Women across the UK may have lost out on up to £4,500 in pension contributions due to a common payroll error, according to new data. The issue arises when employers fail to continue making pension contributions based on pre-maternity leave salaries, leaving many mothers with a financial shortfall.
Employers Failing to Pay Full Pension Contributions During Maternity Leave
A significant number of women have been underpaid in pension contributions while on maternity leave, according to Nugget Savings. The financial advisory platform found that more than 100 women reported missing thousands of pounds from their pensions due to employer miscalculations.
Under UK employment law, companies must continue paying pension contributions based on the employee’s full salary for the first 39 weeks of maternity leave. However, many employers mistakenly reduce contributions in line with statutory maternity pay, despite regulations stating otherwise.
Katie Guild, co-founder of Nugget Savings, highlighted the scale of the issue after a social media video from her organisation reached over 100,000 views.
“Since posting the video, which clocked up over 100,000 views, we have had hundreds of women get in touch to share how much they’d been able to claim back using our advice, with some recouping hundreds and others thousands of pounds.” she said, according to BirminghamLive.
Harriet Morton-Liddle, also a co-founder of Nugget Savings, noted that many initial complaints were dismissed by payroll departments before further investigation proved the women were indeed owed money.
She added, “The reality is, we’ve only just scraped the surface of this issue and we think in months to come, we’ll see this story unfold even further.
This could be a national personal finance crisis on an unprecedented scale where women across the UK could be owed hundreds of thousands of pounds that should be in their pension pots, not in their employer’s bank account.”
Former Pensions Minister Warns of Long-Term Financial Impact
The potential underpayment of maternity pensions comes against a backdrop of a gender pension gap that already sees women retiring with less savings than men. Steve Webb, a partner at pension consultants LCP and a former UK pensions minister, described the situation as deeply concerning.
“Where someone is on maternity leave their employer should carry on paying their full pension contributions for the first 39 weeks, as if they were still on full pay.” Webb stated.
He urged affected women to challenge their employers, citing employment law, and called on companies to rectify past mistakes.
Research has consistently shown that career breaks for childcare can leave women at a disadvantage in retirement, with lower lifetime pension contributions. The maternity pension shortfall adds an additional financial burden to mothers, reinforcing the need for companies to ensure compliance with pension regulations.
