UK Pensions – Carer’s leave: implications for pension schemes
From 6 April 2024, employees will be entitled to a new type of unpaid leave known as carer’s leave. Pension scheme trustees and employers should be aware that employees are likely to be entitled to continued benefit accrual during any period of carer’s leave.
We explain below what this means in practice.
Background
The Carer’s Leave Act 2023 creates a new unpaid leave entitlement of one week a year for employees to provide or arrange care for a dependant with a long-term care need. The new right comes into effect on 6 April 2024.
Although the position is not without doubt, our view is that employees are entitled under the legislation to continued benefit accrual under their pension scheme during any period of carer’s leave.
What does this mean in practice?
As the entitlement to carer’s leave is limited to one week a year, continued benefit accrual is unlikely to have significant cost implications and may well be a more straightforward approach in practice.
However, for other types of unpaid family leave (such as unpaid additional maternity, paternity or adoption leave), most pension schemes take the approach that continued benefit accrual is not required. As a result, scheme rules usually provide that members are treated as having left service during any such period of leave, although there may be a discretion for the employer and trustees to agree to treat a member as still in service.
Because unpaid carer’s leave needs to be treated differently to other types of unpaid family leave, employers and trustees should consider either:
- amending their scheme rules to provide for continued benefit accrual during periods of carer’s leave; or
- exercising their discretion to treat members on carer’s leave as still in service (if they already have the discretion to do so under the scheme rules) until a suitable opportunity arises to amend the rules.
If you would like to discuss the best approach for your scheme, please speak to your usual Linklaters contact.