As an employer you are responsible for calculating the correct pensionable pay. From 1 April 2014 the definition of Pensionable Pay changed, see below.
You may be asked to provide a pensionable pay figure at various points during an employee’s career for instance, if you ask for an estimate of pension benefits or if the member transfers in previous pensionable service.
From 1 April 2014 the rate of contributions the member’s pay will be based on their actual pensionable pay and if they get paid non-contractual overtime or any additional hours worked in excess of their contractual hours, they will also pay contributions on this pensionable pay. The new scheme also brought in Assumed Pensionable Pay and Cumulative Pensionable Pay. Please see section 4.1 of the Payroll Guide for the definition of Pensionable Pay.
Benefits in the Local Government Pension Scheme are based on a member’s pensionable service and final pensionable pay. Calculating the correct pensionable pay is therefore vital to awarding a member the benefits to which they are due.
There are various links on this page to resources that should enable you to calculate pensionable pay correctly:
- A link to Regulation 4 of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 containing the definition of “pensionable pay”.
- Some example pensionable pay calculations contained within our Training Presentation Slides.
- A draft guide to pensionable pay calculations issued by Local Government Employers (LGE) called Final Pay Scenarios (2007 Regulations).
- A Monthly Pay Calculator in Excel format that you may download and use to calculate pensionable remuneration. Note the calculator requires the Analysis ToolPak* add-in program to be enabled.
- In addition to the above calculator there are also two calculations that take into account a longer calculation period of 13 years, needed after a drop in salary and where a Certificate of Protection is in place. For cases where the reduction took placve before 1st April 2008 and a Certificate of Protection was issued, use Certificate of protection pay calc Inc (2015 PI) and for cases where the reduction took place post 31st March 2008 leavers use 2008 Regs Pay Reduction Calc (Inc 2015 PI). Note the calculators also require the Analysis ToolPak* add-in program to be enabled.
Please bear in mind that the method in which you calculate pensionable pay for pension purposes should be based on the method in which you calculate and pay salary.
Pensionable pay is one of the subjects covered in the training sessions provided by our dedicated Employers Team. Please see the Support and Events page of this website for further information.
* Analysis ToolPak = In addition to the many functions that are built in to Microsoft Excel itself, there are dozens of additional functions for Dates, Statistics, Finance, and Engineering provided by the Analysis Tool Pack (ATP). The add-in module must be installed before you can use the function in it. The official Microsoft page is here (please note that this is a link to an external site).