LGPS Pensionable Pay Workshop Hampshire Pension Fund Marian

LGPS Pensionable Pay Workshop Hampshire Pension Fund Marian Kerr Claire Williams

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�Definition of Pensionable Pay �CARE Pay �Cumulative Pay �Assumed Pensionable Pay �Full Time Equivalent Pay �Final Pay What we will be covering

Pensionable pay What is it Why do we need it and Why is it important for employers to get it right

Definition of pensionable pay 2014 Scheme � all salary, wages, fees and other payments � Overtime contractual and non contractual � any benefit specified in the employee’s contract of employment as being pensionable 2008 Scheme � all salary, wages, fees and other payments � Contractual overtime only � any benefit specified in the employee’s contract of employment as being pensionable What is Pensionable Pay?

2014 scheme � Not assessed for income tax � Travel, subsistence, other expenses � Pay in lieu of leave � Pay in lieu of notice � Inducement not to leave � Inducement to terminate contract � Car allowance 2008 scheme � Non contractual overtime � Not assessed for income tax � Travel, subsistence, other expenses � Pay in lieu of leave � Pay in lieu of notice � Inducement to leave � Inducement to terminate contract � Car allowance What is not pensionable

�Salary �Performance related pay �Cash equivalent of lease car �Contractual overtime �Travelling expenses �Subsistence expenses �First Aid allowance �Weekend working enhancement Pensionable or not – exercise 1 2008 and 2014 schemes

Item 2008 (regs) Yes 2014 (regs) No Yes No Salary √ √ Performance related pay √ √ Cash equivalent of lease car √ √ Contractual overtime √ √ Non contractual overtime √ √ Travelling expenses √ √ Subsistence √ √ First aid allowance √ √ Weekend working enhancement √ √ Exercise 1 – pensionable or not

�Accrual rate Ø 49 ths (main section) Ø 98 ths (50/50 section) �Revalued annually using CPI CARE Scheme

Date 01/04/2016 – 30/06/2016 Main section 50/50 section £ 6, 000 £ 10, 000 01/07/2016 - 30/11/2016 01/12/2016 - 31/03/2017 £ 8, 000 1 line on end of year annual return only £ 14, 000 £ 10, 000 Separate reporting of different schemes

What is cumulative pay Assumed Actual Pensionable + Pensionable Pay Pay = Cumulative Pay

Assumed pensionable pay When to use and how to calculate

Yes No Maybe APC Sickness (full pay) √ x Sickness (reduced pay) √ x Sickness (nil pay) √ x Authorised Unpaid leave √ √ Sc APC Ordinary parental leave (reduced pay) √ x Ordinary parental leave (nil pay) √ x Additional parental leave (reduced pay) √ x Additional parental leave (nil pay) √ √ Sc APC Strike break √ √ Type of absence – when to calculate APP When to calculate APP

Authorised unpaid leave Additional Child related leave (unpaid) Shared Cost APC

When to use � Reduced or nil pay How to calculate � Use the actual pensionable pay for the 3 months prior to the pay being reduced due to ØSickness ØOrdinary maternity, paternity or adoption leave • Reduced pay due to ØAdditional maternity, paternity or adoption leave ØReserved forces leave � Use this to calculate the annual APP � Apply to the relevant absence period Assumed Pensionable Pay

Actual pensionable pay for 3 months prior to pay being reduced Month 1 - £ 1, 400 Month 2 - £ 2, 500 (including £ 1, 000 bonus and £ 100 overtime) Month 3 - £ 1, 400 To calculate annual rate of assumed pensionable pay Add together pay for the 3 months prior to reduction £ 1, 400 + £ 1, 500 + £ 1, 400 = £ 4, 300 (include overtime but exclude one off bonus) Divide this by 3 then multiply by 12 to give annual rate of APP £ 4, 300/3 x 12 = £ 17, 200 This is the rate that should be applied to the relevant absence period How to calculate annual APP

