Can I continue to pay my pension during my maternity leave?

I am due to give birth in a few months and I would like to continue paying my pension contributions during my maternity leave. I am currently paying above the minimum premium level to receive higher adjusted premiums from my employer.

I asked my HR department how I could withhold payments while on leave. I have been told that I will receive full wages for the first 20 weeks and that normal contributions will be deducted.

If I move to statutory maternity pay, my contributions will continue to be based on the lower pay level, and my employer’s contributions will continue to be based on full pay, although I will not be able to make a salary sacrifice during that period. .

If I then take unpaid maternity leave, HR tells me that I will not be making any contributions, and neither will my employer, but it suggests that I consider increasing my contributions for a period when I return to work to make up for this.

I am not really satisfied with this answer as ideally I would like to continue paying my current higher contributions and have them paid in full by my employer at all stages of my maternity leave.

Am I entitled to this? If I say I want to pay the usual amount even during the unpaid maternity leave period, does this mean that my employer must also cover my payments and pay them in full?

If not, and I just need to catch up when I return to work full-time, would it be better to pay a lump sum into my pension, or increase my contributions for a period like HR suggested?

Tanya Jefferies from This is Money replies: Many women get off to a good start with retirement savings, but fall behind when they have children.

It is therefore wise to fill any gaps created by maternity leave immediately or as quickly as possible, otherwise you may never be able to catch up.

Even short breaks from saving for retirement can make a difference, especially when you’re young, because you’re not only losing the amounts involved, but also the hugely valuable compound growth of your retirement investments that builds up over time.

If you live together, are married or have a registered partner, it is a good idea to work together to maximize both your pensions throughout your working life, including during maternity leave.

For example, if you are temporarily unable to pay contributions during maternity leave, but your partner has money to help you, ask them to do so as this could benefit you both in the long run.

However, there are some tax pitfalls to be aware of. These are explained in our couples and pensions guide.

You must also make optimal use of your employers’ matched pension contributions, as you already do.

This is free money – plus an extra tax benefit from the government – ​​that you would otherwise not receive in your pension.

It makes sense for both partners to do their part and help each other subsidize your retirement benefits when necessary, provided you do so in a tax-efficient manner so that you can ultimately enjoy a richer retirement together.

And if you unfortunately separate, but your pension pots are not too unbalanced – as has historically been the case between men and women, mainly due to pay gaps and the latter doing unpaid care work – there will be less fuss and hostility over the distribution thereof. .

That said, even for the best-intentioned people like you, the maternity leave system can get complicated when it comes to pension contributions.

We asked a financial expert to explain how to calculate how much you could lose and the best way to fill the gap.

Laura Suter, head of personal finance at AJ Bell, replies: First of all: good that you have thought ahead about this.

Women tend to have smaller pension pots than men, partly because they are more likely to take career breaks when they have children.

As a result, they have a large gap in their pension contributions during that time. It’s great that you’re planning your maternity leave ahead.

What your employer has told you is correct and unfortunately the system is not very flexible.

Your employer will continue to pay the current premium during your pregnancy until you enter the zero-pay period.

However, after the first twenty weeks, your personal contributions will be based on your lower salary level – and that is where your personal pension gap begins.

How big is the financial gap you need to fill?

Your first task is to figure out what your retirement gap will be. It gets quite complicated, but it is possible.

You need to find out how long your maternity leave will last. If you have already discussed this with HR, they should be able to give you an overview of how long you will remain fully paid, legally paid and unpaid.

Then check your most recent pension overview to see how much you and your employer contribute monthly.

You can disregard the first 20 weeks of your leave, as you say you will be paid in full and neither you nor your employer’s contributions will be reduced.

The next phase will determine how much of your remaining leave will go from statutory maternity benefit.

During this period your employer will continue to pay full contributions on your behalf, but your personal contribution will be based on your statutory maternity benefit.

So you will have to do some calculations to calculate how much that is and what pension gap you will have as a result.

And finally, you need to find out how long your last period of unpaid leave will last, during which you will not receive any pension contributions and what the pension shortfall will be during that time.

What is the best approach to fill in the missing contributions?

If you want to close the gap, you have three options: increase your pension contributions before you go on maternity leave; increase them when you return to work; or a combination of the two.

Some companies only allow you to change your pension contribution percentage once a year or on certain life events – and having a child is usually one of them. Depending on their rules, this could force you to increase contributions only when you return to work.

You also wonder whether it is better to pay it in one go or in the form of an increased monthly contribution.

This depends on a number of factors. First: your employer’s matching rules. If you have not yet taken advantage of all employer matching, it is better to increase your monthly premium. Your employer also adds more to your pension.

The next factor is whether you are paying for your pension through salary sacrifice.

If you do this, your pension contributions will effectively be collected before any tax or national insurance is paid. This will save you more money than if you simply paid a lump sum and reclaimed the tax.

What other steps can you take to maintain your pension?

There are a few other things to consider. Because you accrue vacation and public holidays during maternity leave, many women take these vacation days at the end of their leave to shorten the period in which they are unpaid.

During this period you are actually back to work for payroll administration, which means that your pension contributions return to normal. This can contribute to reducing the pension gap.

Secondly, if you decide to work part-time or for fewer hours than you are currently working, this will have major consequences for your pension contributions.

If you want to keep your pension, you will need to significantly increase your contribution rate to compensate for your lower salary.