introduction to pay now in more depth, what information is going to be needed to do the...

Introduction to pay

• Now in more depth, what information is going to be needed to do the benefit/leaver calculations

1.

www.kentpensionfund.co.uk

Pay - what it says in the regulations! 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,

(iii)Parliamentary elections, or

(iv)European Parliamentary elections.

2.


Pensionable Pay• Definition as 2008 and now includes non-contractual overtime

and additional hours

• Loss of Earnings Compensation/marked time payment/Protected pay is no longer pensionable in any circumstance

• Lease cars/cash in lieu of lease cars is still not pensionable

• Will require two pay figures in the calculation of any benefits and at year end

• Will be referred to as

- CARE Pensionable Pay

- Final Salary Pensionable Pay

3.


CARE Pensionable Pay

• CARE Pensionable Pay – to be used in the calculation of Post 2014 benefits

- The actual pay they have paid pension contributions on, and/or any Assumed Pensionable Pay if they have had a period of reduced or no pay due to sickness or child related leave.

- At year end will be for the period 1st April to 31st March

- When they leave from 1st April to DOL

- Any lump sum payments are included in month they are paid and not period they were applicable for

4.


Final Salary Pensionable Pay• Final Salary Pensionable Pay – This will be used in the

calculation of Pre 2014 benefits.

- Based on existing calculation of WTE pay over the last 365 days. Does not include non contractual overtime

and additional hours- At year end will be 1st April to 31st March- When an employee leaves will be the last 365 days.- Employer is to calculate the WTE figure to be used.- Any lump sum payments need to continue to be apportioned over the period the lump sum payment related to rather than included in the month it was paid in

5.


Assumed Pensionable Pay (APP)

• APP is calculated whenever the normal pensionable pay is reduced as a result of:

- Sickness or injury leave on reduced or no pay

- Child related leave

- Reserve Forces service leave

• Similar to notional, but calculated in a different method

6.


APP & Deaths/Ill Health

• Used for the calculation of Death Grants for active members.

• Used for the calculation of Death in Service and Ill health (Tier 1 & 2) enhancements

7.


How is APP Calculated• Pensionable pay received in the 3 complete months (or 12 weeks, if not monthly paid) preceding the commencement of the

pay period in which reduced pay began (APP looks backwards)

• Less any one off lump sum received during that period Performance Related Pay (or similar arrangement) Merit Award

• Add back any regular lump sum payments paid in the previous 12 complete months (determined by the employer)

Market Premium not paid monthly

•Employer will need to ensure that payroll providers are aware which elements are deemed to be regular

8.


Calculating APP – basic payMember has a period of reduced pay starting on 15 August

2014

Annual rate of pay @ 1 April = £24,000.00

No extras/overtime/lump sum payments

May £2,000

June £2,000

July £2,000

Total £6,000 ÷ 3 x 12 = £24,000 APP (annual figure)

Monthly figure is £2,000

9.


Calculating APP – basic pay• So when you are calculating the CARE Pensionable Pay for this member you may need to include the element of APP for the period of reduced/nil pay. In this case from 15th August to 31st October when they returned

- In August calculate (14/31x £2,000) actual pay = £903.23 (17/31x APP ÷ 12) = £1,096.77

- September APP ÷ 12 = £2,000- October APP ÷ 12 = £2,000- April to July would be actual earnings (4 x £2,000)- November to March would be actual earnings (5 x £2,000)

Total CARE Pensionable Pay for the year = £24,000

10.


Calculating APP – with extras

• Annual Rate of Pay from April 2014 - £24,000.00• Contractual Overtime of £200.00 per month• Additional Hours paid in June to August of £300.00 each

month

• Member goes off sick and receives reduced pay for the whole of November and December

• Returns to work on 01 January 2015

11.


Calculating APP – with extras• In this case to work out APP need to look at pay

for - Aug, Sept and October (3 full months before period of

reduced pay)- Aug Basic £2,000

Contractual overtime £200Add hrs £300

- Sept Basic £2,000Contractual overtime £200

- October Basic £2,000Contractual overtime £200

12.


Calculating APP – with extras• Total for last three months

- £6,900 ÷ 3 x 12 = £27,600.00 annual figure £2,300.00 per month

• When you put the figures on the returns it would be - April to October actual pay including all elements

•Basic + o/t + additional hours ((£2,000 + £200) x 7) + £900 = £16,300.00

-November – December APP /12 x 2 (two months on no pay) (£2,300 x 2) = £4,600.00

- January to March actual pay• Basic + o/t = (£2,000 + £200) x 3 = £6,600.00

- Total pay = £27,500.00

13.


APP – lump sums• To calculate APP if a member has any lump sum payments.

- Remove all lump sums when doing initial calculation of APP and gross up to an annual figure

• Then look at any lump sums that are paid to member, in the 12 complete months (or 52 weeks if not monthly paid) prior to the reduction if:

- Employer has deemed them to be a regular lump sum• Add lump sum payments to the annual APP calculation

- Employer has not deemed them to be a regular lump sum• Then they remain excluded from the APP calculation

14.


Notification of Pay• For all

- Estimates

- Leavers

- Opt out with 3 months or more membership

- Retirements

• require two pay figures- Final Salary Pensionable Pay

- CARE Pensionable Pay

• There is a spreadsheet to assist with the calculation of Pay and APP

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introduction to pay now in more depth, what information is going to be needed to do the...

Documents

pay period

pensionable pay app

employees pensionable

actual pay

assumed pensionable

normal pensionable pay

pensionable pay definition

equal pay