UK Maternity Pay Loophole
What’s Happening - And Why It Matters
A fresh story has been circulating in the UK press this week about a maternity pay loophole that many new and expectant parents should be aware of - not as a way to exploit the system, but to navigate it with clarity and confidence.
The headline isn’t about a scandal or dodgy practice - it’s about a little-known rule within the statutory maternity pay system that many working parents don’t know exists, which can affect income and even future pension contributions.
Let’s break it down.
What Is the “Loophole”?
Under current UK law, you are entitled to up to 52 weeks of maternity leave - and up to 39 weeks of Statutory Maternity Pay (SMP) if you qualify. SMP consists of:
90% of your average weekly earnings for the first 6 weeks, and
£187.18 per week or 90% of earnings (whichever is lower) for the next 33 weeks.
After these 39 weeks, the remaining 13 weeks of leave are unpaid (unless your employer offers enhanced pay).
Here’s where the quirk - often described as a “loophole” in press commentary - comes in:
👉 Your employer must continue pension contributions based on your pre-leave salary while you’re on SMP, even though your actual weekly take-home pay drops.
This means if you increase your pension contributions before you go on maternity leave, your employer must continue to match them at that higher rate for the duration of your paid maternity leave.
That’s technically a legal obligation, not something informal - but many parents simply don’t know about it and miss out on the advantage it could give to their long-term financial security.
Why It Matters
1. Income Drop and Financial Pressure
Most parents experience a stark drop in income when shifting from full pay to SMP - and this can affect budgeting right when they need to plan for childcare, essentials and family support. This gap is exactly what advocacy groups and petitions in Parliament are trying to address, arguing that SMP should be closer to the National Living Wage.
2. Pension Impact
The pension rule protects your long-term retirement savings, but only if you know to act on it early. It doesn’t boost your weekly income when you’re on leave - it maintains pension contributions at a level tied to your usual salary rather than the lower SMP amount.
This is especially important in the UK where women’s pension savings are already significantly lower on average than men’s - a gap driven largely by career breaks such as maternity leave.
3. Unpaid Weeks Still Exist
Once the 39 weeks of SMP end, if you choose to take the full 52 weeks of leave, the final 13 weeks are unpaid - and pension contributions normally stop. That’s a part of the system that benefits from clarity, not confusion.
Context: UK Parental Leave System Under Review
It’s worth noting the maternity and parental pay system in the UK is under active review. Government proposals include expanding rights such as day-one eligibility for parental leave - which could eventually reduce some loopholes or gaps in how support works.
Alongside this, there’s ongoing public pressure and parliamentary debate to raise SMP and related pay to levels that better match living costs and support modern families. One e-petition to raise maternity and paternity pay to the National Living Wage received over 100,000 signatures and has been scheduled for a Commons debate.
What This Means for You (Practical Tips)
Whether you’re expecting a child, planning for one, or supporting someone who is, here are key actions worth considering:
1. Understand Your Contract and Entitlements
Statutory rules can work differently from your employer’s enhanced maternity pay policies. Make sure you know which applies to you.
2. Check Your Pension Contributions
If possible, review your pension contribution levels before maternity leave starts - because once you’re on SMP, your employer must continue contributions based on your pre-leave salary.
3. Plan for the End of Paid Leave
Knowing that the final 13 weeks of maternity leave are unpaid can help you budget and consider whether shared parental leave or other arrangements fit your family’s needs better.
4. Seek Advice Early
If you’re unsure whether you qualify for SMP or Maternity Allowance - especially if you’ve had changes in employment status - organisations like Citizens Advice can help clarify your situation.
A Moco Coaching Perspective
This so-called “loophole” isn’t about gaming the system. It’s about understanding the rules that exist so parents can make informed choices during a life-changing season.
Becoming a parent is demanding - emotionally, financially and physically. Strengthening your financial footing - even in small ways like being aware of how pension contributions work while you’re on maternity leave - can reduce stress and allow you to focus on what matters most: your health, your baby and your family’s wellbeing.
As with many aspects of parenting and work, knowledge isn’t just power - it’s peace of mind.