Hundreds of Millions Potentially Missing from Women’s Pensions During Maternity Leave: A Wake-Up Call

By Megan Harwood-Baynes, Cost of Living Specialist

Recent revelations indicate that thousands of women in the UK could be losing out on significant amounts of money in their pensions due to a common administrative mistake made by employers during maternity leave. The Money blog has learned that many companies are incorrectly adjusting pension contributions based on the reduced salary that employees receive during this period.

Understanding the Pension Contribution Error

When a woman goes on maternity leave, her employer is required to maintain pension contributions based on her full salary, ensuring that she continues to receive the same level of benefits as when she was actively working. However, there have been numerous reports from women, some seen on Sky News, indicating that their pension contributions were updated to reflect their lower maternity pay, leading to discrepancies that can amount to several thousand pounds.

According to a survey conducted by the advocacy group Nugget Savings, out of 236 women questioned, over 100 reported finding errors in their pension contributions during maternity leave. While some managed to recoup the funds after addressing the issue with their human resources departments, others were not so fortunate.

The Financial Impact: What Women Are Reporting

Women who have spoken out about the issue have reported missing anywhere from a few hundred pounds to nearly £4,000 from their pension pots. Katie Guild, co-founder of Nugget Savings, emphasized the severity of these mistakes, suggesting that the problem could date back to the implementation of auto-enrolment in 2012, potentially affecting millions.

"It’s concerning that we may only be seeing the tip of the iceberg. There are likely many women who are unaware of the errors impacting their pension savings," said Guild.

Resistance from Employers

Many women reported facing obstacles when trying to address the discrepancies. "Some were successful in recouping their lost pension contributions, but others faced resistance from their employers, who typically claimed too much time had passed or insisted that their contributions were correct," Guild explained.

Member of Parliament Stella Creasy voiced her concerns, stating that issues surrounding pensions during maternity leave are emblematic of broader systemic problems, which can lead to financial insecurity for women in retirement. "These problems are just the tip of the iceberg. When employers sideline women due to motherhood, they are not only affecting their careers but their financial security in old age as well."

Personal Stories Reveal Frustration

In interviews, several mothers shared their experiences. One marketing professional, who remains anonymous, revealed that she was missing £4,000 in her pension and only received repayment after raising the issue, without any apology or compensation for the lost interest during the period the funds were missing.

Another mother, Chloe, described a situation in which her employer underpaid her by £717.22 during her maternity leave, insisting that it was the software’s fault for the miscalculation. "They expect the software to calculate it automatically," she said.

Sam, a mother of two, faced a similar battle, discovering she was owed £1,400 after conducting her own calculations. After getting her union involved, she successfully reclaimed her contributions, including some interest after challenging her employer’s initial offer.

Addressing Awareness and Guidance

Harriet Morton-Liddle, another co-founder of Nugget Savings, raised concerns about the lack of clarity in guidance regarding pension contributions during maternity leave. "We reached out to various organizations, including HMRC and Citizens Advice, to uncover the correct protocols, but the responses were inconsistent," she stated.

This inconsistency implies that many employers may inadvertently make these errors due to a lack of understanding, further necessitating the need for awareness among women about their rights regarding pension contributions during maternity leave.

Steps to Check Pension Contributions

To assess whether you might be affected by this issue, women are encouraged to review their workplace pension provider’s online portal, where contributions should be recorded. Confirming that the amount contributed by employers remains the same before and after taking maternity leave can further detect discrepancies.

Catherine Nicholson of the Pension Regulator acknowledged the ongoing problem. "Some employers are making common errors with regard to calculating pension contributions during maternity leave," she said, noting that a substantial amount of money—over £700 million—has been recovered for missing contributions since 2012, although specific figures related to maternity leave mis-payments remain unavailable.

Conclusion

As this situation unfolds, it highlights the critical need for women to be vigilant and proactive in monitoring their pension contributions during maternity leave. The repercussions of missing contributions are significant, potentially exacerbating the gender pension gap which sees women retiring with pension pots significantly smaller than men’s. As calls for clearer guidance gain momentum, both women and their employers must ensure that practices align with legal obligations to secure women’s financial futures.

If you believe you may have been affected by similar discrepancies, you can reach out to your pension administrator for clarification and potential reclamation of lost funds.

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