Around a third of UK workers have taken or are planning to take extended leave – whether a shorter-term sabbatical (30%) or a longer career break (33%), marking a significant departure from the traditional view of uninterrupted employment, according to new research from professional services consultancy Barnett Waddingham (BW).
With over 27 million people employed in the UK**, this equates to up to around 9 million individuals taking or planning extended leave. Once seen as a luxury, sabbaticals are increasingly becoming a desired option for those seeking to manage their well-being and personal growth. Meanwhile, others are opting to temporarily take a break from their careers to focus on professional development, or to resolve personal health issues.
For workers taking extended unpaid leave, the financial fallout could go far beyond their personal budgets — it could equate to a collective £230.69 billion shortfall in pension pots nationwide if two-years of unpaid leave is taken. This underscores a significant financial set-back many may overlook.
Growing trend among younger workers
This growing trend of extended leave is clearly shaped by age, with younger workers far more inclined to step back from their careers in pursuit of personal goals. Among those aged 25 to 34, 16% have already taken a sabbatical, and a quarter (26%) are planning to do so. Meanwhile, over a fifth (22%) have already taken an extended career break, and 23% are planning to.
As age increases, however, enthusiasm for extended leave starts to decline. For individuals aged 45 to 54, just 13% are planning to take a sabbatical, and 9% an extended career break. Interest drops even further for those aged 55 and over – just 6% are planning a sabbatical, and 5% an extended career break.
Interestingly, the youngest adults – those aged 18 to 24 – are the most inclined to take a career break. Over a third (34%) are planning a sabbatical, and more than a quarter (29%) are planning to take an extended career break, making this cohort the most future-oriented when it comes to sabbaticals.
Cumulative financial impact of extended leave
While the appeal for extended leave is growing, there are long-term financial implications, particularly regarding pension savings, that younger professionals may not fully consider.
BW’s modelling highlights the potential impact: an unpaid one-year career break at age 30 could lead to a 2.7% shortfall in their pension pot if they retire by age 66 – roughly equating to £15,941. If this break extends to two years, the effect is even more significant – resulting in a 5.4% hit, or a £30,688 shortfall of a projected retirement fund at age 66.
The financial impact is lessened for those closer to retirement, however; taking the same two-year break at age 40 results in a £25,319 (4.5%) shortfall, while at age 50, this falls to £20,889 (3.7%). The difference lies in time as younger people lose more due to compounding returns missed over their career.
Minimising the impact
But there’s good news – these losses are generally recoverable. A 30-year-old can offset their pension shortfall from a two-year career break by increasing their monthly contributions by just 0.6% annually upon returning to work. For a 40-year-old, it’s 0.8%, and for someone aged 50, 1.3% is needed. This also means that the younger you are when you take a break, the more important it is to act early to correct the financial trajectory.
As sabbaticals become more mainstream, companies may need to adapt their policies to support their workers.
Paul Leandro, Partner at consultancy BW, says: “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, or the equivalent of an entire year’s moderate income by the PLSA’s Retirement Living Standards.
“Thankfully, modest increases in pension contributions can bridge this gap. But at a time when pension engagement is already low, there’s a significant concern many remain unaware of this issue.
“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. Challenges such as these must be front and centre in the ongoing pensions review to ensure that retirement adequacy is equal for everyone.”