If you’re taking maternity leave, you probably have many things on your mind that have nothing to do with your pension fund. But you should consider a few things to make sure your finances don’t add to your worries.
Alongside your maternity pay, you should make sure to account for your pension contributions when planning finances for your new family.
Here are 6 questions you may have around your pay and pension while you’re on maternity leave:
What is Maternity Leave?
Parents are allowed to share a year’s worth of leave after their child is born, according to legislation from April 2015. This can either be taken by one parent as a full 12 months or as Shared Parental Leave1 for up to 50 weeks. While it’s not compulsory to take the leave, it is your legal right to take it.
Let’s break it down:
Maternity leave usually consists of two parts: Ordinary Maternity Leave as well as Additional Maternity Leave. The former is made up of 26 weeks of your leave, and should you choose to return to work during this time; you can go back to the same job you had before your maternity leave.
Additional Maternity Leave applies to the last 26 weeks of your leave. During this time, your rights change, and if you return to work, you can go back to the same job only if it hasn’t been filled. If it has been filled, your employer must offer you a similar role, with the same paycheck and conditions.
What is Maternity Pay?
Your maternity pay will differ depending on the employer, but you are guaranteed payment for 39 weeks at the statutory minimum or above.
Statutory Maternity Pay (SMP)2 means you’ll receive 90% of your average weekly salary for the first six weeks, followed by £145.18 or 90% of your average weekly wage for the remaining time, depending on which is the lowest. If you take 12 months of maternity leave, the last 13 weeks will be unpaid. To be eligible for SMP, you must earn £113 or more a week. You must have also worked at the company for 26 weeks before you reach the 15th week of pregnancy.
Did you know?
If this doesn’t apply to you, you may be eligible for Maternity Allowance.
What Are My Maternity Rights?
While you’re on maternity leave, you are entitled to benefit from all the things you would usually. This includes benefits such as protection from unfair dismissal, employee benefits, paid holiday and employer pension contributions.
What Happens to My Pension During My Maternity Leave?
If you’re entitled to maternity pay during your leave, you should also receive your regular pension contributions from your employer. All employers must offer employer-pension contributions for employees on maternity leave due to Auto-enrolment regulations. They also have to make contributions of at least 2% of your annual salary to your pension contributions during maternity leave.
Your maternity rights guarantee these pension contributions as one of the benefits you’re entitled to. These payments will continue without your intervention, but you should make sure you remain in your pension scheme and continue with your payments.
What Contributions Should I Make During Maternity Leave?
If you have SMP, your employer must continue to pay your pension for at least 39 weeks. The contributions will be based on our salary before maternity leave. If your employer matches your contributions to your workplace scheme, they’ll continue to match the amount you paid before your leave.
Your pension contributions during maternity leave will be based on your actual earnings over this time, and these may be lower than your regular payments. This could see your contribution level fall if you don’t make arrangements to increase your payments.
But on the other hand
Unless stated otherwise in your contract, your employer won’t have to contribute to your pension scheme during you’re the portion of your maternity leave where you are not being paid. This period, usually the last 13 weeks if you receive SMP, is considered unpaid leave. You may want to increase your contributions when you’re back to your full salary to make up for it.
Can I Top Up My Pension After Maternity Leave?
Once you’re back at work, you may want to top up your pension to cover for the lower contributions made during your maternity leave. You are allowed to add up to contribute up to £40,000 to your pension pot annually and topping up your fund can make sure your pension savings remain on track despite reductions during maternity leave.
A Few Common Questions
Statutory Maternity Pay (SMP) means you’ll receive 90% of your average weekly salary for the first six weeks of your leave. After that, you are entitled to £145.18 or 90% of your weekly average wage, depending on which amount is smaller. Your pay grade and length of time with your employer can affect your eligibility for SMP>
Maternity Allowance Maternity Allowance is a government-funded weekly payment available to some women who are pregnant or have just had a child. This benefit is usually paid to women who don’t qualify for Statutory Maternity Pay because they are self-employed or have not been employed for a long enough period before they take maternity leave.
The pension gap refers to the disparity in savings accumulated between men and women, during their careers, for their retirement. Research has shown that men can save significantly more than women for their pension pots. This could leave women under financial strain later in life.
Parents must claim for Child Benefit to make sure they get their National Insurance credits. Your National Insurance contributions affect your State Pension, as you need 35 years of payments to be able to claim the full State Pension once you retire.
Keeping a close eye on your pension can help reduce stress over your future – especially when you’re starting a family. Knowing your rights and planning for any reduction in your pension contributions can help you stay on track with your savings, offering you security for your retirement.