The baby's on the way. Now for some financial family planning
Mothers-to-be should get into the savings habit to prepare for a drop in income in the early months of their child's life, says Chris Menon
Sunday 03 August 2008
Despite much improvement over the past five years, UK mothers still fare badly in terms of their level of maternity pay and its duration compared with many of their counterparts in Scandinavia and elsewhere in Europe, according to a new study by the consultancy firm Mercer.
In the UK, the statutory maternity pay is 90 per cent of a woman's average weekly earnings for the first six weeks, then up to £117.18 for the remaining 33 weeks. The last 13 weeks, if taken, are unpaid.
Whereas in Norway, for example, maternity benefit is equal to full salary for 44 weeks or 80 per cent of salary for 54 weeks. In Sweden, parental benefit is payable for a total of 390 days at 80 per cent of full salary (up to a ceiling of approximately £30,500) and a further 90 days at approximately £15 a day.
Niklaus Kobel, an employment specialist with Mercer, told The Independent on Sunday: "UK maternity pay has improved greatly over the past five years, with statutory maternity pay extended to 39 weeks in 2007. However, from a benefit level perspective, there is still a long way to go to reach the top levels of EU provision."
Natasha Freedman is a consultant with Punter Southall Financial Management, an independent financial adviser. She is well aware of the financial pressures that motherhood brings. "The often significant drop in income while on maternity leave can be crippling and the inability to maintain your standard of living is perhaps one of the main reasons why women return to work sooner [than they may want to]. It is a very real problem for households that require two incomes to stay afloat, especially in today's economic climate."
So what should expectant mothers be doing to cope with the financial challenges they will face once the child arrives?
Ms Freedman advises: "In the short term, make savings a habit and budget. Practise living on less and put money aside during your pregnancy to supplement maternity pay while you're off work.
"Make sure you apply for any child tax credits you may be entitled to. Additionally, child care vouchers, available via your employer, are offered to working parents as an effective way to cover the cost of childcare. The scheme allows for parents to substitute part of their salary for vouchers which are exempt from both national insurance and tax up to £55 per week.
"In the long term, put money aside into a tax-free individual savings account (ISA) to fund school fees and childcare costs. Update your will and ensure that you have sufficient life cover and long-term illness or disability cover to protect your family should the worst happen.
"Your baby is also entitled to a £250 child trust fund voucher, which can be invested for long-term growth.
"In addition, try to maintain your own pension contributions during your maternity leave. Compound growth on even small contributions can make a big difference to your eventual retirement pot," she says.
Malcolm Cuthbert is managing director of financial planning at Killik & Co, an independent financial adviser and stockbroker. He recommends that protection policies should be checked so you can be confident you would be covered against all eventualities. In that way, even if your partner dies or falls seriously ill, you should be able to cope financially. To do this, however, requires a good understanding of what level of maternity benefit you can expect to receive and the likely bills you'll face before you return to work.
"It is also important to make a will. It might seem morbid but if you haven't made one already then you certainly should now," Mr Cuthbert adds.
For longer-term security, he advises: "Consider how to invest the child trust fund voucher, take out a stakeholder pension for the new child when they are born – and ask a wealthy friend or relative to be the baby's godfather or godmother!"
Beyond that, it is clearly vital to increase your level of savings and reduce frivolous expenditure prior to having a baby. This will entail careful budgeting and prioritisation. What you should not do, experts emphasise, is economise by abandoning or reducing your insurance cover.
What's more, it's crucial to have a savings cushion in place. Experts recommend that, ideally, people should have at least three to six months' income on deposit. Fortunately, one of the few good points of the ongoing credit crunch is that some banks, desperate for additional deposits, are paying bumper rates to attract new savers.
The financial information service Moneyfacts highlights a number of accounts paying rates above 6 per cent. For example, Anglo Irish Bank, West Bromwich building society and Heritable Bank all currently pay well above this level while still offering instant access to your savings.
Meanwhile, people looking to take advantage of their £3,600 annual tax-free cash ISA allowance can scoop 6.1 per cent from Icesave, 6.08 per cent from Barclays or 6.05 per cent from Egg, again all on an instant-access basis.
Some people may be tempted to break into their rainy-day savings to help with the costs of having a baby. However, Jasmine Birtles from the financial advice website Moneymagpie. com cautions: "They should look to rebuild them as soon as possible once they go back to work."
Of course, as every working mother knows, the problems don't simply disappear when they return to work. The National Childbirth Trust (NCT) is a leading charity for parents and has just launched a national survey to look at the experiences of women who have returned to work following maternity leave.
According to its figures, women make up 46 per cent of the labour force, and by 2010 one in five UK workers will be mothers. Approximately 400,000 women take maternity leave each year.
Within nine months, 65 per cent of women have returned to work, with 21 per cent moving to a different employer. After 17 months, 80 per cent of women are back at work. In the UK, 30,000 leave their jobs each year due to discrimination against pregnant women.
Liz Morris, a researcher at the NCT, says: "The demands of caring for a child can be radically different to the demands of the workplace. Women often face realistic anxieties about juggling their new family and their work commitments.
"Research shows companies who adopt a positive approach to a woman's return to work achieve a smooth transition and a happier and more productive outcome for all those concerned, including work colleagues who also have to readjust," she concludes.
Kate Alewood, 28, a nurse from Darlington, Co Durham, had her baby, George, three months ago and is currently on six months' maternity leave until September.
Kate discovered she was pregnant after only a month. She knew her income during maternity leave would be much less than her normal take-home pay, which was boosted by overtime and unsociable hours, so she immediately began putting money aside. There would also be lots of things to buy for her new baby.
"I already had a mortgage with ING Direct and the pregnancy spurred me on to open a savings account using a direct debit," she explains. "I saved about £150 a month, plus any extras from overtime when I could afford it."
She found the savings especially useful during the first couple of months after George's birth, when her income dropped significantly while her outgoings increased. Her income is now £1,000 a month as compared to £1,500 when she was working.
"If I could afford it I would probably stay off longer. However, I do need something more taxing and am looking forward to eventually returning to work," she adds.
- 1 Cyclist who knocked down three-year-old girl says his life has been 'destroyed'
- 2 A politically correct lefty goes to see Top Gear live – you'll probably believe what happened next
- 3 Young Preston fan has play-off hero Jermaine Beckford's shirt stolen from him at Wembley - which then appears for sale on Gumtree
- 4 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
A nation of inequality: How the UK is failing to feed its most vulnerable people
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof