5 Things You Need to Know About Your Pension During Maternity Leave

This article is sponsored by PensionBee, a supporter of Peanut and women alike.

There’s no doubt about it: becoming a mom is an incredible transformation.

And it happens fast.

One minute you’re artfully balancing pregnancy symptoms with your 9 to 5, the next, you’re navigating the beautiful chaos that is motherhood.

Sleepless nights, postpartum recovery, and reaching new levels of emotional intensity—it’s easy to get overwhelmed.

And while a large part of your maternity leave will be spent focusing on your babe’s social, emotional, and mental well-being (yours, too), there’s also the question of your financial security.

More specifically, what happens to your pension during maternity leave?

Securing your financial future is a powerful self-care move for managing mom stress and keeping your attention where it wants to be: your newborn baby.

We’ve teamed up with PensionBee to get you the lowdown on everything you need to know about your maternity pay and pension during maternity leave.

In this article: 📝

How long is maternity leave in the UK?

If you’re employed in the UK with a baby on the way, you’re legally entitled to maternity leave of up to 12 months.

And as of April 2015, both parents are allowed to share these 52 weeks.

This can look like a year of either maternity or paternity leave or a combination of both (shared maternity leave)—it all depends on what suits your unit best.

It’s helpful to understand that maternity leave is actually composed of two parts:

• Ordinary Maternity Leave: Typically covers the first 26 weeks following your baby’s debut, but it can be taken as early as 11 weeks before your due date.
  
• Additional Maternity Leave: This is the 26 weeks that begin immediately after your initial maternity leave ends.

So far, so good, but what’s the difference?

It all comes down to your job entitlement when you return to work.

With Ordinary Maternity Leave, you have the right to return to the exact role you had before having your baby.

In the second six months, this right evolves slightly—you may return to a similar position with the same pay and conditions but not necessarily the exact same job.

Of course, taking a full year is in no way compulsory—you may find 6 months to be just enough—but taking the first two weeks is (what is called compulsory maternity leave).

Just know that whether you choose to embrace all 52 weeks or not, you have a right to it, no matter how long you’ve been working.

How long do you have to work in the UK to get maternity leave?

To qualify for maternity leave in the UK, you simply need to be classified as an ‘employee’ and give your employer at least 28 days’ notice.

The hours you work, how long you’ve been in your role, the amount you are paid—none of it impacts your right to maternity leave.

Statutory Maternity Pay (SMP), on the other hand, is a little different.

This is the legal minimum your employer must pay you during maternity leave, but only under specific circumstances:

• You must have worked for your current employer for 26 weeks before you reach 15 weeks before your due date
  
• You must be earning a minimum wage of £120 a week
  
• You must provide the required notice

If you’re self-employed or are earning less than £120 a week, or even if you have recently stopped working, you can always explore the option of Maternity Allowance.

How much is Statutory Maternity Pay?

Now to the nitty gritty.

So, Statutory Maternity Pay (SMP) is the legal minimum your employer must pay you, but this will vary depending on your income and where you’re at in your maternity leave.

Stay with us.

Typically, SMP for the first six weeks of maternity leave is 90% of your average pay.

After that, you’ll either continue to get 90% of your average weekly earnings or receive £172.48 per week for 33 weeks—it all depends on which is lower.

And, important reminder, if you do decide to take the full year, the remaining 13 weeks go unpaid.

Outside of maternity pay, you’re also still entitled to all the non-payment benefits you had as an employee.

That includes gym membership (power to you, mama), health insurance, or even the company car.

And that continues right on through to Additional Maternity Leave.

Do you pay pension on maternity leave

As you take the time to adjust to your new role as a mom, it’s fair to wonder what happens to your pension.

Typically, pensions are funded through employer and employee contributions, and these are based on a percentage of your salary.

Since Statutory Maternity Pay works very much in the same way as your wages (including tax and National Insurance deductions), the good news is that as long as you receive maternity pay, you’ll keep on securing regular pension contributions from your employer.

