Sackers Insight glossary is a collection of notes to help you further increase your awareness of pensions law.
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Maternity Leave: Defined benefit schemes
The question of how to deal with pensions during maternity leave often arises. The basic position in relation to a defined benefit scheme is set out below. This is the statutory minimum, the employer may offer additional benefits if it wishes.
Ordinary Maternity Leave
The first 26 weeks of a woman’s maternity leave is called “Ordinary Maternity Leave” (OML). During OML a woman’s terms and conditions, except those in relation to pay, continue as if she were working normally. In relation to pensions, while a woman is receiving pay (including statutory maternity pay), employers are required to contribute to her pension scheme based on the woman’s normal salary, i.e. the salary she would be receiving if she were not on maternity leave. The woman herself is only required to contribute to her pension scheme on the basis of the salary she actually receives.
Any death in service cover must be continued during OML.
Additional maternity leave (AML)
The second 26 weeks of a woman’s maternity leave is called “Additional Maternity Leave” (AML). As for OML, while the woman is receiving pay (including statutory maternity pay), the employer must pay pension contributions to her pension scheme based on the woman’s normal salary. The woman herself is only required to contribute to her pension scheme on the basis of the salary she actually receives. Although any unpaid AML does not need to be pensioned, pensionable service before and after the unpaid leave must be treated as continuous.
Any death in service cover must continue during AML.
The woman will be credited with full pensionable service for all her paid maternity leave, despite the fact that she only contributes on the basis of the pay she is actually receiving. This means that she effectively receives a top-up from the employer as it meets the balance of cost of the pension scheme.
For the position in relation to a defined contribution scheme see, Maternity Leave: Defined contribution schemes.
Author: Georgina Jones