the eligibility and application process.

BBLS for business and advisors and how to find a lender.

5. Coronavirus Business Interruption Loan Scheme (CBILS)

If you run a small to medium sized business that makes less than £45 million a year in revenue, and have been negatively impacted by the pandemic, you could apply for the CBILS. The government has even increased the number of eligible businesses to help those that originally fell outside the CBILS eligibility.

The loan is offered by over 40 lenders across the UK. You could borrow anywhere between £50,000 and £5 million as a loan, overdraft or even to help finance your invoices.

The key details are:

• Borrow anywhere between £50,000 and £5 million in the form of a loan
• Have up to 6 years to pay the money back if it’s a loan or up to 3 years if it’s used as an overdraft or to finance your invoices
• The first 12 months are interest free
• You can defer making debt repayments for between 6 and 12 months if you need to (capital repayment holiday)
• No need to personally guarantee any debt under £250,000 so you don’t put your personal situation at risk
• For loans over £250,000 you only need to provide a personal guarantee up to 20% of the amount borrowed (The government guarantees the other 80%)

You can check out the British Business Bank website for more details.

6. Job Retention Scheme

The UK Chancellor, Rishi Sunak, has provided further detail on the Job Retention Scheme which is planned to be wound down by October 2020.

Flexible furlough starting 1 July 2020 employers will be able to bring back ‘furloughed’ workers part-time

From 1 July 2020 employers will be able to welcome back furloughed workers on a part-time or reduced hours basis. They may do so while continuing to claim support from the UK job retention scheme for the hours the employee is not working. Employers can claim 80 per cent of the employee’s wage cost through the furlough scheme for the days the employee is not working.

For example, if an employee is brought back for 3 days a week, the employer will pay wages for these 3 days in full, while continuing to claim 80 per cent of the employee’s wage cost through the furlough scheme for the other 2 days where the employee is not working.

How does the government support scheme taper down?

Thanks to the scheme taper down, the employer will not have to contribute till August. Here is how the scheme will work:

June and July: Under the furlough scheme, the UK government will pay 80% of furloughed employee wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.

August: The government will pay 80% of wages up to a cap of £2,500 however National Insurance and Pension contributions are to be made by the employer.

September: The government will pay 70% of wages while the employer will contribute 10% of the wages to make up the 80% total, subject to a cap of £2,500. The employer will also pay National Insurance and Pension contributions.

October: The government will pay 60% of wages while the employer will contribute 20% of the wages to make up the 80% total subject to a cap of £2,500. The employer will continue to pay National Insurance and Pension contributions.

Even though the Flexible Furlough Scheme will be introduced as a new scheme, it will be only available for organizations that have furloughed the staff before 10 June 2020. The current system will end on 30 June 2020 and therefore from 10 June 2020 to 30 June 2020, the government will give the organizations the three week mandatory period in the current scheme before it ends.

You can read about the Self-Employed Income Support Scheme (SEISS) also on our blog here.

Make sure you are following us on our social media platforms, Facebook, Twitter and LinkedIn to stay up to date with all the latest developments around the schemes announced by the government for the self-employed.

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