A growing number of UK workers are stepping away from the traditional model of continuous employment, opting instead for extended periods of unpaid leave – but experts warn this could cause a shortfall in retirement savings.
New research from professional services consultancy Barnett Waddingham (BW) reveals that around one third of workers have either taken or are planning to take a sabbatical (30%) or a longer career break (33%). With more than 27 million people employed in the UK, this translates to approximately 9 million individuals pursuing extended time away from work.
Once considered a luxury, career breaks are now being used to manage well-being, focus on personal or professional development or address health needs. While these breaks may support short-term goals, BW warns of the long-term financial impact, especially when it comes to pensions. A two-year unpaid break could result in a nationwide pension shortfall of £230.69 billion.
The research highlights the disconnect between the growing appeal of sabbaticals and their hidden financial consequences. Paul Leandro, Partner at BW, said, “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. 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.”
Younger Workers Driving Demand for Career Breaks
The data shows that the appetite for extended leave is most pronounced among younger workers. Among those aged 25 to 34, 16% have already taken a sabbatical and 26% are planning to do so. In the same age group, 22% have taken a career break and 23% plan to follow suit.
Interest declines with age. Just 13% of those aged 45 to 54 are planning a sabbatical, with only 9% considering an extended break. For workers over 55, the figures fall further to 6% and 5% respectively. However, the 18 to 24 age group stands out as the most likely to plan a break, with 34% considering a sabbatical and 29% looking at a longer-term career pause.
This generational shift reflects a changing attitude to work, where flexibility and personal priorities increasingly influence professional decisions.
Financial Impact and Pension Modelling
Barnett Waddingham’s modelling shows the potential long-term cost of unpaid leave. A one-year career break at age 30 could reduce pension savings by 2.7%, or approximately £15,941. A two-year break would double that impact, resulting in a 5.4% reduction, or £30,688. These figures are based on retirement at age 66.
The impact reduces slightly for older workers, primarily due to the shorter time frame for compounding returns. A two-year break taken at age 40 would lead to a projected shortfall of £25,319 (4.5%). At age 50, the effect drops further to £20,889 (3.7%).
Despite these projected losses, BW emphasises that the financial gap is generally recoverable. For example, a 30-year-old returning from a two-year break could offset the shortfall by increasing pension contributions by just 0.6% each year. For those aged 40 and 50, the required increases are 0.8% and 1.3% respectively.
Rethinking Support for Non-Linear Career Paths
As extended leave becomes more common, BW suggests that employers should review their policies to support this changing approach to work.
Leandro added, “The 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.”
He also pointed to the broader implications for pension policy, noting that extended leave and its financial consequences should be central to the government’s ongoing pensions review.
“Challenges such as these must be front and centre to ensure that retirement adequacy is equal for everyone,” he said.
