How can employers help boost the retirement savings of unpaid carers?

The UK is experiencing a growing crisis when it comes to caring for those who need extra support, whether that is older people or those with disabilities or serious illness.

According to Carers Week I care research into unpaid carer identification, published in June 2023, around 10 million people in the UK have caring responsibilities and around one in five (19%) in paid employment currently provide unpaid care and support. Many are forced to reduce hours or move jobs as they attempt to cope with family situations, and some end up leaving the workforce entirely.

Working carers’ pensions

This has obvious implications for the income of large numbers of people but one aspect that is often overlooked is the longer-term impact on people’s pension provisions and retirement options. The Underpensioned report, published by Now:Pensions and the Pensions Policy Institute in November 2020, suggests that 81% of carers are not automatically enrolled into a workplace pension because they earn less than £10,000 a year.

Lizzy Holliday, director of public affairs and policy at Now:Pensions, says: “Our ongoing research with the Pensions Policy Institute on the UK’s most under-pensioned groups reveals that this under-the-radar workforce not only earn less than the average working population, primarily because they don’t have time for paid employment, but their ability to save for their retirement is also severely limited.

“Approximately half are in work, compared with three-quarters of the rest of the population, and they earn between 16% and 20% less than the UK average, depending on their gender and work patterns. Consequently, most carers will reach retirement age with private pension wealth of £29,800; just 37% of the UK average of £80,690.”

 Employer support

There are various ways in which employers can support those with caring responsibilities, both in terms of pensions and wider financial health. Charles Cotton, senior reward adviser at the Chartered Institute of Personnel and Development (CIPD), suggests employers could pay workplace pension contributions to those having to reduce their hours as if they were full-time for a set period.

They can also ensure they are aware of government support. “Employees who care for someone for at least 20-hours a week could be eligible to claim carer’s credit if they meet certain criteria,” adds Cotton. “Claiming this each year will help workers fill gaps in their national insurance record so that their state pension is not affected by working part-time.”

Employers can also provide practical support to carers. Stephanie Leung set up KareHero in 2022, having been a carer since the age of 14, during which time she had to leave three jobs. As well as other assistance, the organisation helps employees who find themselves in caring situations establish what funding they may be eligible for. “There is funding that is not means-tested,” she says. “Around £7 billion goes unclaimed each year.”

Long-term approach 

In the longer-term, employers can help inform carers around how best to tackle their approach to retirement. Jason Cannon, benefits consulting director at Gallagher, says: “This might include offering tailored financial advice workshops to help them navigate unique challenges and plan for the future.” 

This could include dedicated support for those who have had periods where they have not been able to fully contribute to pensions, says Cotton. “Employers can create a timetable over which their contributions will rise, using save-more-tomorrow schemes, and providing matching contributions,” he says.

Other policies should form part of the mix. “Enhanced leave policies, such as carers’ or emergency leave, provide a vital safety net without impacting regular holiday entitlements,” says Cannon. “Sabbaticals and career breaks can also give these employees the chance to recharge from work and caregiving responsibilities.”

Mental health support should also be offered, he adds.

Flexible working is another useful tool, because it could enable carers to meet their responsibilities without having to reduce hours or stop work. Francesca Lilley, an associate in the employment team at law firm Knights, says: “A request to reduce or vary hours, start or finish times, the days worked or place of work might make all the difference.”

Employers need to expect this issue to affect even more people in future, says James Towsend, chief executive officer (CEO) and co-founder of unpaid carers community Mobilise. “It’s estimated that an additional one million unpaid carers will emerge in the UK over the next ten years,” he says. “Teams [that] are aware of this reality can put in place plans to more easily accommodate and adjust to caring roles, if and when they come.”