Pensionable Pay

Retirement

Table of Contents

Pensionable Pay

The pension benefits you build up from 1 April 2014 will be based on the pensionable pay that you earn 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 you pay contributions. From 1 April 2014 this includes all pay received in respect of overtime worked and any additional hours worked in excess of your contractual hours.

The benefits you build 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 your pensionable pay is put into your pension account every financial year. Your pension account is increased in line with inflation. For further information on how a CARE scheme works please click here.

Pensionable pay includes:

  • Basic Pay

  • Contractual Overtime

  • Non-Contractual Overtime (only pensionable under the CARE scheme)

  • London Weighting Allowance

  • Bonus

  • Honoraria

  • 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

  • Buying and Selling of annual leave

Regulation 20 of the LGPS Regulations 2013 define pay as follows: 

20. -(1) 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.

(2) 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,
(ii)    Parliamentary elections, or
(iv)    European Parliamentary elections.

Final Pay Protections prior to 1 April 2014

Even though the scheme has changed to CARE arrangement from 1 April 2014 protection is in place to ensure you can use your final pay when you leave to work out your pension for the membership you built up to 31 March 2014. This means that any future pay increases will be included in the final pay used to work out these benefits. The definition of final pay for benefits built up before 1 April 2014 remains the same as it was before the Scheme changed. Your final pay is normally the pay in respect of your final year of scheme membership on which you paid contributions, or one of the previous 2 years if this is higher. This remains so from 1 April 2014.

Further protections on final pay

In addition if your pay is reduced, or increases to your pay are restricted in your last 10 years of continuous employment with your employer, you continue to have the option to have all your pre 1 April 2014 membership based on the average of any 3 consecutive years' pay in the last 13 years (ending on a 31 March). If you have a certificate of protection which was issued by your employer for a reduction or restriction in pay beyond your control before 1 April 2008 and you leave the LGPS within 10 years of the reduction or restriction, then this protection continues to apply after 1 April 2014 for benefits built up in the final salary scheme.

Important: If you have a break in membership from a public service pension scheme for more than 5 years then any final salary benefits in the LGPS are transferred across to the career average scheme unless you choose to retain them as separate final salary benefits.

A public service pension scheme includes a pension scheme covering civil servants, the judiciary, the armed forces, any scheme in England, Wales or Scotland covering local government workers, or teachers, health service workers, fire and rescue workers or members of the police forces; or membership of a new public body pension scheme.