Maternity and paternity leave and your pension

If you’re having a baby, there’ll be lots to think about – and your pension might not be top of your priorities. However, it’s worth considering what you are entitled to and how your maternity leave might affect your pension arrangements.

Terms that will help you understand your entitlements

Statutory Maternity Pay

You’ll be entitled if you:

  • have worked for your employer for 26 weeks when you reach the 15th week before your due date, and
  • earn at least £120 a week.

You’ll be entitled to 52 weeks off work and receive Statutory Maternity Pay for 39 weeks of your maternity leave.

For the first six weeks of your maternity leave, you’ll get 90% of your average weekly earnings.

For the next 33 weeks, you get receive the lower of 90% of your average weekly earnings and £151.20 a week.

The remaining 13 weeks are unpaid. 

Income tax and National Insurance contributions are deducted from these payments.

Statutory Paternity Pay

You’ll be entitled if you:

  • have worked for your employer for 26 weeks when you reach the 15th week before the due date, and
  • earn at least £120 a week.

You’ll be entitled to time off work and can receive Statutory Paternity Pay. You can choose to take either one or weeks – but you must take your leave in one go.

The statutory weekly rate of Paternity Pay is £151.20, or 90% of your average weekly earnings (whichever is lower)

Maternity Allowance

If you’re not entitled to Statutory Maternity Pay you might be entitled to Maternity Allowance for up to 39 weeks.

To qualify, you need to be either:

  • employed and not eligible for SMP, or
  • self-employed and have paid Class 2 National Insurance for at least 13 of the 66 weeks before your baby’s due.

If you’re employed, you’re still entitled to 52 weeks off work.

If you’re employed

If your employer has automatically enrolled you, they must continue contributing to your pension scheme.

If your employer is due to automatically enrol you while you’re on maternity leave, they’ll decide if you qualify – based on your pay before you went on maternity leave.

If you’re automatically enrolled, your contributions will be based on this salary.

If you’re self-employed

You can decide how much maternity leave you want to take, whether to continue contributing to your pension scheme, and how much you want to contribute.

I’m employed and entitled to Statutory Maternity Pay
Leave
Week
Your contributions
Your employer contributions

Ordinary Maternity Leave

Week 1-26

Based on your actual pay

Based on your pay before maternity leave

Additional Maternity Leave

Week 27-9

Based on your actual pay

Based on your pay before maternity leave

Additional Maternity Leave

Week 40-52

Contributions only payable if stated in the scheme rules, or your employment contract

Contributions only payable if stated in the scheme rules, or your employment contract

Salary Sacrifice

If your pension contributions are deducted under a salary sacrifice arrangement, these are treated as employer contributions. During periods of maternity leave, your employer should continue to pay the entire contribution.

Your employer might have to stop your participation in a salary sacrifice arrangement during your maternity leave to comply with their duty to pay you at least the National Minimum Wage.

Sacrificing part of your salary means you earn less. Lower earnings might affect your entitlement to the State Pension or contribution-based State benefits.

I’m employed but not entitled to Statutory Maternity Pay
Leave
Week
Your contributions
Your employer contributions

Ordinary Maternity Leave

Week 1-26

Not required unless you’re receiving some pay from your employer

Based on your pay before maternity leave

Aditional Maternity leave

Week 27-52

Contributions only payable if stated in the scheme rules, or your employment contract

Contributions only payable if stated in the scheme rules, or your employment contract

Paternity leave

If you’re entitled to paternity leave you can take one or two weeks’ paid statutory paternity leave.

If you decide to take paternity leave, you’ll remain a member of your workplace pension scheme. You and/or your employer will continue to make contributions – unless you decide to stop contributing.

Employee pension scheme contributions should be based on the actual paternity pay received.

If you do stop contributing, your employer will also stop their contributions – you’ll need to check how your scheme will treat this.

What happens after maternity / paternity leave?

If you return to work

You may be able to pay extra contributions to make up for any period of unpaid leave. If you do this, your employer must also contribute.

If you go back to work part-time on a lower salary

This will mean that your pension will build up at a slower rate. So you might want to consider paying extra contributions.

Most pension schemes will let you pay in more than the standard contribution amount.

If you decide not to return to work

The pensions you’ve paid into will remain with your pension provider until you reach retirement.

If you have a defined benefit pension, this might increase with inflation each year.

If you have a defined contribution pension, the contributions you’ve made will remain invested and the fund value may go up or down. You might also be able to make contributions (subject to the annual allowance).

Does it matter what type of pension I have?

The contributions paid by you and your employer during maternity/paternity leave are set out above. However, the way your pension benefits build up during the leave will depend on the type of scheme you’re a member of.

Defined benefit schemes

These pay a retirement income based on your salary and how long you’ve worked for your employer.

Defined benefit pensions include ‘final salary’ and ‘career average’ pension schemes.

These are generally now only available from public sector or older workplace pension schemes.

If you’re in a final salary pension, you’ll continue to build up an entitlement to a pension while you’re on paid maternity/paternity leave. This is because it counts as ‘pensionable service’.

If you decide to take any extra unpaid leave, this is classed as non-pensionable service.

So, although you don’t leave the scheme – this period of unpaid leave won’t count towards your pensionable service and so might result in a lower pension when you at retire.

Career average schemes

You’ll continue to build up your pension while you’re on paid maternity/paternity leave. Although it will be based on your salary before you went on leave.

If you decide to take extra unpaid leave, you won’t build up your pension for that period.

Defined contribution schemes

These build up a pension pot to pay you a retirement income based on how much you and/or your employer contribute, and how much this grows

While on paid maternity/paternity leave, these contributions are still paid into your ‘pot’.

Your contributions will be based on your actual earnings. Your employer contributions will be based on your earnings before you went on leave.

If you decide to take any extra unpaid leave, you don’t need to contribute. And your employer doesn’t need to contribute unless your contract of employment or the scheme rules state otherwise.

What about my State Pension?

Your State Pension is based on your National Insurance record.

This record is based on the number of years you’ve paid National Insurance for, or how many years of National Insurance credit you have.

Maternity Pay

Maternity Pay is subject to National Insurance deductions. If your maternity pay is £183 a week or more, you’ll continue to pay National Insurance, which will count toward your State Pension. If you earn between £120 and £183 a week, you’ll build up National Insurance credits – but you won’t have to pay National Insurance contributions.

Child Benefit

If your child is under 12 and you’re not working or don’t earn enough to pay National Insurance contributions, Child Benefit can help you qualify for National Insurance credits

These credits count towards your State Pension.

Voluntary Contributions

These can be paid if you find you have a gap in your National Insurance record.

It’s important to also take into account your circumstances and future plans. This is because you might build up enough ‘qualifying years’ if you return to work in future without filling in any current gaps.

More information

If you have any queries about your pension and maternity/paternity leave, for example your employer is not paying the right level of pension contributions, contact us and we can help.

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impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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