April May June July Pay £ 2, 500 £ 2, 600 Salary £ 250 £ 260 Bonus £ 650 £ 775 £ 450 £ 399 Overtime £ 296 £ 210 £ 174 £ 305 Expenses £ 1225 £ 0 £ 0 Honorarium £ 4, 921 £ 3, 735 £ 3, 484 £ 3, 564 Total Exercise 2(a) - Calculate Annual APP

May £ 2, 500 + £ 250 + £ 775 = £ 3, 525 June £ 2, 600 + £ 260 + £ 450 = £ 3, 310 July £ 2, 600 + £ 260 + £ 399 = £ 3, 259 Pensionable Pay £ 3, 525 + £ 3, 310 + £ 3, 259 = £ 10, 094 Annual assumed pensionable pay £ 10, 094 / 3 x 12 = £ 40, 376 The annual APP should be applied to absence Annual Assumed Pensionable Pay

Exercise 2 (b) Apply to relevant absence Mr Jones had reduced pay due to sickness calculate the Assumed Pensionable Pay for the period: 01/08/2017 – 15/11/2017 (3. 5 months)

Annual APP = £ 40, 376 Pay reduced due to sickness from 1 August to 15 November 3 months 15/30 days £ 40, 376 / 12 = £ 3364. 67 = monthly APP £ 3364. 67 x 3. 5 months Assumed pensionable pay for period = £ 11, 776. 35 Apply to relevant absence

Exercise 2(C) Using the answers to 2(a) and 2(b) Calculate cumulative pay Cumulative pay = Actual Pay + Assumed Pensionable Pay

Month Actual Pay APP April £ 4, 625 May £ 3, 525 June £ 3, 310 July £ 3, 259 August September 3. 5 months reduced pay Assumed Pensionable Pay for this period £ 11, 776. 35 November 16 th to 30 th £ 1, 725 December £ 3, 450 January £ 3, 450 February £ 3, 450 March £ 3, 450 Total £ 30, 244 £ 11, 776. 35 October November 1 st to 15 th Cumulative pay = Actual Pay + Assumed Pensionable Pay £ 30, 244 + £ 11, 776. 35 = £ 42, 020. 35 Cumulative Pay

Mrs Adams Maternity Leave Full Pay 01/04/2014 – 31/07/2014 Ordinary maternity leave (reduced pay) 01/08/2014 – 31/01/2015 Additional maternity leave (reduced pay) 01/02/2015 – 28/02/2015 Additional maternity leave (unpaid) 01/03/2015 – 31/03/2015 Calculate APP for Mrs Adams who returned to work on 01/04/2015 following maternity leave Exercise – calculate cumulative pay

Month Salary April 14 £ 1875 Full Pay May 14 £ 2020 Full Pay June 14 £ 1975 Full Pay July 14 £ 1900 Full Pay August 14 Reduced Pay Ordinary Mat leave September 14 Reduced Pay Ordinary Mat leave October 14 Reduced Pay Ordinary Mat leave November 14 Reduced Pay Ordinary Mat leave December 14 Reduced Pay Ordinary Mat leave January 15 Reduced Pay Ordinary Mat leave February 15 Reduced Pay Additional Mat leave March 15 Nil Pay Additional Mat leave Calculate assumed pensionable pay

Break the calculation down as follows Calculate annual assumed pensionable pay Calculate assumed pensionable pay for period pay was reduced Calculate assumed pensionable pay for period pay was nil Exercise 3

Months Annual assumed pensionable pay = £ 23, 580 Ordinary and additional mat leave reduced pay 01/08/2014 – 28/02/2015 7 months - £ 23, 580/12 x 7 = £ 13, 755 Additional mat leave unpaid 01/03/2015 – 31/03/2015 1 months £ 23, 580/12 x 1 = £ 1, 965 Calculate assumed pensionable pay

Exercise 3(c) Using the table and the assumed pensionable pay answers calculate cumulative pay at 31 st March 2015 Cumulative Pay = actual pay + assumed pensionable pay Calculate cumulative pay

