The new system of shared parental leave came into force on 1 December 2014 and will change the way that employees can take time off following birth or adoption. Shared parental leave will be treated for pension purposes in the same way as maternity leave, with pension provision during paid shared parental leave being based on the pay the employee would be likely to have received if working normally. The new regime will apply to qualifying employees whose baby is due, or who are adopting a child, on or after 5 April 2015. Employers are now starting to consider their approach to this and how it fits with existing family leave policies.

Under the new regime, as now, mothers will be able to take up to 52 weeks' maternity leave, including 39 weeks' statutory maternity pay, and fathers will be able to take up to 2 weeks' ordinary paternity leave and ordinary paternity pay. However, the additional paternity leave system will be abolished and replaced with the new shared parental leave scheme.

Under the shared parental leave scheme, mothers will be able to convert up to 50 weeks of their maternity leave (and 37 weeks of their statutory maternity pay) into shared parental leave and pay and effectively share it with their partner.

The shared parental leave system will give parents significant flexibility – for example, they can apply to take the time off together, or separately, and as one continuous period, or in up to 3 discontinuous blocks of leave (with each block of leave having a minimum duration of one week). There is a complex notification process.

From a pensions perspective, under the draft legislation the key point to note is that for any period of paid shared parental leave, continuing membership and accrual of rights under a pension arrangement must be in accordance with the "normal employment requirement". This means that:

  • or the purposes of accrual of benefits, the individual must be treated as if they were working normally and receiving the remuneration likely to be paid for doing so;
  • however, for contribution purposes, the member must only be required to pay contributions based on the amount of contractual remuneration or statutory shared parental pay actually paid to them for the relevant period.

Employers will wish to factor the pensions requirements into their policies on shared parental leave and shared parental pay and consider how this fits with existing family leave policies in order to ensure that they are fully compliant and understand the cost implications.