How Maternity Leave Affects Your Pension
During paid maternity leave, your employer must continue making pension contributions based on your normal salary, even though you are receiving reduced statutory maternity pay (SMP). This is a legal requirement that many employers get wrong.
However, your own contributions are calculated on your actual pay during maternity leave, which is usually lower. This means your total pension savings may be reduced during this period.
Your Pension Rights During Maternity Leave
Your pension rights during maternity leave depend on which period you are in:
- Ordinary Maternity Leave (weeks 1-26): Your employer must continue all pension contributions based on your normal salary. You continue to build pension benefits as if you were working
- Additional Maternity Leave with pay (weeks 27-39): Employer contributions continue based on normal salary while you are still receiving SMP
- Unpaid Additional Maternity Leave (weeks 40-52): Neither you nor your employer is required to make pension contributions during unpaid leave
What to Do About the Pension Gap
The period of reduced or no contributions during maternity leave creates a pension gap. Here is how to minimise the impact:
- Check your payslips: Verify that your employer is maintaining pension contributions at the correct level
- Consider making up contributions: When you return to work, you could increase your contributions temporarily to compensate for the gap
- Use shared parental leave: Splitting leave with your partner can reduce the pension impact on either individual
- Check for enhanced maternity packages: Some employers offer full salary during maternity leave, which maintains full pension contributions
National Insurance Credits During Maternity
Maternity leave protects your National Insurance record in several ways:
- During SMP period: You continue to accrue NI contributions through SMP payments
- During unpaid leave: You receive NI credits automatically if you are receiving Child Benefit
- After returning to work: Your NI record continues as normal
Claiming Child Benefit is particularly important for NI credits, even if you or your partner earn over £60,000 and need to repay the benefit through the High Income Child Benefit Charge.
Common Mistakes During Maternity Leave
These are the most frequent pension mistakes made during maternity leave:
- Not checking employer contributions: Some employers incorrectly reduce pension contributions to match maternity pay levels
- Opting out of the pension: Opting out during maternity leave means losing employer contributions permanently
- Not claiming Child Benefit: Even if you have to repay it, claiming Child Benefit provides NI credits that protect your State Pension
- Ignoring the long-term impact: A year of reduced contributions may seem small, but compound growth means the real cost could be thousands of pounds by retirement
Government Protections and Support
Several legal protections exist to safeguard your pension during maternity:
- Equality Act 2010: Protects against discrimination in pension provision during maternity leave
- Employment Rights Act 1996: Ensures pension benefits continue during maternity leave
- National Insurance credits: Automatically provided through Child Benefit claims
- Pension Wise: Free guidance available if you need help understanding your options