Pensions and Maternity Leave

The Equality Act 2010 which came into force in October 2010 (and was strangely not widely publicised at the time) states that if an individual is on paid maternity leave and is in an occupational pension scheme, the employee will pay pension contributions based on their actual salary during the maternity leave period. These will obviously be reduced and only relate to the statutory maternity leave pay, unless the employer is paying contractual maternity leave pay. This is no change from previous legislation or regulations.

 Defined Contributions Scheme

The employer must continue to pay its contributions based on the salary the employee would have been receiving had they not gone on paid maternity leave.

Defined Benefit Scheme

The employer must continue to pay its contributions based on the salary the employee would have been receiving had they not gone on paid maternity leave. Additionally, as the reduced contributions made by the employee would impact on the defined benefits, the employer may be liable to make up the shortfall of the reduced contributions being made by the employee.

 These are the changes made by the Equality Act 2010.

THIS LEGISLATION DOES NOT APPLY TO PERSONAL PENSION SCHEMES.

If the employee takes a further period of unpaid maternity leave, they may continue to make contributions to their pension if they wish (but are not obliged to do so). The employer will not have to make any contributions during this period, unless the contract of employment specifically states otherwise.

For those clients for whom The Accounting Equation operates payroll, we have checked our records and can confirm that this has not impacted on anyone who has paid Maternity Pay between October 2010 and now.

 However, for those clients for whom we do not operate payroll and for whom Employer Pension Contributions are being made into an occupational pension scheme, you should check your records back to October 2010. If, during this period, you have had any employee(s) on paid Maternity Leave and for whom you are making Employer Pension Contributions, you will need to make up any shortfall in your contributions to the relevant pension scheme if you have contributed at a reduced amount reflecting their Maternity Pay rather than their normal salary. If the scheme is a defined benefits scheme, you should contact the pension provider to establish whether, in addition, you need to make up any shortfall in the employees contributions.

If you require any further information, please do not hesitate to contact us.

 

 

 

 

 

 

 

 

 

 

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