You have a million things to think about when you're having a baby and it's easy to forget about your pensions. In fact, one of the last things on your mind is probably going to be pension contributions during maternity leave – but it's something you do need to consider.
Here is what you need to know about Statutory Maternity Pay, payments into your pension while you are on maternity leave, and protecting your State Pension.
Will I be entitled to Statutory Maternity Pay while on maternity leave?
You will be entitled to Statutory Maternity Pay if:
- You have worked for your employer for 26 continuous weeks when you reach the 15th week before your due date and;
- You earn at least £123 a week (gross) on average.
You need to give your employer proof that you're pregnant, such as a letter from your doctor or midwife or your MATB1 certificate. You also have to tell them when you want to stop work to have your baby and the day you want your Statutory Maternity Pay to start. You need to give them at least 28 days’ notice, which may be in writing if they ask for it. Your employer must confirm within 28 days how much Statutory Maternity Pay you’ll get and when it will start and stop.
How much Statutory Maternity Pay will I get?
You will receive Statutory Maternity Pay for the first 39 weeks of your Maternity Leave and are entitled to take 52 weeks off work. You will get:
- 90% of your average weekly earnings for the first 6 weeks.
- The lower of 90% of you average weekly earnings and £156.66 a week for the next 33 weeks.
- The remaining 13 weeks are unpaid.
Income tax and National Insurance contributions are deducted from these payments, which are paid in the same way as your wages (for example monthly or weekly).
What happens to my pension contributions during maternity leave?
During maternity leave, you're allowed to benefit from all the things you usually would such as paid holidays, employee benefits and employer pension benefits.
During the first 39 weeks of maternity leave, your employer must continue to contribute into your workplace pension. However, you need to ensure that you continue with your contributions and don't opt-out of the scheme. Check your contract as your employer may offer to contribute into your pension for longer than the 39 weeks.
Your contributions into your workplace pension will be based on your actual earnings during maternity leave. Your employers contributions into your pension will usually be based on your salary before you went on maternity leave. Your personal contributions into your workplace pension will be less than usual (if your maternity pay is less than your usual salary) and you may wish to consider topping up your pension when you can afford to do so.
During the period of your maternity leave when you are not being paid – the last 13 weeks – your employer does not have to contribute to your workplace pension. However, it's worth checking your contract as it may state otherwise.
What if my employer isn't paying into my pension while on maternity leave?
Firstly, check with your employer that your pension contributions are being paid while you're on maternity leave and that they are paying you the correct amount. If you have spoken to your employer about your pension contributions and are still concerned that they aren't paying you what you are due, you can contact the Pension Wise helpline on 0800 011 3797 or the HM Revenue & Customs Employee Helpline directly on 0300 200 3300.
What happens to my State Pension?
It's important to understand your National Insurance contributions during maternity leave as ensuring there are no gaps in your National Insurance record protects your State Pension.
- If your maternity pay is £190 a week or more (2022/23 tax year), you will continue to pay National Insurance contributions.
- If your maternity pay is between £123 and £190 a week (2022/23 tax year), you’ll get National Insurance credits. These credits count towards your State Pension, therefore protecting it.
- If your pay is less than £123 a week (2022/23 tax year) then claiming Child Benefit will help protect your State Pension as you will get National Insurance credits until your child is 12 years old.
How can I protect my State Pension?
Paying National Insurance contributions or receiving National Insurance credits will protect your State Pension. You should qualify for Child Benefit if you're responsible for a child under the age of 16 (or under 20 if they stay in approved education or training) and you live in the UK. You don't need to be the biological parent and can apply for Child Benefit if you foster a child, adopt a child or you’ve got an informal arrangement to look after a friend or relative’s child. Remember that more than one person cannot receive Child Benefit for the same child.
You will automatically qualify for National Insurance credits if you claim Child Benefit and your child is under 12 years of age. The person who claims the Child Benefit receives National Insurance credits. Therefore, the person not working or on a low income should claim Child Benefit so that they receive the National Insurance credits towards their State Pension. You can change who is receiving the Child Benefit by contacting the Child Benefit Office. You can find their details on the government website.
What if one of us earns more than £50,000 a year?
If you or your partner earns less than £50,000 a year then you will receive the full amount of Child Benefit. If one of you earns between £50,000 a year and £60,000 a year, then the higher earner will have to pay back some of the Child Benefit. For every £100 you earn over £50,000, you have to pay back 1% of the Child Benefit in the form of extra income tax. You will have to register for Self Assessment and fill in a tax return each year. However, you would have still benefited from some Child Benefit payments.
If one parent earns more than £60,000 a year, then you’ll have to pay back all of your Child Benefit as income tax via self assessment. If you don't want the hassle of completing a tax return then you can still put in your claim for Child Benefit but choose not to receive the payments. This ensures that you don’t miss out on valuable National Insurance credits. There's also other benefits to claiming Child Benefit, such as your child will automatically be issued with a National Insurance number before their 16th birthday.
What are the key takeaways?
Although retirement may seem a long way off, your future self will thank you for taking the time to check the following:
- Check your employer is paying the correct amount into your workplace pension.
- Check your contract to see if your employer will pay into your pension for longer than the paid 39 weeks.
- Claim Child Benefit, even if you or your partner are a higher earner and you decide not to take the payments.
- Check that the parent who is not earning or is on a low income is claiming the Child Benefit to protect their State Pension.
Please note that this is general guidance only and not advice. The information given relates to the tax year the article was written (2022/23) and tax and legislation may change in future years.
If you have any questions on this then please let me know in the comments below.
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