To pause pension contributions on mat leave

[Sparksi]

I understand about the pension gap, and that pension contributions are very worthwhile as they gain interest & often employers match your contribution.

I am wondering though if 9 months really makes a difference? Yes I want to be comfortable in retirement but I also want to be comfortable now, and £150-200 extra (can’t remember what I pay exactly) would really help.

AIBU to pause contributions over mat leave?

Will your other half - if you have one - be contributing to his pension? If yes, I think you should too. I didn’t, and wish I had.

But if you have more children it’s not just 9 months - I had 3 so it would have been 27 months.

Do anything you can to protect your pension - your future self will thank you.

My husband, yeah probably, whilst also doing a ton of overtime to further boost our funds as a family.

We’re thinking we just want one, but I appreciate your point and hadn’t thought of that

I’ve got two teens now and if I could go back in time I would’ve asked exh to pay into my pension. If your employer makes a contribution and you have tax relief added, with compounding interest that small amount of money could have grown considerably.

Google compound interest calculator, there are loads of tools where you can pop in an amount of money, expected growth rate and number of years you expect to be investing that money and then make a decision with the best information available.

It’s free money.

i dropped mine to minimum matched on my second mat leave but wouldn’t drop them entirely ever.

I’d rather go without baby classes, buy 2nd hand vs new, forgo a holiday than stop my pension contributions

i plan to retire at 60 come hell or high water

I guess it depends how committed you are to making them up. I reduced them quite a lot during both mat leaves but knew I'd be in a position later to up them. I'm paying 40% of my salary into pension now so I don't regret that time I reduced them. I needed the extra cash.

Really really regret pausing mine. So angry at myself for listening to my husband (when he didn’t know what he was talking about).
If you really can’t find the money, then fair enough, but I would continue if you possibly can.

IIRC your pension contribution remains a percentage of your maternity pay but your employer has to pay the percentage of your contracted salary.

Therefore if on SMP your contribution will be low, the employer contribution will be at previous amount.

Don't do it!

If you pause your contribution you'll probably lose the employers contribution and the tax relief.

That's what I was going to say but wasn't sure if my memory was right. You're turning down free money from your employer OP, don't do that unless it means no food on the table.

I stopped mine for a year during mat leave, I have at least 25 working years ahead of me, in the grand scheme of things, it won’t make a massive difference but the extra money a month now would as mat pay is still shite.

Check your maternity policy! My company had salary sacrifice pension and the policy said they wouldn’t deduct salary sacrifice from maternity pay. So I got a massive injection into my pension without paying a penny as they covered both my contributions and their contributions whilst I was on maternity. I didn’t believe this was actually going to be the case until I saw my payslips - but it was!

Does your employer match your contributions and if so does that stop if you stop?

if yes and yes then no, do not pause your contributions. You’d gain, let’s say £200 now but in reality is that going to mean the difference between eating and heating or not? or just make the next few months a little more comfortable (to use your words).

if it’s the latter then for a small increase in comfort you’re sacrificing your £200 plus your employers £200 contributions plus the government 25% top up (tax relief) which would be another £50.

do you really need to have an extra £200pm / £1,800 for the next 9 months. But it would mean you lose £450 pm or a total of £4,050 from your pension contributions?

as I said further up, unless it comes down to eating and heating then no, do not pause your pension contributions.
Especially if you’re likely to return part time after mat leave and therefore your earnings and therefore pension contributions go down again.

Missed payments can make a significant difference. My DH's pension payments were low because of a mistake made by payroll/HR. Only for about 5 months. They had to get an actuary to work out the loss and then made a one-off payment of around £1,000 into his pension.

OP are you on SMP or better? What %age do you pay into pension? What percentage does employer pay? Will you lose the employer contribution if you stop paying? How much is that going to be?

Look at your contract and pay slips.

I paused mine with 2 dcs. I've already paid in all the full years contributions through working before and after dcs. I like many other over 55s still have to work a number of more years to retirement age to get state pension and will still continue to pay NI until retirement age. Even though we've already paid full contributions.

So if you need it now, pause it. You'll be paying it for years ahead.

@wippandzipp - I'm pretty sure the OP isn't talking about NI and pension. Anyway, you can't pause NI in the way you can pause contributions to your own pension.

Seconding what @Adviceplease2022 said. I dropped my salary sacrifice % to the minimum needed to get the full company contribution but when I queried what they actually paid into it (as it wasn't based on normal earnings) they eventually paid in both mine and their own normal contributions, so a big windfall into my pension.

Also keep compound interest in mind- the more you pay in while younger, the more it grows.

I worked in the nhs. During both mat leaves I simply couldn’t afford to pay into the pension when I was on unpaid leave. Many years later I paid additional contributions to make up the shortfall and it pretty much doubled my monthly payments. For several years.

In my late 40s I suffered an injury which meant I eventually received ill health retirement and I was extremely glad I had made up that shortfall.

If you can find that money somewhere/ somehow please do. The early years are really, really expensive to buy back.

@ TheDefiant. My mistake, yes I paused my private one, started that at 18. Still glad I did. Was self-employed for a number of years, still paid my NI while SE. Workplace pensions didn't exist when I started work, as not a civil servant, NHS worker etc.

I didn't pay but I paid my whole entire bonus into the scheme the year before in preperation

If you get used to having the money you will find it hard to restart. Once you return to work, and your full wage, it will be the childcare bill making you think that extra "200 a month" would be really useful.

If you are really struggling and need to money I would look into both you and your husband reducing your contributions short term, so you are not shouldering all the damage on just your pension. You should both make the sacrifice.

Yes, for the first six months. After that it depends.

Don't do it OP.

I've been doing matched betting - £300/month target easily achievable during naps, takes about 20m a day.

I didn't stop mine, but I did reduce what I was paying in (LGP) for 6 months. My pension is still looking quite healthy even though I did it.

Just carefully check work policy’s and with other mums at work what the craic is. My employer maintained my pension and paid my childcare vouchers whilst I was on may leave (no policy said that would happen).

Just to add if your mat pay is a reduction from your normal pay then your pension contributions will be lower anyways