Title: Thousands of Women Face Pension Discrepancies During Maternity Leave, Potentially Missing Significant Funds
By: Megan Harwood-Baynes, Cost of Living Specialist
In an alarming revelation, it has been reported that thousands of women in Britain could be missing substantial contributions to their pension pots due to a "common error" made by employers during maternity leave. The Money blog has obtained exclusive insights on this issue, shedding light on the financial impact this could have on women, particularly during the economically challenging times many are currently facing.
Miscalculations in Pension Contributions
Under current UK law, employers are mandated to continue making pension contributions based on a woman’s full salary while she is on maternity leave. However, accounts from numerous women suggest that their employers have instead adjusted these contributions to align with their reduced maternity pay. This miscalculation has resulted in reported discrepancies of pension pots ranging from a few hundred pounds to as much as £4,000. A survey conducted by advocacy group Nugget Savings has further outlined the scope of this issue. Out of 236 women interviewed, over 100 reported inconsistencies in their contributions during their maternity leave. While some women managed to reclaim their funds after addressing the issue with their HR departments, others have reported ongoing difficulties in securing the repayment.
Gender Pension Gap Concerns
Katie Guild, co-founder of Nugget Savings, emphasizes the potential depth of this issue, noting that its origins may stretch back to the introduction of auto-enrolment in 2012. With over half a million women taking maternity leave each year, even a minor pension mis-payment could lead to diminished earnings from compound interest over time—creating a wider gender pension gap, where women retire with approximately 55% less than their male counterparts in pension pots.
Guild stated, "Some women were successful in recouping their lost contributions, while others faced resistance from their employers who either disputed the claims or argued that too much time had elapsed to rectify the errors."
Increasing Financial Pressures on Mothers
The impact of these pension discrepancies is exacerbated by the current financial pressures facing families, including rising childcare costs. One anonymous mother, a marketing professional, revealed she was missing £4,000 from her pension during her maternity leave. Although the funds were eventually returned, she lamented that there was "no apology or explanation" and that she was denied compensation for the loss of interest accrued during that period.
Another mother, Chloe, experienced an underpayment of £717.22 from her aviation industry job during maternity leave. After raising the issue, she too received a repayment, but discomfort with the employer’s lack of accountability persisted. Similarly, Sam, yet another mother, detailed a struggle to recover £1,400 in underpaid contributions, needing to involve her union to secure the correction.
Call for Clarity and Awareness
Harriet Morton-Liddle, co-founder of Nugget Savings, has expressed concern over the lack of clarity in guidance surrounding pension contributions during maternity leave. Despite attempts to gather clearer instructions from regulatory bodies, she noted that conflicting information is prevalent, which may inadvertently lead employers to make errors.
Nugget Savings aims to raise awareness among women potentially affected by this issue, encouraging them to take action to claim back funds owed to them.
What Women Should Do
Women are encouraged to review their workplace pension contributions meticulously during and after maternity leave. Checking the contributions recorded by both the employee and employer is essential. Discrepancies may indicate underpayment that warrants further investigation.
Regulatory Response
The Pensions Regulator (TPR) acknowledged the common errors occurring in the calculation of pension contributions. Interim Director Catherine Nicholson stated, “Some employers are making common errors by skipping important steps in respect of calculating pension contributions and communications to staff.”
Although TPR has successfully recovered over £700 million in missing contributions since 2012, specific instances pertaining to maternity leave underpayment have not been detailed sufficiently by the organization.
Seeking Support
For those experiencing disparities with pension payments during maternity leave, TPR advises pursuing the Internal Dispute Resolution Process (IDRP) provided by occupational pension schemes. If unsatisfied with the resolution, individuals have the right to escalate their complaints to the Pension Ombudsman.
Women are encouraged to share their experiences and any discrepancies related to pension contributions during maternity leave by contacting the Money blog via email at [email protected].
As this pressing issue gains visibility, the conversation surrounding the impact of maternity leave on women’s financial futures and the critical necessity for gender equality in pension schemes continues to unfold.
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