“What happens to your pension on maternity leave” is one of the most common Google searches, with an average of 3,650 searches per month. Experts at PensionBee have answered this burning question, explaining what happens when you take time off and when you return to work.
Employers continue to pay into an employee’s pension pot during maternity leave
Maternity rights state that those on leave must receive the same benefits as they would if at work– and this includes pension contributions. If an employee is eligible to receive Statutory Maternity Pay during their leave and is enrolled in a workplace pension scheme, they will continue to receive regular pension contributions from their employer for at least 39 weeks, possibly longer, depending on what’s agreed in their contract.
Pension payments will usually be based on the salary received before maternity leave. In a pension scheme where the employer matches their contributions, these will also be matched to the level of contributions made before their leave began.
Unless a workplace contract states otherwise, an employer doesn’t have to make a contribution to an individual’s workplace pension during the period the employee isn’t being paid, such as the last 13 weeks of Statutory Maternity Pay. This period is considered unpaid leave and a saver may want to make extra contributions to cover between when their leave ends and when they go back to earning their full salary. Further guidance on pension contributions during maternity leave can usually be found via workplace HR departments, pension agreements or even workplace contracts.
What about the State Pension?
Savers automatically secure National Insurance credits, even if they are not working, by claiming Child Benefit for any children under the age of 12. This is significant as the number of credits a saver accumulates informs the amount of State Pension support available for them at retirement age.
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Key terms and rights during maternity leave
When an employee takes time off work to have a baby, they’re usually entitled to Statutory Maternity Leave and pay. Partners may also be eligible for paid paternity leave.
Statutory Maternity Pay: For the first six weeks of maternity leave, a woman is entitled to 90% of their average weekly income – before tax. For the following 33 weeks, they’re entitled to £156.66 or 90% of their average weekly income – whichever is lower. Statutory Maternity Pay is paid in the same way as wages (for example monthly or weekly).
Tax and National Insurance will be deducted as usual. If someone doesn’t qualify for Statutory Maternity Pay, they may be able to claim a Maternity Allowance.
Maternity Allowance: This can be claimed by those unable to receive Statutory Maternity Pay, such as self-employed or unemployed mothers, or those earning under a certain threshold. A woman can claim £156.66 or 90% of their average weekly income – whichever is lower – for the full 39 weeks. This means if a woman takes the full 52 weeks Statutory Maternity Leave, the final 13 weeks will be unpaid.
Paternity Leave: If a woman’s partner is taking paternity leave, they should check whether their workplace offers a paternity package beyond Statutory Paternity Pay. Unlike Statutory Maternity Pay, Statutory Paternity Pay is generally less generous.
Statutory Paternity Pay: The statutory weekly rate of Paternity Pay is £156.66, or 90% of your average weekly earnings – whichever is lower.
Returning to work: When returning to work after maternity leave, savers may want to consider topping up their pension. Savers can contribute up to £40,000 to their pension each year, so if this allowance hasn’t been used fully, it may be sensible to make up for any personal or employer contributions that are reduced towards the end of your leave.
Topping up one’s pension ensures that savings aren’t adversely affected by any time taken out to raise children and can help keep savers on track for retirement. This is especially important the more children, and therefore the more breaks, a saver may have throughout their career.
