- Slides: 20
An overview of Pensionable Pay Kate Escudier Employer Liaison Officer
Scheme overview • Account based scheme with 1/49 th accrual and CPI revaluation – every scheme year a deposit equal to a 49 th of a member’s pay in that year is added to their pension account – Can exchange part of pension for tax free lump sum • 50/50 section - pay half, get half • Normal Pension age linked to State Pension Age (SPA) (minimum age 65) • Voluntary retirement from age 55 (subject to reduction) without requiring employer consent • Benefits on pre 1 April 2014 membership still based on Final Pay
Common Pay Definitions • Pensionable Pay – members normal pay, plus any shift allowances, bonuses, overtime and statutory sick pay • Cumulative Pensionable Pay – all pensionable pay received in the Scheme Year for the employment, including any Assumed Pensionable Pay • Assumed Pensionable Pay – pay you calculate when a member is on reduced/nil pay due to sickness/authorised unpaid leave • Final Pensionable Pay – final pay is normally the pay in respect of a member’s final year of scheme membership on which they paid contributions, or one of the 2 previous years if this is higher
Pensionable Pay • An employees pensionable pay is the total of: – all the salary, wages, fees and other payments paid to the employee and – any benefit specified in the employee’s contract of employment as being a pensionable emolument – However it does not include certain elements e. g. Pay in lieu of notice • Full list of exclusions is available in the Payroll Guide available from http: //www. lgpsregs. org/ • Please see CPP handout for comprehensive list of exclusions for reference • Note: - non-contractual overtime (incl. excess hours) is pensionable - any paid by employer whilst on reserve forces service leave is not pensionable - any paid by employer as consideration for loss of future pensionable pay is not pensionable
Cumulative Pensionable Pay • Benefits are built up based on Pensionable Pay received in each Scheme Year (1 April to 31 March) • Cumulative Pensionable Pay = Pensionable Pay PLUS any Assumed Pensionable Pay (APP) • Cumulative Pensionable Pay is required separately per Section and per employment • Cumulative Pensionable Pay to be reported within three months of that scheme year end i. e. , on your Year End Return
CPP Example Mr Burgundy works part time as a TA in a school. • His full time equivalent salary from April 2016 is £ 16, 660 • His part time salaries are: April 2016: £ 8675 (52% hours) • He receives a non consolidated bonus of £ 200 in January 2017 • In July 2016 he moves from the main section of the Scheme to the 50/50 section and opts to rejoin the main section from October 2016 • He retires from his TA post on 31 st March 2017 Month Main Section 50/50 Section April ’ 16 722. 92 May ’ 16 722. 92 June ’ 16 722. 92 July ’ 16 ---- 722. 92 August ’ 16 ---- 722. 92 September ’ 16 ---- 722. 92 October ’ 16 722. 92 November ’ 16 722. 92 December ’ 16 722. 92 January ’ 17 722. 92 + 200 (non consol. Bonus) February ’ 17 722. 92 March ‘ 17 722. 92 Total CPP 6706. 28 2, 168. 76
Assumed Pensionable Pay • Assumed Pensionable Pay (APP) replaces the actual Pensionable Pay received during: – periods of sickness on reduced or nil pay – reduced or nil pay during relevant child related leave (ordinary and paid additional) – reserve forces service leave • Based on last complete 3 months or 12 weeks Pensionable Pay including any APP in that period (but excluding all lump sums)
Assumed Pensionable Pay • Exception: actual pay is higher such as on KIT day – use pensionable pay, not assumed pensionable pay • Following KIT/Stringer Day APP is not recalculated and continues to be based on the three months/12 weeks prior to the start of the reduced/unpaid pay period • If unpaid sick leave crosses two 31 st March, APP is increased / decreased by Treasury Order revaluation (CPI) • APP drops into Cumulative Pensionable Pay • DO NOT drop both Pensionable Pay and APP into cumulative for the same day • APP to be calculated for Tier 1 and Tier 2 ill health retirements and death in service, as well as Leaver certificates and Year End.
Assumed Pensionable Pay (APP) Example • • Mr Burgundy goes on a reduced pay due through sickness on the 13 th April 2016 to 31 st May 2016. The APP is calculated using the average actual pay received through January to March 2016 (the 3 months prior to reduced pay) Month Amount Received (£) January 1200 February 1400 March 1400 Total 4000 The APP is therefore £ 4000 / 3 mths = £ 1, 333. 33 per month or x by 12 mths is £ 16, 000 annually • The APP is for the period 13/04/16 to 31/05/16 using the annual salary is: (£ 16, 000/12 mths)/30 days in April x 18 days = 800 (£ 16, 000/12 mths)/31 days in May x 30 days = 1290 • Total APP for the period of absence £ 1290 + £ 800 = £ 2, 090.
