Pension salary sacrifice on maternity leave: contributions continue while you are paid, the pay used depends on your terms, and SMP cannot be sacrificed.

If you sacrifice part of your pay into a pension and a baby is on the way, two things need checking: what happens to the pension contributions while you are away, and what the sacrifice does to your maternity pay. Sacrifice and maternity pay interact in ways particular to your payslip. Putting that to an FCA-authorised adviser costs nothing; a call-back is booked by sending this page’s short form.

Does salary sacrifice carry on during maternity leave?

While you are being paid, contributions continue: GOV.UK says you and your employer keep paying in during paid maternity leave. What can differ under a sacrifice is the pay figure used. HMRC’s guidance for employers says the employer “decides whether salary sacrifice affects contributions into a workplace pension scheme.” It also says that employers often use “a notional level of pay” to work out employer and employee pension contributions, so that people in a salary sacrifice arrangement are not put at a disadvantage. Notional pay here means the salary you gave up, rather than the smaller cash salary you now receive.

The same guidance adds that pension-related payments can be based on the notional salary or on the reduced cash salary, “but this must be made clear to the employee.” So the detail sits in your contract, your salary sacrifice agreement and the employer’s maternity policy, with the leave law below as a floor for occupational schemes.

GOV.UK’s workplace pensions guide gives the general position for any paid leave. Your own contribution is based on your actual pay, but your employer pays contributions based on the salary you would have received if you were not on leave. Where you are not being paid, the employer still has to make pension contributions during the first 26 weeks of leave, and has to carry on afterwards only if it is in your contract. The week-by-week picture, without salary sacrifice, is in pension contributions on maternity leave.

How does a salary sacrifice change your maternity pay?

It can lower it. Statutory Maternity Pay (SMP) is worked out from your average weekly earnings, and where a sacrifice is in place the calculation uses the earnings actually paid to you during the relevant period. The Department for Work and Pensions’ maternity benefits guide says the reduced pay “will reduce the amount of SMP paid to you or may mean that you will not be entitled to SMP as your earnings are too low.”

Two protections run the other way once SMP starts. Your employer cannot take part of it as a sacrifice: it “cannot be sacrificed or offset against other benefits, it must be paid in cash.” And SMP cannot be cut further by a sacrifice arrangement that runs during your maternity pay period. SMP is paid for up to 39 weeks of the 52 weeks of Statutory Maternity Leave.

Maternity Allowance, paid to people who do not get SMP, follows the same logic: it is assessed on your lower contractual earnings, with no account taken of the salary you gave up.

What do the leave rules say about your pension terms?

Two pieces of law are relevant, and neither mentions salary sacrifice. Regulation 9 of the Maternity and Parental Leave etc. Regulations 1999 gives you the benefit of all your terms and conditions during leave, but defines those as excluding terms about remuneration, which means sums paid as wages or salary.

Section 75 of the Equality Act 2010 reads a “maternity equality rule” into every occupational pension scheme. Scheme terms on membership, building up rights and working out the amount of a benefit must treat time on maternity leave as time when you are not on leave. That applies in full to paid leave, and getting SMP from your employer counts as being paid; unpaid weeks are covered only in part. Your own contributions for the leave can still be set by what you are actually paid. Schedule 5 to the Social Security Act 1989 once held a maternity rule for pension schemes too (paragraph 5); it has been repealed, and section 75 now does that job. If your scheme’s handling of sacrificed contributions during leave is unclear, an FCA-authorised adviser can untangle it by phone without charge, and sending this page’s short form is how you ask.

What happens in weeks 40 to 52 and on unpaid leave?

Statutory leave is longer than statutory pay. With nothing being paid, there is no pay to sacrifice, so the question becomes whether your employer carries on paying into the pension at all. GOV.UK’s answer is the 26-week rule above, and after that it turns on your contract. You may also be able to make contributions yourself during unpaid leave; GOV.UK says to check with your employer or the pension scheme provider.

Employer contribution terms for the later weeks vary by contract and by scheme. A longer enhanced maternity policy may continue them, so read the policy rather than assuming the statutory minimum is what you have.

What to ask your employer before leave starts

  • Will employer pension contributions during leave be based on your pay before the sacrifice or on the reduced cash salary?
  • Does the sacrifice carry on while you receive SMP, and what happens to it once pay stops?
  • Has the sacrifice been counted when your SMP was calculated, and what would your SMP be without it?
  • Does the arrangement keep your cash pay above the National Minimum Wage? HMRC says a sacrifice must not take cash earnings below those rates.

The government’s planned National Insurance cap on salary sacrifice is a separate matter from the maternity rules; pension salary sacrifice changes explains them, and is pension salary sacrifice worth it covers the wider trade-off.

Salary sacrifice and maternity leave: your questions

Is SMP worked out before or after the sacrifice?

After it. The calculation uses earnings that count for National Insurance and were actually paid, so the reduced pay is what feeds in. That is why the effect on SMP is worth checking before you agree or increase a sacrifice.

Can my employer put part of my SMP into my pension as a sacrifice?

No. HMRC’s employer guidance says SMP cannot be sacrificed and must be paid in cash. Normal deductions are a separate matter.

Will my Maternity Allowance be lower because of salary sacrifice?

It may be. Maternity Allowance is assessed on your lower contractual earnings, which can reduce what you get or, in some cases, mean you are not entitled.

Could a sacrifice leave a gap in my State Pension record?

HMRC says it may, because lower cash pay can mean less National Insurance paid, or treated as paid, and entitlement to contribution-based benefits depends on that record. The State Pension guide shows how a record is built.

Can a salary sacrifice take my pay below the minimum wage?

No. HMRC says an arrangement must not reduce cash earnings below National Minimum Wage rates, and employers must have procedures to cap the sacrifice.

Getting your own position checked

Contract, scheme rules and sacrifice level together decide the outcome. For an FCA-authorised adviser to weigh all three, send your number through this page’s short form so a call-back can be arranged at no cost. Pensions are invested, so the value of investments can fall as well as rise and you may get back less than you put in.

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