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Roses are Red, Violets are Blue, Working or Grandkids? What will you do?

What have Pierce Brosnan, Whoopi Goldberg, Donny Osmond, Kiefer Sutherland, Sarah Palin, Jim Carrey, Charlie Sheen and Priscilla Presley all got in common?  They all became grandparents before the age of 50.  They are not alone.  Many new parents have parents who are still of working age.  And as the goalposts for the state pension age keep moving it’s likely that there will be more and more grandparents in employment.

Valentine’s Day is already upon us, so what is the Government doing to “share the love” and help grandparents be part of their grandchildren’s first few months?

In the March 2016 budget, George Osborne announced that the Government would extend shared parental leave to working grandparents by 2018.  Some employers, such as Santander, have already introduced this as an employee benefit, allowing all employees who are new parents to share their parental leave with their parents as well as their partners. When this becomes law, employers and trustees will need to make sure that their pensions policies and plan rules are not at odds with the new requirements.

How will extending shared parental leave to grandparents work in a pensions context?  The Government’s consultation paper on this is still awaited, but it is likely that it will operate as an extension of the current form of shared parental leave.  Under the existing rules, during any period of paid shared parental leave the employee pays pension contributions calculated on the amount of pay actually received, whilst the employer calculates its pension contributions by reference to the employee’s former unreduced salary.  Under the existing rules for shared parental leave, there is no requirement for either the employer or employee to make pension contributions during a period of unpaid shared parental leave.

It’s not clear how popular grandparent leave will be – to date, there hasn’t been much take up of shared parental leave.  This may be because many employers provide the statutory minimum in respect of shared parental leave whilst continuing to offer enhanced maternity terms, meaning that the latter proves to be a more financially beneficial option for new families.

Time will tell whether the extension of shared parental leave to grandparents will result in a greater take up.  In the meantime, if music be the food of love, play on…

© Copyright 2017 Squire Patton Boggs (US) LLP

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About this Author

Catherine McKenna, Pension Attorney, Squire Patton Boggs Law Firm
Partner

Catherine McKenna leads our Pensions practice group . Her particular expertise is in providing advice to companies and trustees on all aspects of pensions law, including advice on managing pension risk and developing creative solutions to assist with funding shortfalls. She deals with pension plan restructuring, governance, and the pensions issues arising on corporate activity. Catherine also specialises in Pension Regulator applications and intervention, pension disputes and negotiating all types of pension fund investment management, custody and other third party...

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