Mrs Adams – cumulative pay FTE £ 22, 500 Actual Pay Assumed Pensionable Pay 01/04/2014 – 31/07/2014 £ 7, 770 01/08/2014 – 31/01/2015 01/02/2014 – 28/02/2015 01/02/2014 – 31/03/2015 £ 11, 790 £ 1, 965 Cumulative Main section Pensionable Pay @ 31 st March 2015 = £ 7, 770 + £ 11, 790 + £ 1, 965 = £ 23, 490 (with sc. APC) Cumulative Main section Pensionable Pay @ 31 st March 2015 = £ 7, 770 + £ 11, 790 + £ 1, 965 = £ 21, 525 (without sc. APC) Main section pensionable pay

APC Calculator

Calculating FTE and Final Pay

FTE or WTE For Annual Return �full time equivalent averaged over the scheme year �scaled up for part time or variable hours (casual) employees For final pay �full time equivalent averaged over final 365 days �scaled up for part time or variable hours (casual employees) Full Time Equivalent (FTE)

Example FTE for end of year 2017 01/04/2016 FTE= £ 24, 000 01/08/2016 FTE= £ 27, 000 01/04/2016 – 31/07/2016 = 4 months 01/08/2016 – 31/03/2017 = 8 months £ 24, 000 / 12 x 4 = £ 8, 000. 00 £ 27, 000 / 12 x 8 = £ 18, 000. 00 FTE for end of year is £ 8, 000. 00 + £ 18, 000. 00 = £ 26, 000 Calculating FTE for end of year

Exercise 4 Calculate the Full Time Equivalent for Mr Adams was temporarily promoted for 3 months from 1/11/2016 and returned to substantive post on 01/02/2017

Calculate FTE for end of year 2017 for Mr Adams who was temporarily promoted for 3 months from 1/11/2016 and returned to substantive post on 01/02/2017 Date FTE 01/04/2016 £ 36, 200 01/11/2016 £ 42, 350 01/02/2017 £ 36, 200 FTE is the averaged over the scheme year 01/04/2016 – 31/10/2016 01/11/2016 – 31/01/2017 01/02/2017 – 31/03/2017 7 months @ £ 36, 200 3 months @ £ 42, 350 2 months @ £ 36, 200 / 12 x 7 = £ 42, 350 / 12 x 3 = £ 36, 200 / 12 x 2 = £ 21, 116. 67 £ 10, 587. 50 £ 6, 033. 33 FTE for EOY 2017 £ 37, 737. 50 Exercise 4 – calculate FTE

We do need the FTE for part time, term time or variable hours (casual) workers. This is the full time equivalent that they would earn if they worked full time – for example 37 hours x 52 weeks per year Calculating this is relatively simple For part time or variable hours workers Full time hours Annual part time pay x Contractual hours For term time workers Full time hours Annual part time pay x 52 x Contractual hours Weeks worked per year FTE for part time or variable hours employees

Exercise 5 a & b Calculating the Full Time Equivalent for part-time and casual staff

For part time or variable hours workers Andrew works 18. 5 hours per week all year his annual pro rata pay is £ 9, 000 and full time hours are based on 37 per week 37 £ 9, 000 x = £ 18, 000 18. 5 For term time workers Sheila works 15 hours per week for 46. 4 weeks per year and her pro rata pay is £ 5, 400 and full time hours are based on 37 per week 37 £ 5, 400 x 52 x 15 Exercise 5 a & b £ 14, 927. 59 46. 4

Using 2008 Scheme Definition Final pay is based on last 365 days or the best in last 3 years if higher, for example Mrs Jones left on 30 September 2016 1 October 2013 £ 15, 000 pa 1 April 2014 £ 15, 600 pa 1 April 2015 £ 16, 440 pa 1 April 2016 £ 17, 400 pa Calculate final pay

Final Year 1 October 2015 to 31 March 2016 £ 16, 440/12 x 6 = £ 8, 220 1 April 2016 to 30 September 2016 £ 17, 400/12 x 6 = £ 8, 700 £ 16, 920 pa Year 1 1 October 2014 to 31 March 2015 £ 15, 600/12 x 6 = £ 7, 800 1 April 2015 to 30 September 2015 £ 16, 440/12 x 6 = £ 8, 220 £ 16, 020 pa Year 2 1 October 2013 to 31 March 2014 £ 15, 000/12 x 6 = 1 April 2014 to 30 September 2014 £ 15, 600/12 x 6 = £ 7, 500 £ 7, 800 £ 15, 300 pa Best of last 3 years

