LGPS Pensionable Pay Shirley Cuthbert Deputy Head of

LGPS Pensionable Pay Shirley Cuthbert Deputy Head of Peninsula Pensions

Agenda • • • What is Pensionable Pay? Basis of Final Pay calculation Absences Assumed Pensionable Pay Help Available

What is pensionable pay LGPS 2013 Regulation 20 • All salary, wages, fees and other payments paid to the employee, and any benefit specified in the employees contract of employment as being pensionable. Exclusions shown in Reg 20 (2) • 3 Main difference between 2008 and 2014 definitions: - non-contractual overtime becomes pensionable; - a payment in consideration of loss of future pensionable payments or benefits is now not pensionable - any actual pay paid by Scheme employer to a reservist during Reserve Forces Service Leave is not pensionable;

Exercise 1 – What is pensionable? Salary Fees Pay in lieu of notice Weekend/Shift allowance Lump Sum payment to remove contractual overtime First Aid Allowance

Pensionable Pay Pre & Post 1/4/2014 Leaver with pre & post 1/4/2014 membership: Employers will need to hold 2 different pensionable pay figures for employees with pre & post 2014 membership: Actual Pensionable Pay for CARE Pension (April to March/DOL) (2014 pensionable pay definition) PLUS Pensionable Remuneration for full 365 days prior to date of leaving (2008 pensionable pay definition) HMRC rules state need to keep records for 6 years plus current but pay details may be needed for 13 years plus current: • Best of last 3 years still required • Reduction in Pay Protections: • pay reduced in previous 10 years (best 3 year average in last 13) • Certificate of Material Change effective (drop 1/4/98 to 31/3/2008) • Still need to confirm any payments after leaving 5

Pensionable Pay Pre 1/4/2014 Pensionable Pay for the last 365 days of membership (2008 definition) – not salary point Uprate the actual pay earned for the period to full-time equivalent (FTE) pensionable pay based on the hours worked: Actual pensionable pay x FTE hours / Hours per week (or % of hours) = FTE Pensionable Pay for that period – not FTE salary For example: £ 12000. 00 x 37. 00 / 18. 50 = £ 24000. 00 £ 12000. 00 / 50. 00% = £ 24000. 00 PLEASE NOTE: You will need to split the remuneration figures for any changes in hours or pay so please uprate the part-time pay according to the hours for each period (spreadsheet to help with calculations available on request) 6

Exercise 2 – Calculate Final Pensionable Pay Harry Potter Left 12/01/2018 Joined LGPS 01/01/2010 Works 18. 5/37 hpw Salary details: 1. 4. 2016 - £ 7465. 50 1. 4. 2017 - £ 8000. 00 From TO 13/01/17 31/03/17 x 78/365 x 37/18. 5 01/04/17 12/01/18 x 287/365 x 37/18. 5 Total Actual Pay Days Part time hours FT Equiv Pay

How to calculate full-time equivalent Pensionable Pay (Pre 1/4/2014) for a Term-Time Employee Devon Fund Employers: Term-time employees have their hours adjusted to equate to a full year and the full-time equivalent pay is worked out by uprating the actual pay by the adjusted hours Divide the actual hours by the whole-time equivalent hours for the week then multiply by the week’s factor: 25. 00 ÷ 37. 00 x 44. 50 ÷ 52. 143 x 100 = 57. 6637% (percentage of hours to be stated in the Current Hours section of the Leavers form) Use the percentage of hours to up-rate part-time pensionable pay to the full-time equivalent pensionable pay: Somerset Fund Employers Historically, service for term-time employees within the Somerset Fund has not been adjusted and hours have been recorded as the hours they work. The full-time equivalent pensionable pay is then reduced to take account of the number of weeks worked per year. Please provide: • The hours they work per week as a percentage • The full-time equivalent pensionable pay reduced to take account of the number of weeks worked per year. For example: Actual basic annual salary (adjusted to take into account the number of weeks worked each year), plus any additional pensionable recurring pay, ) multiplied by the basic hours worked (37), divided by actual hours worked each week. Adjusted pay = £ 10, 000 x 37. 00 ÷ 25. 00 = £ 14800 FTE Pensionable Pay

