Some employers are unintentionally basing pension contributions on statutory maternity pay rather than a woman’s full salary – and it could leave mothers with less money in retirement
Mums taking maternity leave might be in for a rude awakening with their pensions, as some employers are reportedly basing pension contributions on statutory maternity pay rather than on the full salary. This could leave a £12,554 hole in a pension pot by retirement.
Camilla Esmund, senior manager at interactive investor, says that although it’s unclear how widespread this problem is, women need to stay on top of their pension plans. She said: “The rules are supposed to ensure women still get a full pension payment even while their pay is reduced, but in some cases, it seems this isn’t happening, so it is important that women check.”
For instance, if an employer blunders by calculating contributions based on maternity pay instead of full salary, a woman earning £35,000 could see her pension fall short by £822 over 39 weeks. And it gets worse for those earning more, she said.
Women on £50,000 or £80,000 salaries may face pension deficits of £1,307 and £2,276, respectively. But there’s more – thanks to investment growth, these figures could balloon to gaps of £4,534 and £12,554 by the time they retire, reports the Express.
Ms Esmund further cautioned: “These potential pension errors are yet another barrier when it comes to closing the gender pension gap, with many women struggling to build retirement wealth.”
Women are facing a pension wealth gap, with typically 35% less in their pots compared to men, largely due to career breaks for child-rearing and part-time work patterns. The absence of pension contributions during maternity leave can result in women having thousands less by the time they retire.
To combat this shortfall, Ms Esmund has urged women to keep up with their pension contributions during maternity leave. She emphasised: “It’s crucial to carry on paying into your pension whilst on maternity leave, as your employer may not pay in at all if you stop contributing.”
While employer contributions should be maintained based on the pre-maternity leave full salary, the employees’ own contributions will reflect their lower maternity pay. Ms Esmond also recommended that women engage with their employer’s HR department before taking maternity leave, to ask questions about their pension contributions during this period.
