What happens to your NHS Pension when you go on maternity, paternity or adoption leave, and what happens when you return to work?
What happens to your NHS Pension when you go on maternity, paternity or adoption leave, and what happens when you return to work?
If you’re at the stage in life where you’re ready to start or expand your own family, it’s important to understand what implications this could have on your NHS Pension, and the implications for your retirement years, no matter how distant those might seem.
It’s also important to consider how you can protect yourself and your family financially, once you’re ready to return to work, as your priorities will almost certainly have changed.
What happens to my pension?
Whilst on leave, you’ll remain a member of the scheme and will still be able to contribute to your pension. If you have told your employer that you’ll be continuing to work after your leave then both you and your employer will continue to contribute to the NHS Pension Scheme for the period of your leave.
The exception is if you are working as a locum, as locums are only able to contribute to the scheme whilst they are actually working.
Can I join the NHS pension scheme while on maternity leave?
It’s important to remember that you can’t join the scheme whilst on maternity leave. This includes those who have previously opted out of the scheme for whatever reason in the past. If you’re not a member of the NHS Pension Scheme, and will be going on maternity, paternity or adoption leave soon, then make sure you know of the many benefits associated with being a member of the NHS Pension Scheme.
Occupational pay and pension contributions
The contributions made by you to your NHS pension during periods of leave will be determined by the amount of pensionable pay you will receive during your leave. This will depend on your eligibility to receive occupational maternity, paternity or adoption pay from the NHS, as well as your entitlement to statutory pay. Your employer can provide you with further information.
If you receive Full pay
- Contributions are based on your pensionable pay received
If you receive Half pay
- Contributions are based on your reduced pensionable pay received
If you receive Statutory Pay
- Contributions are based on the amount of statutory pay you receive
Unpaid leave
- Contributions continue to be payable based on the pensionable pay received immediately before any unpaid leave begins
In all cases, you will continue to pay the same percentage contribution as applied immediately before your period of maternity, paternity or adoption leave.
You should note, in the case of your employer’s contributions to your NHS pension, these will be based on your actual pensionable pay before any reduction.
As your pension contributions are reduced during the period of half pay, statutory pay or unpaid leave, this could have an impact on the future value of your NHS pension and, therefore, on your income in retirement. Where there is an impact, in most cases, it’s not likely to be significant. That said, and depending on your own personal situation, perhaps you’ve had more than one period of absence, you may well decide to offset any impact, for instance, paying more into your NHS Pension.
But what happens after your maternity leave is over and you’ve returned to work? If you don’t go back on a full-time basis, then what happens? Reduced working hours will mean less pensionable pay. As a result, your pension contributions, the value of your pension benefits, and benefit accrual will be reduced, which will have an impact on your final retirement income as well as the benefits your family would receive should the worst happen and you pass away or have a serious illness. However, good financial planning can help to prepare you for less than full-time working through careful consideration of the all-round issues.
The NHS Pension Scheme offers an excellent range of benefits if something serious happens to you. This includes a death in service benefit, which provides your loved ones with a lump sum that equates to x2 your pensionable pay and is paid immediately upon death; a short-term pension, which is the equivalent of six months’ full pensionable pay on death; and a dependant’s pension, which starts when the short-term pension ends and is reliant on two years’ continuous service, depending on the scheme you’re in. More information on these benefits can be found here.
Whilst these benefits are excellent, for many they often aren’t enough, particularly with the future of your children to consider. After all, your lump sum isn’t going to last forever, so you do need to think about longer-term plans. Financial protection offers you peace of mind, so you can enjoy the important things in life, such as spending time with your nearest and dearest, and feel safe in the knowledge that your partner and or children have a financial safety net should anything happen to you.
So what do you need to consider?
Income protection
Income protection is designed to cover you if you can no longer work due to an injury or illness. After all, if something happened to you, would you and your family be able to survive on your savings, or on sick pay from work?
Life insurance
Life insurance protects your dependants, whether it be your partner or children. Should you pass away during the term of your contract, your loved ones will receive a cash sum, which is usually tax-free. The cost of a life insurance policy depends on a number of factors, including your age, health and lifestyle.
Critical illness
Critical illness protects you with a tax-free sum, which is paid to you if you’re diagnosed with a serious illness, or have an accident that leaves you unable to work.
Does your spouse / partner need cover too?
It is also essential to consider what would happen if your spouse or partner suffers a serious illness or passes away. If they are the main provider of childcare, who will carry out this vital responsibility if they are unable to? These are all consequences none of us want to even think about, and yet it is really important to consider these things, as we all know the unexpected can strike at any time. A good financial plan will underpin your finances and provide financial security for your whole family at a time when they need it most.
If you’re a new parent or soon-to-be parent, and want to know more about how you can ensure your family is protected financially, even if something happens to you, then it’s recommended that you seek expert advice. To receive advice tailored to you and your profession, click here to arrange your appointment.
Content correct at time of writing and is intended for general information only and should not be construed as advice.