Nappies Are Temporary. A Pension Is Forever.
Let’s be honest. When you’re expecting a baby, your pension is probably the last thing on your mind. You’re thinking about prams, paint colours, and whether you’ll ever sleep again.
But here is the thing nobody tells you over the celebratory pub toast: having children is one of the biggest financial risks your pension will ever face. Career breaks, reduced hours, and the terrifying cost of childcare can quietly derail your retirement savings while you are busy keeping a tiny human alive on approximately 17 minutes of sleep.
The good news? There are specific rules, clever loopholes, and simple strategies that can protect your pension through parenthood. Most people don’t know they exist. Now you will.
Here are five pension rules every parent should know. Your future self, possibly sipping cocktails on a beach somewhere, will send you a thank you card.
Rule 1: Your Employer Must Keep Paying Their Bit While You’re on Leave
This is the big one, and it catches thousands of parents out.
Under UK law, if you stay in your workplace pension during paid parental leave, your employer must keep paying contributions based on your full pre-leave salary. Not your reduced statutory pay. Your actual, normal, pre-baby salary. (Source: Royal London, ‘Parental Leave and Pensions’ [1])
So if you normally earn £40,000 and your employer chips in 5% (£2,000 a year), they have to keep paying that £2,000 even while you are surviving on statutory pay and wondering if coffee can be administered intravenously. This is not a nice-to-have. It is the law.
Your move: Before you go on leave, confirm with HR that they know this rule and will follow it. Most employers do, but some “forget” or simply don’t realise. That’s thousands of pounds of free money that belongs in your pension, not their pocket.
Once your leave becomes unpaid - typically the final 13 weeks of maternity leave (weeks 40–52) - your employer has no legal obligation to continue pension contributions at all. [1] And this is exactly why Rule 2 exists - check it out below.
Rule 2: Unpaid Leave Doesn’t Have to Mean a Lost Pension
Most parents assume their pension simply pauses during unpaid leave. It doesn’t have to.
Once you move into unpaid additional maternity leave (typically from week 27 onwards, and always for the final 13 weeks if you take the full 52), contributions stop. This is the gap worth planning for.
What you can do about it depends on the type of pension you have. Read the bit below that applies to you.
“I’m in a public sector pension scheme (LGPS, NHS, Teachers’, Civil Service)”
You have a formal, legally-backed mechanism to buy back your lost pension - but it comes with a strict deadline that catches many parents out.
When you return to work, you have 30 days to elect to buy back the pension you lost during unpaid leave.(Source: Highland Pension Fund [2]; Shropshire County Pension Fund [3]) Here is why that window matters so much:
If you elect within 30 days of returning:
You pay one-third of the cost
Your employer pays two-thirds (this is called a Shared Cost Additional Pension Contribution, or SCAPC)
If you miss the 30-day window:
You can still buy back the lost pension, but you pay the full cost yourself
The maximum period you can buy back through the shared-cost arrangement is 36 months
You can pay as a lump sum or spread the cost through regular deductions from your salary.
Your move - before you go on leave: Ask your HR or pension administrator these three questions now, while you still have the headspace to act on the answers:
“What is the exact deadline for electing to buy back my lost pension when I return?”
“Will my employer contribute to the cost if I elect within the deadline?”
“Can I set up a payment plan to spread the cost when I return?”
Then set a reminder for your first week back. The 30-day window will arrive faster than you expect.
“I’m in a private sector workplace pension (usually a defined contribution scheme)”
You don’t have the same statutory buy-back right as public sector workers, but you have more options than most people realise. The key is knowing which levers to pull.
Option 1: Increase your contributions when you return
The simplest starting point. When you return to work, a temporary increase in your contribution percentage to make up for the months you missed, even an extra 2-3% for 12-18 months, can meaningfully rebuild what was lost.
Before you go on leave, ask HR: “If I increase my contribution rate when I return, will you match the increase?” Some employers will match enhanced contributions up to a certain level.
