Follow up

Maternity

[Policy]

Pension entitlement during family leave

Types of pension scheme

The provisions apply both to occupational pension schemes and personal pension schemes to which you contribute. A personal pension scheme will always be a defined contribution (“money purchase”) arrangement, whereas an occupational pension scheme can either be a defined benefit (“final salary”) or defined contribution scheme. In practice, most occupational pension schemes are defined contribution schemes.

Maternity leave

Under s.75 Equality Act 2010 , employer contributions to pension schemes should continue to be made during ordinary maternity leave (OML) based on the salary the employee would have received had they been working normally, i.e. you should continue to make the contributions you usually make. This applies whether the OML is paid or unpaid. However, employee contributions (assuming the scheme is contributory) should be based on the amount of actual pay, i.e. statutory maternity pay (SMP) or contractual maternity pay, that the employee is receiving, rather than on their normal salary.

Pro advice. Remind employees that they might want to increase their contributions whilst on leave to make good any shortfall whilst they’re in receipt of less than their usual salary. You can do this in your maternity policy (see Follow up ).

During additional maternity leave (AML), the position changes. Unless the employee’s employment contract states otherwise, pension contributions need only continue to be made during the period when they’re receiving SMP or contractual maternity pay, not during any unpaid AML period. Again, employer contributions must be based on the salary the employee would have received had they been working normally, and employee contributions must be based on the amount of actual pay that they’re receiving.

Pro advice. You don’t need to make employer contributions during unpaid AML unless the employment contract states otherwise.

Pro advice. If you operate a defined benefit scheme, the periods of OML (whether paid or unpaid) and paid AML count as pensionable service and benefits must continue to accrue as if the employee was working normally. This means you’ll probably need to make good the shortfall here to reflect that the employee’s contributions are less than they would have been if they’d been working normally. However, unless the pension scheme rules allow or the employment contract provides otherwise, the period of unpaid AML won’t count as pensionable service. If the employee returns to work at the end of unpaid AML, pensionable service before and after this period will be treated as continuous.

Other family-related leave

Similar provisions apply during adoption and paternity leave. That is, during periods of ordinary adoption leave, paid additional adoption leave or paid paternity leave, you must continue employer pension contributions based on the employee’s normal salary as though they weren’t on leave, but the employee’s contributions should be based on their actual pay received. As for shared parental leave, employer contributions are effectively determined on the same basis as for AML, i.e. they only need to be paid for as long as the employee is in receipt of pay and based on the employee’s normal salary, with the employee’s contributions being based on their actual pay received.

Maternity policy