Thousands of Women Risk Losing Pension Contributions During Maternity Leave Due to Employer Errors

By Megan Harwood-Baynes, Cost of Living Specialist

A recent investigation has revealed that thousands of women in the UK may be missing out on crucial pension contributions due to a widespread error made by employers during maternity leave. This situation occurs when companies fail to maintain pension contributions based on a woman’s full salary while she is on maternity leave, instead adjusting them to an often lower maternity allowance.

Significant Financial Shortfalls

Following a survey conducted by advocacy group Nugget Savings, it was discovered that over 100 out of 236 women reported discrepancies in their pension contributions while on maternity leave. These inaccuracies could result in missing pension contributions ranging from hundreds to up to £4,000. According to women who shared their experiences, the financial consequences of these errors can significantly impact their future retirement savings.

Katie Guild, co-founder of Nugget Savings, expressed her concerns saying, “We’re concerned we have just scratched the surface of this issue. This error could have started as far back as auto-enrolment in 2012, therefore affecting potentially millions of women.”

The issue is compounded by the fact that over half a million women take maternity leave each year in the UK. Even a minor mis-payment can lead to substantial losses in compound interest over time, exacerbating the existing gender pension gap—where women retire with pension pots that are, on average, 55% smaller than their male counterparts.

The Struggle for Rectification

While some women have successfully reclaimed their owed pension contributions after confronting their HR departments, many face barriers. Some employers argue that too much time has elapsed to amend contributions, insisting their calculations were correct from the start.

One anonymous mother shared her frustration, stating she initially missed £4,000 in her pension contributions. Although eventually repaid, she received no apology or explanation and did not benefit from lost interest during the time her contributions were adjusted incorrectly. Another woman, Chloe, experienced a similar issue, discovering an underpayment of £717.22, which her employer mistakenly assumed was calculated correctly by their software.

Sam, another mother, reported missing £1,400 in pension payments and noted that getting her union involved was necessary to rectify the situation. She shared, “I had to work out the calculations for the missing contributions myself and estimate what their growth would have been.”

Wider Implications and Call to Action

These pension discrepancies may extend far beyond individual cases, raising alarms about the long-term financial security of women in the workforce. MP Stella Creasy emphasized the significance of this issue, stating, “The problems women have with pensions and their maternity leave are just the tip of the iceberg. When employers write women off because they have children, they do not just harm their careers, they consign them to poverty in old age too.”

Harriet Morton-Liddle, also a co-founder of Nugget Savings, pointed out the confusion surrounding pension advice during maternity leave. Despite requests made to various organizations, such as HMRC and The Pensions Regulator, clarity on the correct procedures for employers remains elusive. “We want to raise awareness for the women across the UK who could be impacted but might not even realize it yet, so they can claim back money that rightfully belongs in their pension pots,” she explained.

Identifying Possible Errors in Pension Contributions

Women who suspect that they have been affected by mis-calculated pension contributions during their maternity leave can take several steps to verify their situation:

Check Your Workplace Pension Provider: Log into the online portal for your pension provider, where you can find details about contributions. Your annual statement will also outline how much both you and your employer have contributed.
Review Past Payslips: Compare the amounts contributed by your employer before and after your maternity leave. If you notice a decrease, it may indicate an underpayment scenario.
Engage HR: If you identify discrepancies, contact your HR department promptly to address the issue.

Response from Pension Authorities

In a comment to Sky News, Catherine Nicholson, interim director of automatic enrolment at The Pensions Regulator, confirmed, “Some employers are making common errors by skipping important steps in respect of calculating pension contributions.” Although the regulator has successfully recovered millions in missing contributions since 2012, it specifies no targeted data exists regarding maternity leave mis-payments.

The Pension Ombudsman encourages dissatisfied individuals to utilize their Internal Dispute Resolution Process before escalating complaints.

Final Thoughts

Women across the UK who have recently taken maternity leave are encouraged to review their pension contributions closely. Addressing these discrepancies not only safeguards their financial futures but also raises awareness of a recurring issue that could impact countless others. For individuals who have encountered similar situations or have questions regarding their pension contributions, engaging in proactive measures is crucial to reclaim what is rightfully theirs.

For further assistance or to share your experiences, you may reach out via email at [email protected].