A growing number of UK employees are stepping away from the traditional career ladder to prioritise wellbeing, personal development or health — but new research suggests the financial consequences of these breaks could severely impact their retirement savings.
According to new figures from consultancy Barnett Waddingham (BW), around one in three workers have either taken or are planning to take an extended period of unpaid leave. It includes 30% taking short-term sabbaticals and 33% opting for longer career breaks. While the trend reflects a shift towards greater workplace wellbeing and flexibility, BW estimates it could create a collective pension shortfall of more than £230 billion.
The analysis reveals that a two-year unpaid career break taken at age 30 could wipe £30,688 off a worker’s retirement pot — a 5.4% reduction. Even a one-year break at that age could result in a £15,941 shortfall by the time they reach 66. These figures highlight the hidden financial risks of career breaks that are often underestimated by younger workers in particular.
Younger Employees Most Likely To Step Back
BW’s research, based on a Censuswide survey of over 2,000 UK workers taken in February, shows the appetite for extended leave is most pronounced among those aged 18 to 34. Nearly half of workers in this age group (49%) have taken or are planning a sabbatical, while 56% have taken or plan to take a longer break.
The enthusiasm fades with age: only 9% of workers aged 45 to 54 are considering a career break, and among those aged 55 and over, the figure drops to just 5%.
‘Choice Comes With Hidden Risks’
Paul Leandro, Partner at BW, warned that without proper planning, today’s career breaks could become tomorrow’s retirement regrets.
“We are witnessing a shift in how employees approach their careers, with many taking breaks earlier to support their mental health, personal growth, or long-term productivity,” he said. “But this choice comes with hidden risks – taking just a two-year break at age 30 can result in a pension shortfall of over £30,000 by retirement, or the equivalent of an entire year’s moderate income by the PLSA’s Retirement Living Standards.”
Leandro said, however, that even small increases in pension contributions could make up the shortfall. But he said many people were not aware of the problem and that overall, “pension engagement is already low”.
He added that “[t]he traditional career path has evolved, but this can’t come at the cost of people’s retirements. Businesses embracing this shift will attract and retain top talent, but should also play an active role in preventing these shortfalls. Challenges such as these must be front and centre in the ongoing pensions review to ensure that retirement adequacy is equal for everyone.”
Solutions For Employers: Supporting Flexibility Without Compromising Futures
Experts suggest that the rise in sabbatical and career break culture need not come at the cost of retirement security, provided employers take proactive steps. Practical solutions include:
- Enhanced Financial Education: Ensure employees understand the long-term implications of taking unpaid leave, particularly for pensions.
- Flexible Contribution Options: Allow for voluntary or catch-up pension contributions before or after a break.
- Career Break Policies With Guidance: Formalise sabbatical policies that include financial planning tools or advice on mitigating pension impact.
- Digital Modelling Tools: Offer access to tools that simulate the pension consequences of breaks and the benefits of making small additional contributions.
- Wellbeing-Led Communication: Position pension planning as part of a broader personal wellbeing strategy to increase engagement, especially among younger staff.
BW’s data shows that small adjustments can make a significant difference. For example, a 30-year-old returning from a two-year break can fully recover the shortfall by increasing their pension contributions by just 0.6% a year. The earlier the action is taken, the better the long-term outcome.
A Pivotal Moment For Workplace Planning
With over 27 million people in the UK workforce, the scale of potential impact is stark. Up to 9 million workers may already be on or planning a career break, suggesting employers face a pivotal moment in balancing flexibility with future security.
As flexible working continues to evolve, and employee wellbeing remains high on the agenda, experts say it’s vital that financial resilience keeps pace with cultural change. Employers who succeed in embedding financial foresight into wellbeing programmes are likely to lead the way in attracting, supporting and retaining a dynamic workforce.