If Mrs Jones leaves on 29 September 2016 1 April 2015 1 April 2016 £ 16, 440 pa £ 17, 400 pa Months and days 30 September 2015 to 31 March 2016 – 6 months 1 day £ 16440 / 12 x 6 = £ 8, 220. 00 £ 16, 440 / 12 = 1370 x 1/30 = £ 45. 67 1 April 2016 to 29 September 2016 – 5 months 29 days £ 17, 400 /12 x 5 = £ 7, 250. 00 £ 17, 400 / 12 = 1450 x 29/30 = £ 1, 401. 67 Final pay = £ 16, 917. 34 Months and days

Using months and days or days to calculate the final pay for Mr Smith who left employment on 28 January 2017 FTE figures over the last 3 years 1 April 2016 – 28 January 2017 1 April 2015 – 31 March 2016 1 April 2014 – 31 March 2015 29 Jan 2014 – 31 March 2014 £ 23, 154 £ 22, 522 £ 24, 378 £ 17, 472 Exercise 6 – final pay

29 January 2016 to 28 January 2017 29/01/16 – 31/03/16 @22, 522/12 = £ 1. 876. 83 x 2 3/31 = £ 3, 935. 29 01/04/16 – 28/01/17 @ £ 23, 154/12 = £ 1, 929. 50 x 9 28/31 = £ 19, 108. 27 Final pay final year £ 23, 043. 56 29 January 2015 to 28 January 2016 29/01/15 – 31/03/15 @ £ 24, 378/12 = £ 2, 031. 50 x 2 3/31 = £ 4, 259. 60 01/04/15 – 28/01/16 @ £ 22, 522/12 = £ 1, 876. 83 x 9 28/31= £ 18, 586. 70 Final pay year 1 £ 22, 846. 30 29 January 2014 to 28 January 2015 29/01/14 – 31/03/14 @ £ 17, 472/12 = £ 1, 456. 00 x 2 3/31 = £ 3, 052. 90 01/04/14 – 28/01/15 @ £ 24, 378/12 = £ 2, 031. 50 x 9 28/31 = £ 20, 118. 40 Final pay year 2 £ 23, 171. 30 Exercise 6 - answers

No Full time equivalent Final pay based on best flat rate pay from the last 3 years added to the average of the last 3 years fees Flat pay Fees Final year Year 1 Year 2 £ 3, 000 £ 2, 800 £ 2, 600 £ 120 £ 1, 020 £ 550 First take the best flat rate pay (£ 3, 000) then add this to the average of the last 3 years fees (£ 120 + £ 1, 020 + £ 550)/3 = £ 563. 33 Final pay = £ 3, 000 + £ 563. 33 = £ 3, 563. 33 Variable time – FTE and Final pay

Name Mr John Smith Ni. No NH 124589 D Address 41 Main Street, Newtown, Salisbury Wiltshire, SP 5 8 DD Date of Birth 29/01/1952 Service Breaks (strike) 10/04/1998 – 1 day 17/11/1999 – 1 day Hour changes 29/01/1970 – 31/12/2000 – Full time 01/01/2001 – 31/12/2005 – 30 hour week 01/01/2006 – 31/12/2006 – 25 hour week 01/01/2007 – 28/01/2017 – Full time Section 4. Cumulative Pensionable pay 01/04/2015 – 31/03/2016 - £ 25, 250 01/04/2016 – 28/01/2017 - £ 22, 000 Whole Time Equivalent pensionable pay Annual rate of pay at leaving use FTE from exercise 6 Final pay use as calculated in exercise 6 50: 50 section 01/04/2015 – 31/03/2016 Payroll Number 335689 – 2 Exercise 7 – Complete Leaver Form for Mr Smith who retired on 28 Jan 17

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