Option 2: Make a lump sum contribution
At any point - when you return, when you receive a bonus, or when you have savings available - you can make a one-off additional contribution directly into your pension. You will receive full tax relief on the contribution (subject to the annual allowance rules in Rule 5).
Option 3: Open a personal pension (SIPP) alongside your workplace scheme
If your workplace scheme does not accept additional one-off contributions, or if you want more flexibility, you can open a Self-Invested Personal Pension (SIPP) and contribute directly into that alongside your existing scheme. The same tax relief rules apply. This is particularly useful for self-employed parents or those returning to a new employer with a different workplace pension.
Option 4: Use carry forward to catch up in a higher-earning year
If your income increases in the years after your return - a promotion, a strong bonus, or a move to a better-paid role - carry forward allows you to contribute more than the standard annual allowance in a single tax year, making up for years of lower contributions. Rule 5 covers this in detail. The two rules work well together.
Rule 3: The £100,000 Childcare Trap (And How Pensions Spring It)
This is arguably the most powerful pension hack for parents right now. Strap in.
If either parent’s income creeps over £100,000, your family instantly loses (Source: Royal London [4]; GOV.UK [7]):
30 hours of free childcare per week for children aged 9 months to 4 years. For children aged 3-4, crossing the £100,000 threshold reduces entitlement from 30 to the universal 15 hours. For younger children, the funded entitlement is lost entirely - worth £6,000+ a year
Tax-Free Childcare top-ups (another £2,000 per child)
Your Personal Allowance which reduces by £1 for every £2 you earn over £100k, effectively creating a 60% tax rate. (Source: GOV.UK, ‘Income Tax rates and Personal Allowances’ [7]) For example, if you earn £120,000, the extra £20,000 will be taxed 60%, putting you down £12,000. Ouch.
Here is the beautiful rule: Pension contributions reduce your income for tax purposes.
If you are sitting at £102,000 and you chuck £3,000 into your pension, HMRC does some maths and decides your income is actually £99,000. You keep every penny of childcare support and your Personal Allowance stays intact.
Your move: If you or your partner are anywhere near the £100,000 mark, do the maths now. Factor in bonuses, freelance income, or that Etsy side hustle. A well-timed pension contribution can save you thousands and boost your retirement. It’s basically legal magic.
Tax calculations are based on current rates and thresholds for the 2025/26 tax year for taxpayers in England, Wales and Northern Ireland. Scottish taxpayers have different income tax rates which may affect the outcome. The benefit of pension contributions in reducing adjusted net income will depend on your individual circumstances and how your income is structured. If you are close to the £100,000 threshold, consider speaking to a financial adviser or tax professional before acting. Tax treatment is subject to personal circumstances and may change in the future.
Rule 4: Stay-at-Home Parents Can Still Have a Pension
This is the rule that should be printed on a poster and stuck in every antenatal clinic.
Here is a fact that surprises most parents: you do not need a payslip to pay into a pension. As long as you are under 75 and resident in the UK, you can put money into a pension and HMRC will top it up. (Source: HMRC Pensions Tax Manual, PTM044100 [5]) No job required. No income needed. This legislation is designed specifically to help non-earners, including stay-at-home parents, build retirement savings.
How the numbers work: For non-earners, the current annual limit for contributions that get tax relief is £2,880. (Source: HMRC Pensions Tax Manual, PTM044100 [5]) Here is the calculation in simple terms:-
You pay in: £2,880
Government adds: £720 (this is 20% tax relief on the grossed-up amount)
Total in pension: £3,600
Why does £2,880 turn into £3,600? Because pension tax relief works like this: when you pay into a pension, the government gives you back the tax it assumes you paid. If you put in £80, they add £20 to make £100. That is a 25% boost on your contribution. Apply that same 25% boost to £2,880 and you get £3,600. You won’t find that guaranteed return anywhere else.
Why this matters: The gender pension gap is brutal. Women over 55 have average pension pots of just over £81,000, compared to £156,000 for men. (Source: DWP, ‘Gender pensions gap in private pensions: 2020 to 2022’ [6]) Career breaks for childcare are the main reason. Paying into a non-working partner’s pension is one of the most effective ways to fix this.