Of course, these contributions to your pension will be lower during your maternity leave (just like your average earnings).

Equally, during the 13-week period of unpaid maternity leave, your employer is not required to make any contributions at all.

So, what options do you have?

Well, it turns out you have two: you could make extra contributions to cover the unpaid period or top up your pension after maternity leave.

How much will maternity leave affect my pension?

In short, this all depends on the length of your maternity leave.

Whether you choose to take a full year or avail of Ordinary Maternity Leave followed by part-time work, the impact on your pension will vary.

Since your pension contributions are based on the percentage of your income, any gaps or wage reductions will have a negative impact on your pension.

Yep, maternity leave is one of the leading factors behind the pension gap between men and women, followed closely by reduced hours taken for childcare and the gender pay gap (on average, women earn 16% less than men).

It’s little wonder that women often have lower pension pots come retirement.

What is the gender pension gap in the UK?

Simply put, it’s the percentage difference in retirement income for men and women.

And recent PensionBee research shows that this gap is as high as 44% in some parts of the UK. 🤯

Yep, more than twice the level of the gender pay gap…

It’s hard to get a sense of how much your maternity leave will impact your retirement pot, especially while you’re adapting to an entirely new chapter of your life.

But, taking proactive steps now can make all the difference to setting you on a more secure path towards retirement.

In true PensionBee spirit, it’s about becoming more pension confident—and that starts with gaining more clarity and knowledge about all the options available to you.

How can I boost my pension after maternity leave?

Before we delve into how you can keep your pension pot on track, we want to echo PensionBee’s sentiments that the onus should not be placed on women to close the pension gap.

Real change requires a collective push towards equal hours, equal pay, and shared responsibilities—interventions that PensionBee has found can help close the gap significantly.

It also looks like empowering women to improve their financial health, whether that’s becoming more informed or more confidant about their financial options.

So what can you do now to bridge the pension gap after maternity leave?

You could opt for topping up your pension once you return to work.

This ensures your savings stay intact while you weather all the trials and joys motherhood brings your way.

Currently, the annual pension contribution limit is 100% of your income or a cap of £60,000—depending on which is lower.

And while the maximum amount may not be doable, it’s important to ensure you know your limits so you avoid a tax charge.

Helpful tip: Use PensionBee’s pension calculator to get a handle on how much you need to contribute for a healthy pension pot.

Your Pension During Maternity Leave

Your pension may be the last thing you think of while on maternity leave—especially if you have maternity pay rolling in—but it’s a big part of shaping your future financial well-being.

Getting up close and personal with your pension contributions can empower you to make informed choices with a big impact on your retirement years.

Consider your pension your personal unsung hero, quietly working behind the scenes to secure your financial future while you stay focused on the present milestones.

But even heroes need help (something you’ll become all too familiar with during motherhood).

Regularly reviewing your pension and keeping track of how your savings are performing are the very things that will have you financially confident and thriving.

PensionBee can even help you combine your old pension pots into one online plan that lets you keep track of your balance 24/7.

And it only takes five minutes—music to a new mom’s ears.

For more information, pop over to www.pensionbee.com/combine.

Risk warning: As always with investments, your capital is at risk. The value of your investment can rise or fall, and you could receive back less than you invest. This information should not be considered as financial advice.

About PensionBee

For far too long consumers have struggled to manage their retirement savings. Pensions are often complicated, presenting a significant obstacle for savers wanting to take control of their money. In addition, many of us have no idea what we have saved, or how our pension is being managed.

This is where PensionBee can help. Our technology platform is designed to make it easy for savers to combine their old pensions into one diversified online plan, so they can take the first step towards a happy retirement. We’ve created pension calculators and retirement forecasting tools to help savers plan ahead, so they can build a clearer picture of what they should be contributing to meet their retirement goals. Then, when they reach he age of 55 (57 from 2028), we help our customers make hassle-free withdrawals.