Pensionable Pay Post 1/4/2014 • Cumulative Pensionable Pay (CPP) paid April to March/DOL • No longer required to uprate pensionable pay to full-time equivalent • Include any payment after leaving (confirm additional amount and date of payment) • Include Assumed Pensionable Pay (APP) • Do not include pay which relates to pre April 2014 • Split for 50/50 Scheme (CPP 1 = main scheme, CPP 2 = 50/50 scheme) 10

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Absences https: //www. peninsulapensions. org. uk/wpcontent/uploads/2017/02/Pension-Scheme-Contributions. pdf Includes types of absence and who pays contributions

Absences Additional Pension Contract (APC) and Shared Cost APC (SCAPC) • When a member has an unpaid break, no pay is received so they have ‘lost’ pension • Member can elect to buy the ‘lost’ pension via paying Additional Pension Contributions (APC). • On-line calculation for members on our website - forms for member to send to employer and Peninsula Pensions. • Shared Cost APC (SCAPC) - If member opts to pay for period of unpaid leave/child related leave within 30 days returning to work (*or longer period as employer allows), then employer must pay 2/3 rd of Additional Pension Contribution (APC) costs with employee paying the remaining 1/3 rd. *Employer can extend 30 day period and can choose date member needs to elect by • Employer has to inform member of Shared Cost APC option. Additional Benefits Team to help and full guidance on our website

Pensionable Pay – Salary Sacrifice HMRC approved salary sacrifice arrangements: Employee’s contractual pay is reduced by an agreed amount (supported by variation to their contract) in return for a tax assessable benefit in kind from which tax liability is removed Salary Sacrifice Scheme which fits above remains pensionable under the 2014 scheme. • Sold leave - Holiday entitlement is sold in return for additional pay. Extra pay = payment in consideration of loss of holidays = not pensionable • Bought leave – employee forgoes pay in return for additional days holiday = authorised unpaid leave of absence = APC’s More info within LGPC Circular 244 – link is on our website 14

Assumed Pensionable Pay (APP) • Assumed Pensionable Pay is used for reduced or no pay periods (sickness, injury, statutory child related leave (CRL) or reserve forces leave) • Calculated at an annual rate based on the pensionable pay received in the 3 complete months (or 12 weeks if weekly paid) before the start of the applicable period: For example: Month 1 = £ 1400 Month 2 = £ 1500 (inc £ 100 overtime) Month 3 = £ 1400 Annual rate of APP = (£ 1400 + £ 1500 + £ 1400) / 3 x 12) = £ 17200 • • Annual figure is then apportioned to the applicable period - replaces any pay received Ignore any lump sum payments made in the previous 3 months as already included in pensionable pay Regular lump sum payments can be included at employer’s discretion APP calculations need to be done each month (for annual pensionable pay) • • More guidance within LGA Payroll Guide and on our website 15

Exercise 3 – APP Calculation Date commenced nil sick pay: 16 th Sept 2017 Returned to work: 1 st Nov 2017 Pay information: June 2017 July 2017 Aug 2017 Sept 2017 Answer: APP for Sept = APP for Oct = £ 1, 000 £ 1, 500 - includes £ 400 bonus and £ 100 overtime £ 1, 100 £ 500

Procedures and Forms One member per email please! It is advisable that when emailing a completed form to that you use a secure ‘gcsx’ email address. If a secure email address is not available, please print off the completed form, sign it and post it to us

Online https: //www. peninsulapensions. org. uk/lgps-employer Email Emma. Davies@devon. gov. uk Phone – 01392 383000

Disclaimer • The information contained in these slides are the authors interpretation of the current regulations. • The information is subject to change due to various factors including, but not limited to, changes to rules and regulations introduced by the Government Actuary's Department, HMRC and/or the CLG. Changes can happen at short notice and may be implemented prior to the Council issuing any future revised documentation. • Readers should take their own legal / financial advice on the interpretation of any particular piece of legislation. • No responsibility whatsoever will be assumed by Peninsula Pensions for any direct or consequential loss, financial or otherwise, damage or inconvenience, or any other obligation or liability incurred by readers relying on information contained in these slides.