Pregnancy often brings a long list of financial worries, from childcare costs to reduced income during maternity leave. But there is one little-known pension loophole that could actually leave expectant mothers better off and even earn them what is effectively free money.
The trick lies in boosting pension contributions while you are still working and pregnant, before your income drops. Because many maternity pay arrangements are based on your salary before leave begins, some employers continue paying pension contributions at the higher pre-leave rate, even when your own pay falls significantly.
In practical terms, this means that increasing your pension contributions in the months before maternity leave can unlock higher employer contributions, while your own outgoings later reduce. For mothers on statutory maternity pay, the difference can be surprisingly generous.
This approach works particularly well for women whose employers calculate pension contributions based on “notional salary” rather than actual maternity pay. In those cases, employer contributions may continue as if you were still earning your full wage, while your own contributions are taken from a much smaller income or paused altogether.
There is also a second, often overlooked benefit. Pension contributions made via salary sacrifice can reduce your taxable income before maternity leave starts, potentially increasing entitlement to certain benefits and reducing tax and national insurance contributions.
Financial advisers say the key is timing and understanding your employer’s pension rules. Not all schemes operate in the same way, and some employers base contributions strictly on actual pay received during maternity leave.
However, for those whose schemes allow it, the sums can add up. Over the course of maternity leave, the boost to a pension pot can run into thousands of pounds money many women would otherwise miss out on during a career break.
With women already facing a significant gender pension gap later in life, experts say this is one area where better information could make a real difference.
As always, expectant mothers are advised to check scheme rules carefully and seek independent financial advice before making changes. But for those who can take advantage, pregnancy could be an unexpected opportunity to strengthen long-term financial security.
