All pension benefits built up since 1 April 2014 are based on the pensionable pay a member receives in each scheme year. A scheme year is the period from 1 April to 31 March.
Pensionable pay is the amount of pay on which contributions are deducted. From 1 April 2014 this includes all pay received in respect of overtime worked and any additional hours worked in excess of contractual hours. The benefits built up from 1 April 2014 are based on a CARE scheme formula:
Pensionable Pay (from 1 April to 31 March) X 1/49th
A 49th of the member's pensionable pay is put into their pension account every scheme year. Pension accounts are increased in line with an inflationary increase each year.
Pensionable pay includes:
- Basic Pay
- Contractual Overtime
- Non-Contractual Overtime (remains non-pensionable under the Final Salary regulations)
- London Weighting Allowance
- Shift Allowance
- Sleeping-In Allowance
- Statutory Sick/Maternity Pay (SSP & SMP)
Pay that is not pensionable includes:
- Travelling or Subsistence Allowances
- Pay In-Lieu of Notice
- Car Allowances
- Any payment made in consideration of a Loss of Holidays
- School Achievement Awards
The LGPS regulations define pay as being the total of all the salary, wages, fees and other payments paid to the employee for their own use in respect of their employment and any other payment or benefit specified in the contract of employment as being pensionable.
The official definition of Pensionable Pay under the 2014 LGPS regulations is as follows:
- Subject to regulation 21 (assumed pensionable pay), an employee's pensionable pay is the total of—
(a) all the salary, wages, fees and other payments paid to the employee, and
(b) any benefit specified in the employee's contract of employment as being a pensionable emolument.
- But an employee's pensionable pay does not include—
(a) any sum which has not had income tax liability determined on it;
(b) any travelling, subsistence or other allowance paid in respect of expenses incurred in relation to the employment;
(c) any payment in consideration of loss of holidays;
(d) any payment in lieu of notice to terminate a contract of employment;
(e) any payment as an inducement not to terminate employment before the payment is made;
(f) any amount treated as the money value to the employee of the provision of a motor vehicle or any amount paid in lieu of such provision;
(g) any payment in consideration of loss of future pensionable payments or benefits;
(h) any award of compensation (excluding any sum representing arrears of pay) for the purpose of achieving equal pay in relation to other employees;
(i) any payment made by the Scheme employer to a member on reserve forces service leave;
(j) returning officer, or acting returning officer fees other than fees paid in respect of—
(i) local government elections,
(ii) elections for the National Assembly for Wales,
(iii) Parliamentary elections, or
(iv) European Parliamentary elections.
IMPORTANT: Pensionable pay under the CARE Scheme includes both contractual and non-contractual overtime. However under the previous Final Salary pension scheme (pre 1 April 2014) non-contractual overtime is still deemed to be a non-pensionable element of pay. Therefore when calculating a Final Pay figure under these regulations you must only include contractual overtime in this calculation.
For more information please download our Pensionable Pay - Pension Pointers factsheet.
Salary Sacrifice - Car Lease
If you have a salary sacrifice for a Car Lease please refer to the information via the link below: