Maternity and paternity leave and your pension

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 £123 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 the lower of 90% of your average weekly earnings and £172.48 a week.

The remaining 13 weeks are unpaid. 

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

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 £123 a week.

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

The statutory weekly rate of Paternity Pay is £172.48, or 90% of your average weekly earnings (whichever is lower).

If you’re not entitled to Statutory Maternity Pay (SMP) 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 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, plus any pay increases during maternity leave.

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.

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.

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.

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.

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.

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).

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.

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 based on your salary before you went on leave, including any pay increases during maternity 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 retire. However, you may be able to pay extra contributions to make up for any period of non-pensionable service.

While you’re on paid maternity/paternity leave, you’ll continue to build up your pension based on your salary before you went on leave, including any pay increases during maternity leave.

If you decide to take extra unpaid leave, you won’t build up your pension for that period. However, you may be able to pay extra contributions to make up for any period of non-pensionable service.

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.

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 is subject to National Insurance deductions. If your maternity pay is £242 a week or more, you’ll continue to pay National Insurance, which will count toward your State Pension. If you earn between £123 and £242 a week, you’ll build up National Insurance credits – but you won’t have to pay National Insurance contributions.

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.

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.

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.