Thousands of British women could be missing significant sums from their pension due to a “common error” made by their employers while on maternity leave.
When a woman goes on mat leave, their employer should continue to make pension contributions based on their full salary. However, women have reported their contributions have been wrongly changed to match their lower mat leave income.
Women who spoke to Sky News reported missing anywhere from a few hundred to £4,000 in their pension pots.
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Advocacy group Nugget Savings shared data with Money after surveying 236 women about their pension contributions while on maternity leave. More than 100 had found discrepancies, and while some have been repaid the money after raising it with their HR department, others have not.
It is not clear how widespread the issue is, but Katie Guild, co-founder of Nugget Savings, said: “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.”
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More than half a million women take maternity leave each year and a pension mis-payment of just a few hundred pounds loses the chance to earn compound interest over the following decades, exacerbating the existing gender pension gap, which sees the average woman retire with a pension pot 55% smaller than the average man’s.
Katie said: “Some were successful in recouping their lost pension contributions.
“Others faced resistance from their employers who said too much time had passed to fix the error or the employers still believed that they had contributed correctly to their pensions.”
Problems are ‘tip of the iceberg’
MP Stella Creasy expressed concern to Sky News about these discrepancies.
“The problems women have with pensions and their maternity leave are just the tip of the iceberg when it comes to why millions of older women end up destitute,” she said.
“When employers write women off because they have children they don’t just harm their careers, they consign them to poverty in old age too.
“With women living longer and forming a larger proportion of the older workforce, it’s time we committed not just to ending the gender pay gap but the gender pensions gap too.”
‘No apology or explanation’
One mum of two, who works in marketing and asked to remain anonymous, said she was missing £4,000 in her pension pot.
The amount was eventually repaid by her employer after she flagged it with them.
But she said there was “no apology of explanation”, and she was not compensated for the loss of interest – her pension is currently at 7% growth, meaning she has lost out on hundreds of pounds in interest.
“Given how tough working mums have it at the moment, combined with increasing financial pressures and extortionate childcare costs, I’m disheartened that a big corporate company has chosen to leave me out of pocket due to a technical issue out of my control,” she said.
Chloe, 29, a mother of two, said her employer underpaid her by £717.22 while on maternity leave from her role in the aviation industry. She raised the issue and was eventually repaid.
She said her employer was not apologetic and expected the software to calculate it automatically.
Sam, also a mum of two, was missing £1,400 – she had to get her union involved to recover the money.
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“I ended up working out the calculations for the missing contributions myself and estimating what their growth would have been over the year – around 10%,” she said.
“I eventually was offered a repayment and something like 0.4% interest. I challenged this and got the 10%.”
She said her finance director personally apologised to her and thanked her for identifying the issue.
“It turned out to be a longstanding mistake and they were going to identify everyone impacted and restore missed contributions,” she said.
A woman pays 5% of her salary into her pension pot, a total of £200 of her paycheque. Her employer matches this and also pays £200. This means £400 goes into her pension pot each month.
While on maternity leave, the woman’s pay drops and now she pays £100 into her pension pot because the percentage is based on her actual pay received.
However, her employer should continue to pay the full £200 as if she had not taken the leave. This means £300 goes into her pension each month.
Why many won’t even know they’re missing out
Not all women have been repaid.
One mother, who was missing around £250 from six months of maternity leave, said her employer told her they would “look into it” but has yet to repay the shortfall.
“I feel let down as I have had other errors with my maternity pay,” she said. “It is challenging enough raising a newborn without having to go through payslips with a fine tooth comb to check for errors. It’s tiring having to chase things up and it all feels very unfair.”
Harriet Morton-Liddle, co-founder of Nugget Savings, said the organisation had tried to discover why advice on pension contributions during maternity leave was not more clear.
“We contacted HMRC, The Pensions Regulator and Citizens Advice and even submitted FOI requests but still had no straight answer regarding the correct procedure that should be followed for employers or employees,” she said.
Much of the online advice was “contradictory”, she said, which means many employers may not even realise they are making mistakes.
“We want to raise awareness for the women across the UK who could be impacted but might not even realise it yet, so they can rightfully claim back money that belongs in their pension pots,” she said.
You need to check with your workplace pension provider – there is usually an online portal to do this, although the amounts contributed may be listed on your paycheque (but it may just list your own contributions).
Your pension provider should also send you an annual statement, outlining how much you and your employer have both contributed.
Check the amounts paid by your employer – both before and after you took maternity leave – are they same? If they have decreased, you may have been underpaid.
What the pension regulator said
When Sky News contacted the pension regulator, Catherine Nicholson, interim director of automatic enrolment, said: “Some employers are making common errors by skipping important steps in respect of calculating pensions contributions and communications to staff. These errors include miscalculating contributions for staff receiving maternity pay.”
It said it has recovered more than £700m in missing contributions owed since 2012, but did not have specific figures related to mis-paid pensions while on maternity leave.
The Pension Ombudsman said it did not have any data on this, but said: “We have not seen an increase in complaints stemming from this issue.”
It added: “All occupational pension schemes must operate an IDRP (Internal Dispute Resolution Process). If they remain unhappy with the response after the IDRP process they are able to submit a complaint to TPO, we act impartially, and our service is free.”
How problem makes gender pay gap worse
The missing money could exacerbate the existing gender pay gap.
According to Legal and General, the average UK pension pot for men is £84,205. The average woman has less than half of this saved, at £39,654.
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Research shows the difference in savings begins right at the start of people’s careers – the initial gap stands at 16% but can double by the time women reach their 40s.
By the time they retire, on average, a woman’s pension pot is 55% smaller than a man’s.
The reasons for this are varied and complex – women are still paid less, and are less likely to be in senior leadership positions, resulting in lower pension contributions.
They are also more likely to take career breaks to care for children or work part-time and reduced hours.
Women are also more likely to waive their right to a partner’s pension after a divorce, according to Legal and General, despite being entitled to a portion of their husband’s private pension wealth.
Have you been affected or found discrepancies with your pension payments on maternity leave? Email [email protected]
