If you decide to take parental leave (i.e maternity leave, paternity leave or adoption leave), you should remain a member of your workplace pension scheme and you and/or your employer will continue to make contributions unless you decide to stop contributing. If you do stop contributing, your employer will also stop their contributions and you will be treated as having left the scheme.
However, we are often finding many employers are not making the correct employer pension contributions during this period! If you’re a member of a defined contribution pension scheme (e.g. Group Personal Pension), you continue to pay contributions into the scheme while you’re on paid parental leave.
Your employer’s contributions should be based on your pensionable earnings before you started the parental leave, while your contributions are based on your actual earnings during the parental leave. For example, in the case of maternity leave, the employer must continue to base their employer pension contributions on pre-maternity earnings for the 39-week paid maternity period.
After this period, the employer’s pension contributions can be paid on the employee’s actual earnings.
Furthermore, if your employer operates ‘salary sacrifice’ (also known as ‘salary exchange’), then they are obliged to continue contributing the full employee and employer pension contribution as if you are working your pre-maternity duties.
This is because a salary sacrifice arrangement is a contractual change and employees in receipt of statutory maternity/paternity/adoption pay cannot have a contribution deducted as statutory payments are protected earnings.
If you decide to take a period of unpaid leave after your paid parental leave, you don’t need to continue contributing during the period of unpaid leave. Your employer may also cease contributing.