5 things to know about your workplace pension & maternity leave

Maternity leave and the impact it has on your workplace pension

If you are reading this, you probably already have a baby or there is one on the way. Congratulations!

With so much going on preparing for the joyous event of a baby's arrival, the last thing on your mind is your pension. But it's an important financial consideration that's worth taking a few minutes to get your head around.

In Ireland, you’re entitled to a statutory minimum maternity leave of 26 weeks, but you may choose to extend this and avail of up to 16 weeks additional unpaid leave. That means a potential total of 42 weeks leave, which is great for getting to know and look after your baby.

But breaks in your pension contributions during maternity leave can have a disproportionate impact on your final pension pot as shown by research from Irish Life in its report In Search of Pension Parity: Ireland’s Gender Pension Gap.

Women in Ireland face a gender pension gap of 22% compared to their male counterparts due to a combination of factors including lower pay and gaps in contributions during maternity leave and career breaks. In fact, the report shows that women who take a break from age30-36 could be looking at a reduced pension pot of around €118,000 than if they had taken no break at all.

The good news is that there are lots of statutory rights for parents and parents-to-be in Ireland.

Here are five things you need to know about your company pension while you are on maternity leave in Ireland:

1. Does my membership of my workplace pension continue while I am on leave?

If you are a member of a pension plan, your membership must continue while on statutory maternity leave. You will continue to accrue pensionable service during this period.

2. Does my employer have to keep paying in pension contributions on my behalf while I’m on maternity leave?

Yes, your employer has to keep up contributions for you while you are on paid statutory maternity leave.

If you are not paid by your employer during maternity, or take unpaid leave, the rules of your pension plan and the terms of your contract will decide whether your employer continues to pay contributions.

3. Do I have to continue my pension contributions?

You may have to continue making contributions. If you are paid by your employer during maternity leave, depending on the terms of your contract and the rules of your scheme.

4. What happens if I take unpaid leave?

If you choose to take unpaid maternity leave, usually, neither you nor your employer have to make contributions, unless your employment contract states otherwise. However, you could lose out financially in the long run.

Another thing to consider is your State Pension, which is an important part of retirement planning. If you take unpaid leave, there could be gaps in your PRSI contributions. You can make up for these by applying for credits.

5. How much will maternity leave impact my pension?

Any shortfall or gap in contributions could have a negative impact on your pension over the long term.

Making contributions to your pension early in your career has a big impact on boosting your savings, as your pension has a chance to grow over many decades and benefit from the extraordinary power of compound interest.

Irish Life’s Pension Parity Report highlighted this issue showing women have €120,000 less in their pension pot than men on retirement.

According to The European Commission Pension Adequacy Report, 2018,( Publications catalogue - Employment, Social Affairs & Inclusion - European Commission (europa.eu) men spend seven more years in paid employment than women. While according to Irish Life’s report women are three times more likely to reduce hours/ work part-time than men.

What are my next steps?

While there is no quick fix to Ireland’s Gender Pension Gap, Irish Life is aware that many parents who take leave can find it difficult to get a real sense of how this impacts their pension, or how to optimise their pension plan to negate the ramifications of a leave period.

The Irish Life Member Engagement team is available to support members throughout their pension journey. Parents who are taking maternity leave can get in touch and avail of this support facility with a view to being as informed as possible and getting the most from their pension plan throughout their leave period.