Your move: If you are a single-income household, set up a pension for the non-working partner. Pay in up to £2,880 per year. Watch HMRC add £720. Here is what that looks like over time:
Figures shown are before investment growth and charges, and assume contributions are made at the start of each year. For illustrative purposes only.
Years | You Pay In | Government Adds (25% boost) | Total Pot (before growth) |
1 | £2,880 | £720 | £3,600 |
5 | £14,400 | £3,600 | £18,000 |
10 | £28,800 | £7,200 | £36,000 |
18 | £51,840 | £12,960 | £64,800 |
Rule 5: Carry Forward: Your Unused Allowance Hasn’t Gone Anywhere
Here is a rule for parents returning to work after a career break, blinking in the daylight and trying to remember what spreadsheets are.
The annual allowance, the maximum amount you can contribute to all your pension schemes in a tax year, is currently £60,000. If you haven’t been contributing much during parental leave or reduced hours, you have been quietly stockpiling unused allowance without realising it. (Source: HMRC Pensions Tax Manual, PTM055100 [8])
One important limit to know: you can only receive tax relief on personal contributions up to 100% of your earnings in the current tax year. So if you earned £45,000 in your first year back, that is your ceiling - regardless of how much unused allowance you have banked.
Employer contributions are not subject to this cap, so if your employer can contribute more on your behalf, that unused allowance can still be put to work. If you are returning part-time or are self-employed with variable income, it is worth doing the maths before making a large contribution.
Carry forward lets you use unused annual allowance from the previous three tax years. Yes, it rolls over. Like leftover holiday days, but for your pension.
This means that in the 2025/26 tax year, you can potentially use leftover allowance from 2022/23 (£40,000 cap), 2023/24 (£60,000 cap), and 2024/25 (£60,000 cap). Add this year’s £60,000 and you could contribute up to £220,000 gross (but only if your earnings support it as per the above). (Source: HMRC Pensions Tax Manual, PTM055100 [8]) That is not a typo.
Your move: If you are returning to work and have some catching up to do, carry forward is your friend. You must have been a member of a registered pension scheme during the years you are carrying forward from (membership counts, even with zero contributions). Keep records.
Exceeding your available annual allowance - including any carried forward - will result in an annual allowance charge levied at your marginal rate of tax via Self Assessment, effectively removing the tax relief on the excess. If you are considering a large contribution using carry forward, particularly one that takes your total close to or above £60,000, consider taking independent financial advice or speak to a pension specialist first. The tapered annual allowance may also apply if your adjusted income exceeds £260,000, which could significantly reduce the allowance available to you.
Extra Tip: Junior SIPPs - Get Your In-Laws Contributing!
Tell your in-laws to listen up: a Junior SIPP must be opened by a parent or legal guardian, but once it is set up, anyone - including grandparents - can contribute. The same rules apply: up to £2,880 per year, instantly topped up to £3,600 by the government through tax relief. (Source: HMRC Pensions Tax Manual, PTM044100 [5])
The money is then invested and left to compound for decades before the child can access it at retirement age (currently 55, rising to 57 in 2028). (Source: GOV.UK, ‘Pension age changes’ [9]) That combination - an early start, a government top-up on every contribution, and decades of compounding - is what makes the Junior SIPP so powerful.
What could it be worth?
The illustrations below assume £3,600 is contributed each year from birth to age 18 (that’s £2,880 paid in plus £720 government tax relief). We’ve shown three scenarios to reflect different possible market conditions, as required by FCA rules. All figures are in today’s money (real terms, after inflation), with an assumed 0.5% annual fee deducted in each scenario.
