Maternity & Paternity Leave: Surviving the Income Drop

01 The two-stage income cliff

Statutory Maternity Pay runs for 39 weeks in two stages, and the second stage is where household budgets break.

For the first six weeks you receive 90% of your average weekly earnings, which is close to normal pay. Then for the next 33 weeks it drops to the lower of a flat weekly rate — £187.18 in 2025-26 — or 90% of your earnings. For anyone earning above roughly £10,800 a year, that means the flat rate, whatever your salary was.

The flat rate is what makes this so uneven. Someone on £25,000 loses about 60% of their pay at week seven; someone on £60,000 loses about 84% of theirs. The absolute drop is far larger for higher earners, and the fixed household costs — mortgage, nursery for an older child, car — do not scale down with it.

The remaining 13 weeks of the 52-week entitlement are unpaid entirely, which surprises people who have budgeted for "a year of maternity pay". The honest planning figure is 39 weeks of declining pay followed by 13 weeks of none.

Paternity pay is shorter and blunter: two weeks, at the same flat rate or 90% of earnings if lower. For most households that is a fortnight at a fraction of normal income, and it is why Shared Parental Leave matters more than its take-up rate suggests.

Source: GOV.UK — Maternity pay rates

02 Check your employer's enhanced pay first

Before you plan around the statutory minimum, find out what your employer actually pays, because many offer enhanced maternity pay well above it — full pay for three or six months, or half pay for a stretch, is common in larger organisations. There's no legal duty to pay more than the statutory amounts, so it varies enormously, and it's set out in your contract or staff handbook rather than the law. This single fact can change your shortfall by thousands of pounds, so it's the first number to pin down. Watch for conditions, too: enhanced pay sometimes comes with a requirement to return to work for a minimum period or repay it.

03 Sizing your shortfall

The tool below turns your salary into the number you actually need: the total Statutory Maternity Pay over the year and the income shortfall against normal pay. Use it as the baseline to budget against — then adjust down if your employer offers enhanced pay.

Source: GOV.UK — Maternity pay and leave

04 Your pension keeps building — mostly

Here is the genuinely good news, and it gets lost underneath the income worry.

During paid maternity leave — the 39 SMP weeks — your employer must continue paying their pension contributions based on your normal full salary, not your reduced pay. The valuable employer slice carries on in full while your income has dropped substantially, which is the opposite of what most people assume.

Your own contribution, by contrast, is based on what you actually receive. So during the flat-rate weeks you contribute a percentage of £187.18 while your employer contributes a percentage of your full salary — an unusually favourable ratio, and one of the few times the pension system quietly works in your favour.

The exception is the final 13 unpaid weeks. With no pay there is no pay to contribute from, and employer contributions generally stop too, so those weeks are a genuine gap in both contributions and, potentially, National Insurance credits.

Two things follow. Do not opt out of the pension to improve cash flow during leave, because doing so forfeits the employer contribution calculated on your full salary — which is the most valuable it will ever be relative to what you are putting in. And if you can afford to, consider making up the unpaid-period contributions on return, while the gap is small and recent.

Source: MoneyHelper — Pensions for parents

05 The other levers: SPL, Maternity Allowance, credits

Maternity leave is not the only option, and the alternatives can reshape the household finances considerably.

Shared Parental Leave lets parents split up to 50 weeks of leave and 37 weeks of statutory pay between them. Because statutory pay is a flat rate regardless of salary, the household is usually better off when the lower earner takes the longer share of leave — the flat rate replaces a larger proportion of their normal pay, and the higher earner returns to full salary sooner. Take-up remains low, largely because the rules are complex rather than because the arrangement is bad.

Maternity Allowance covers people who do not qualify for Statutory Maternity Pay — the self-employed, recent job changers, and anyone whose earnings or employment history falls short of the SMP tests. It pays a similar flat rate for up to 39 weeks and is claimed from the DWP rather than an employer.

National Insurance credits are the third lever and the easiest to lose — and where a year is already missing, voluntary contributions can fill it. Statutory maternity pay periods and Child Benefit claims for a child under 12 both generate credits that count toward the State Pension, which matters because a year missed is a year of entitlement gone unless voluntary contributions are paid later.

Worth checking all three before assuming the standard arrangement is the right one. For a household where the mother earns considerably more than her partner, Shared Parental Leave weighted toward the partner is frequently several thousand pounds better over the year.

Source: GOV.UK — Shared Parental Leave and Pay

06 Planning the year before the baby arrives

The whole problem is solvable if you start before the income drops rather than after, and three moves do most of the work.

First, build a maternity fund in the months before the due date, sized to the shortfall rather than to a round number. A few hundred pounds a month across a pregnancy covers a meaningful share of the flat-rate weeks, and it is far easier to save from two incomes than to borrow on one.

Second, map the monthly cash flow across the whole leave, not just the average. The pinch point is not the start; it is weeks seven onward, and then the unpaid final quarter. Knowing which specific months are short lets you plan around them instead of discovering them.

Third, time anything flexible around the leave. Salary sacrifice reduces the earnings SMP is calculated from, so pausing it before the reference period protects the statutory pay. Large discretionary spending is better before the drop or well after it.

The Child Benefit decision deserves its own note because it is quietly permanent in effect. Higher-earning households that decline Child Benefit to avoid the High Income Child Benefit Charge can lose the National Insurance credits that protect the State Pension of the parent on leave. Claim it and tick the box to receive £0 in payments: the credits are preserved, no charge arises, and payments can be restarted later. Declining outright is the version that costs qualifying years.

07 What the drop looks like at three salaries

The flat rate is what makes maternity pay so uneven — the higher the salary, the larger the fall.

Every row lands on the same £187.18, which is the point. Statutory maternity pay is a flat floor rather than a proportion of income, so the planning problem grows with salary — and the household with the largest mortgage typically faces the steepest fall.

Source: GOV.UK — Maternity pay and leave