Final Pay • Final Pay is the pay which is used to calculate pre 1 April 2014 benefits • Pre 1 April 2014 definition of Pensionable pay (e. g. not including non -contractual overtime) received in the last 365 days before a member leaves the scheme • If the member is part time, this will be based on their full time equivalent salary • If pay in the 2 preceding years is higher than current year, that higher year should be used. Enter both using section 4 of the leaver cert in case Protections are applicable.
Final Pay Example remember Mr Burgundy? Mr Burgundy works part time as a TA in a school. • His full time equivalent salary from April 2016 is £ 16, 600, increasing to £ 17, 100 from September 2016 • His part time salaries are: April 2016: £ 8, 675, September 2016: £ 8, 880 • He receives a non consolidated bonus of £ 200 in January 2017 • He retires from his TA post on 31 st March 2017 Date From Date to FTE Pay (£) 01/04/2016 31/08/2016 16, 600 01/09/2016 31/03/2017 17, 100 To calculate his final pay – 01/04/2016 – 31/08/2016 = 16, 600/12 x 5 = £ 6, 916. 67 01/09/2016 – 31/03/2017 = 17, 100/12 x 7 = £ 9, 975 £ 6, 916. 67+£ 9, 975 + 200 (bonus) = £ 17, 091. 67 Final Pay
What do I do when a member is on child related leave? • In the Regs child related leave means: – Ordinary adoption leave; – Ordinary maternity leave; – Additional maternity or adoption leave during which the member receives some pensionable pay; – Paternity leave; or – Shared parental leave during which the member receives some pensionable pay • It does not include any additional unpaid leave that can be taken at the end of child related leave • When a member is on child related leave then you will calculate and add APP, not pensionable pay, to any CPP (unless pensionable pay is higher than APP e. g. a kit day)
What do I do when a member is on child related leave? • You will pay pension contributions on APP, whilst the member pays contributions only on the pay they receive • Additional unpaid parental leave and unpaid shared parental leave is treated the same as unpaid leave: – No contributions are paid by either party initially – The member can then elect to pay an Additional Pension Contribution (APC) to cover the ‘lost pension’ – If elects within 30 days you will pay 2/3 rds of the APC, the member 1/3 rd – To work out the APC amount you will need to enter the pensionable pay lost on the APC calculator – this will be based on the APP you calculated when they were on ordinary or additional paid leave
What do I do when a member is on sick leave? • If a member is reduced or nil pay due to sickness/injury then you would calculate APP for that period • You will pay pension contributions on APP, whilst the member pays contributions only on the pay they receive • There is no need for the member to pay an Additional Pension Contribution as no pension is lost. A member on sick or injury leave is deemed to be a fully paid up member of the Scheme.
Sick leave, child related leave and the 50/50 section • Should a member be in the 50/50 section when they go on nil contractual pay then from the first day of the next pay period they should be moved into the main section of the scheme (provided they are still on nil pay) • Onus on member to then move back to the 50/50 section • APP and 50/50 - Monthly paid employee on half pay sick drops to nil pay in mid-August - Move to main section from 1 September - APP does not change but in August APP drops into 50/50 Section cumulative, from September APP drops into Main Section cumulative
APCs for ‘lost’ pension • APCs to buy back ‘lost’ pension (except due to strike) are at shared cost (1/3 rd employee, 2/3 rds employer) providing employee makes an election within 30 days of return to work • Online modeller, including election form, on our website • Full and Shared Cost APC (SCAPC) contracts possible, providing a maximum of £ 6, 675 additional annual pension: split on the Annual Return • APC contract can be paid for by either a one off lump sum payment or regular additional contributions • APCs only increase the member’s pension, there is no increase in survivors’ pensions
Additional Pension and the Two Sections If a member moves to the 50/50 section: • APC/SCAPC contracts to purchase ‘lost’ pension continues unless member elects not to • APC/SCAPC contracts to purchase additional pension must cease • AVC contracts continue unless the member terminates the contract • Any additional contributions being paid should not be halved when a member moves to the 50/50 section
Leavers Certificates • When do you have to issue a Leavers Certificate to LGSS Pensions? • • • For all leavers aged 55 or over that will be entitled to immediate pension benefits, it should be issued at least two weeks before the last day of pensionable employment For death in service cases, it should be issued as soon as possible BUT also inform LGSS Pensions Service by telephone or email as soon as death is known For all other leavers it should not be done no more than a week after the last day of pensionable employment. • Every Leavers Certificate that we receive into the section should have all relevant areas fully completed. We also request that a illustration of your calculation be attached to show the Pensionable Pay figure has been reached
Completing a Leavers Cert (ESS) • Make member a leaver – Member Update >Notification of Leaver • Complete & upload a leavers cert – Documentation > Generate Member Document – Select a template > EMPLEAVEN – Employer Leaver Cert D Update > submit – Click on leaver form > Save as* > use exactly the same file name – Open > complete – Documentation > Upload Word Document – Browse >find on your own drive >open > upload * You must keep the file name exactly the same