Annual contribution: £3,600 (£2,880 paid in + £720 government top-up)
Total cash paid in over 18 years: £51,840
Total government tax relief added: £12,960
Total gross contributions: £64,800
Scenario | Low Growth (2% real) | Medium Growth (5% real) | Higher Growth (8% real) |
Annual real return (net of 0.5% fee) | 1.5% | 4.5% | 7.5% |
Pot at age 18 (today’s money) | ~£70,000 | ~£101,000 | ~£134,000 |
Pot at age 57 (today’s money) | ~£126,000 | ~£562,000 | ~£1,400,000 |
From age 18, the pot continues growing with no new contributions needed. Even in the low growth scenario, the £51,840 of actual cash paid in has the potential to roughly double in today’s money by retirement. Under more favourable conditions, the pot could grow significantly more. But worth noting that markets can also fall – in a sustained downturn, the pot could be worth less than the total amount contributed. The government’s £12,960 tax relief contribution is in there working just as hard as every pound you paid in, whatever the market does.
A note from Chest: We do not currently offer Junior SIPPs, though we are exploring them. Regardless, this information is too important to keep to ourselves.
Important: These projections are for illustrative purposes only and are not a guarantee or prediction of future returns. They are based on hypothetical growth rates under different market conditions to provide a balanced view of possible outcomes. The value of investments can go down as well as up. The growth rates shown are real rates after inflation, with a 0.5% annual fee deducted – actual charges will vary by provider and fund. Real-world returns will depend on investment performance, the specific funds chosen, and future market conditions. Past performance is not a reliable indicator of future results. Such forecasts are not a reliable indicator of future performance. Tax rules, annual allowances, and pension access ages are subject to change. Tax treatment is subject to personal circumstances and may change in the future. Pension savings are locked until retirement age – currently 55, rising to 57 in 2028 – and cannot be accessed earlier under normal circumstances. Capital is at risk when investing. You should consider seeking independent financial advice before opening a Junior SIPP.
The Bottom Line
Having a baby is about being intentional. Whether you’re still counting down the weeks or you’re already in the thick of midnight feeds, you’re thinking about the future: what kind of life you want to build for this tiny human, and for yourselves as a family.
While you’re nesting, painting the nursery, and stockpiling nappies, you could also be setting up something that grows alongside your child. A pension for the stay-at-home parent, or even a Junior SIPP for the baby themselves, turns this season of preparation into lasting financial security.
That is where Chest comes in. A pension that turns your new life spending into future security is one of the smartest gifts you can give your growing family, and yourself.
Learn more about how Chest can help you save for tomorrow, even as you spend for today. Your future (and your future tiny human) will thank you.
Sources:
References are cited inline throughout the article. Full source URLs:
[1] Royal London – Parental leave and pensions: https://adviser.royallondon.com/technical-central/pensions/general/parental-leave-and-pensions/
[2] Highland Pension Fund – Buying lost pension: https://highlandpensionfund.org/resources/buying-lost-pension/
[3] Shropshire County Pension Fund – APCs and SCAPCs: https://www.shropshirecountypensionfund.co.uk/contributing-member/what-will-i-pay/can-i-pay-more/apcs-and-scapcs
[4] Royal London – Pension planning and childcare benefits: https://adviser.royallondon.com/technical-central/pensions/case-studies/turning-a-pay-rise-into-a-financial-win-how-pension-planning-can-help-individuals-keep-their-childcare-benefits/
[5] HMRC Pensions Tax Manual – PTM044100, Tax relief for non-earners: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100
[6] DWP – Gender pensions gap in private pensions 2020-2022: https://www.gov.uk/government/statistics/gender-pensions-gap-in-private-pensions-2020-to-2022/gender-pensions-gap-in-private-pensions-2020-to-2022
[7] GOV.UK – Income Tax rates and Personal Allowances: https://www.gov.uk/income-tax-rates
[8] HMRC Pensions Tax Manual – PTM055100, Annual allowance and carry forward: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm055100
[9] GOV.UK – State Pension age changes: https://www.gov.uk/state-pension-age
Important information: This article has been prepared by Chest for general information and educational purposes only. It does not constitute financial, tax, or legal advice and should not be relied upon as such. The information is based on our understanding of current UK legislation and HMRC rules as of February 2026, which are subject to change. The value of pension investments can go down as well as up and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change. Eligibility for tax relief, childcare support, and other benefits described will vary depending on your personal situation.