When Christmas approaches, we tend to reassess a little more. We become reflective, exploring what we have and what we would like to shape in our future. It could be that you are planning to extend your family but are concerned about what this might mean for your finances, both short and long term.
In the short term, speaking to an independent advisor about topics ranging from insurances to daily budgets is a sensible plan. While having children is exciting, it is also expensive.
In the long term, you might be concerned about the impact of your maternity or paternity leave on your pension. We offer some guidance here.
What happens to your pension when on leave?
If you continue to receive your contractual or statutory pay, your pension will be unaffected. If you are not receiving any pay, you are no longer an active member of the scheme.
If your earnings are reduced, as you might extend your maternity leave longer than planned, you will pay the same rate of contributions. What this means is the amount you pay is proportional to the actual salary you receive.
What happens if we choose to adopt?
Adoption leave is treated the same as an absence due to maternity or paternity. As long as you receive contractual or statutory pay, you are an active member of the scheme.
If you receive no pay, you are not an active member. If you choose to extend the career break beyond five years, you may find there are consequences for your pension benefits. The salary link will have been broken, and any benefits in your Final Salary arrangement will be impacted. For full details on the consequences of the break in the salary link, talk to an independent financial advisor.
Exciting times need a secure future
You may also want to consider the impact on your benefits should you die in service. Your children will benefit from your pension should this happen. You may therefore want to consider referencing your pension in your will.
The content in this article was correct on 29th November 2021. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your teachers’ pension scheme, as well as financial matters in general. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.