Missing maternity payments could create £12,554 hole in pensions

Ahead of Mother’s Day on 30 March, new calculations from interactive investor, the UK’s second-largest investment platform for private investors, show that women could be left with a £12,554 hole in their pension wealth in retirement due to missing vital employer contributions during maternity leave.

In response to a Sky News report, interactive investor – which has been vocal about the pension shortfall that women can face compared to men – outlines steps that mothers-to-be can take, to ensure they don’t miss out on what they’re entitled to by law. interactive investor, which is committed to empowering savers and investors, also sets out some key questions women can ask employers before they go on maternity leave.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

This is for educational purposes only and should not be considered financial advice. If in doubt, speak to a financial adviser.

A crucial reminder about pension engagement

Camilla Esmund, senior manager, interactive investor, says: “It’s not clear whether this is a widespread issue, but it is another reminder of the importance of pension engagement. Unfortunately, the pensions system is quite complex - so understandably, it isn’t always easy for consumers to know what to look out for, or what to ask. But essentially, 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.”

It appears that some employers unintentionally base pension contributions on statutory maternity pay (£187 per week after the first six weeks from April 2025) rather than an employee’s full salary. Women need to check their payslips and speak to their employer’s HR department to ensure they don’t miss out.

Key points:

• During maternity leave, a £35,000 earner could be left with a £822 hole in her pension over 39 weeks if employer contributions are mistakenly based on her reduced maternity pay rather than her full salary
• Earners with a salary of £50,000 or £80,000 could face a gap of £1,307 and £2,276 gap, respectively
• Because of investment growth, this gap could grow to £4,534 by retirement for a £35,000 earner, and a staggering £12,554 gap for a higher earner on £80,000.

Assumptions - pension contributions based on 5% of full pay versus 5% statutory maternity pay. *Gap at retirement based on investment growth of 5% net of fees for 35 years.

Camilla Esmund continues: “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. On average, women have 35% less pension wealth than men by retirement because they often take years out of the workplace and are more likely to work part-time to care for their family. To help close this gap, it’s vital that women get everything they are entitled to, especially on maternity leave.

“At a time when finances are stretched to the limit, it’s extremely worrying that women could be missing out on valuable pension contributions. Women often have more than one maternity leave, so they could be missing thousands by the time they reach retirement.

“When you’re planning for a baby, your pension and retirement might be the last thing on your mind. But taking a moment to check your pension could make a big difference to achieving your retirement goals. Anything you set aside in your 20s and 30s can benefit from years of investment compounding, which helps your wealth to snowball over time. That is, if you’re also keeping a close eye on your fees as this can also eat into your wealth over time if you’re overpaying in charges.

“It’s important to speak to your employer’s HR department and check if their pension contributions will be based on your full pay.

“In addition, it’s crucial to carry on paying into your pension while on maternity leave, as your employer may not pay in at all if you stop contributing. Your contributions will cost less than normal because, while employer contributions are based on your full salary, yours are based on your reduced maternity pay.”

Understanding the rules

Your employer’s pension contributions during maternity leave should be based on your pay before you go on maternity pay. However, some employers unwittingly reduce their pension payments, basing contributions on your reduced maternity pay. This is increasingly an issue because statutory maternity pay after the first six weeks is just £187 per week from April 2025.

Knowing the rules is key, because missing out on pension contributions could leave a hole of thousands of pounds in your pension by the time you retire.

For instance, if you normally earn £35,000 and your employer pays 5% of your total pay into your pension, their monthly pension contributions should continue to be £146 every month during your maternity leave, adding up to £1,313 over 39 weeks.

But if your employer accidentally bases your pension on your maternity pay, you could get an average of £54 added to your pension each month, just £490 over 39 weeks.

The rules on pension payments during maternity leave:

• Your own pension contributions are based on your reduced maternity pay
• Your employer’s pension contributions are based on your full salary, before you go on maternity leave
• If you stop paying into your pension, then your employer can also stop its contributions
• Your employer can opt to stop pension contributions after 39 weeks as the time between 39 to 52 weeks is unpaid.

Here are some key questions women can ask their employer before going on maternity leave: 

1. What employer pension contributions will I receive on maternity leave, and is this based on my full pay before maternity leave?
2. How much will I pay each month in employee contributions?
3. Will you stop employer contributions if I stop paying in?
4. Do you pay employer pension contributions after 39 weeks of maternity leave?