Police Pension Scheme

Transcription

1 Police Pension Scheme Pensionable Pay Form Completion Notes April 2017 Version 1.4

2 Page 2 Table of Contents Section A: Identification details... 3 Section B: Pension contributions and contracted-out earnings (where member has less than two years of service)... 3 Pension contributions... 3 Contracted out earnings to 5 April Section C: Periods of service on Reduced/Nil pay (in the last 3 years)... 3 Section D: CARE pensionable earnings... 3 Section E: Pensionable Pay and Average Pensionable Pay... 5 Part time adjustment... 6

3 Page 3 Section A: Identification details Please complete this section with the member s details. Section B: Pension contributions and contracted-out earnings (where member has less than two years of service) Members with less than two years service (including service in any of the pre-2015 schemes), may have the option of receiving a refund of contributions. To calculate and pay a refund, we need both the contributions paid by the member AND the contracted out earnings so that we can pay a contributions equivalent premium (CEP) to the DWP in order to reinstate the member into the additional portion of the State Pension. Please note that contracting-out ended with effect from 6 April 2016 therefore contracted-out earnings are not required for post April 2016 service. Pension contributions Please provide the total pension contributions paid by the employee for the scheme year of leaving and the previous two years. Contracted out earnings to 5 April 2016 Up until 5 April 2016 National Insurance contributions were payable on earnings between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Employees who are members of the police schemes paid NICs at the reduced, contracted-out rate up to the Upper Accrual Point (UAP). They then paid NICs at the higher, standard rate on earnings between the UAP and the UEL. Please provide the employee s total earnings made between the LEL and the UAP from the employment they have left or opted-out of the PPS from. Further information including examples can be found in HMRC guidance manual CA39 click here Section C: Periods of service on Reduced/Nil pay (in the last 3 years) Although these are taken into account in the cumulative CARE pay received, we still require these details when assessing pay and benefits for those with final salary protection membership in the 1987 & 2006 schemes. The indicator for whether contributions have been paid for the period helps us to ensure that service or pension bought for the period is credited where due and helps us to maintain complete records in case of any dispute in the future. You should include a full description as well as the dates, as the various classes of leave are treated differently i.e. do not simply put leave of absence in the reason box. Section D: CARE pensionable earnings Pension benefits for any period a person is an active member of the 2015 (CARE) scheme are no longer final salary based but are calculated on a Career Average Revalued Earnings basis. Benefits are 1/55.3th of the pensionable earnings (career average pensionable pay) received and any Assumed Pay (AP), the member would have received when on nil or reduced pay in certain circumstances in each scheme year. The amount of pensionable pay received by the member is not scaled up to a whole time equivalent for part-time workers.

4 Page 4 Pension benefits are based on earnings in each scheme year: a scheme year is a period of 1 year beginning with 1 April and ending with 31 March. Pensionable earnings are elements of pay/earnings on which contributions are paid and currently include: Basic salary London weighting Increase in pay on temporary promotion Temporary salary Competency Related Threshold Payments (to be phased out by April 2016) Allowances are not pensionable Part time overtime is not pensionable Pensionable earnings also include assumed pay For the purpose of calculating earned pension (CARE pension), assumed pay means the amount of pensionable earnings a member would have otherwise received in respect of a period of assumed pay. During a period of assumed pay a member is presumed to have received an amount equal to the sum of the amount of pensionable earnings they would have received had the circumstances listed below not applied, and any increase the scheme manager considers appropriate. A period of assumed pay is a period in respect of which any of the following circumstances apply; A member is on reduced pay while they are taking: Sick leave Paid adoption leave & adoption support leave Paid maternity leave & maternity support leave Paid parental leave A member is receiving statutory pay A member is on unpaid maternity leave during the first 26 weeks of such leave A member voluntarily surrenders pensionable earnings in whole or in part A member is absent from duty because of being called out, or recalled, for permanent service in Her Majesty s armed forces in pursuance of a call-out notice served, or a call-out or recall order made, under the Reserves Forces Act 1996 (the bullet point above does not apply to any period of permanent service during which the member is in pensionable service in an existing scheme that relates to the armed forces or another scheme under section 1 of the act that relates to the armed forces or any other occupational pension scheme Assumed pay also includes the pay applicable to any of the following periods of unpaid leave for which the member has elected to buy back the relevant period by paying pension contributions; The pay applicable to any periods of unpaid; sick leave maternity leave & maternity support leave adoption leave & adoption support leave parental leave

5 Section E: Pensionable Pay and Average Pensionable Pay Page 5 For members of the 1987 or 2006 scheme, pension benefits are calculated using average pensionable pay (APP). For members of the PPS 1987, pension benefits are calculated using the better of: the member s pensionable pay in the last 12 months; or the member s pensionable pay in either of the previous 2 years; For members of the PPS 2006, pension benefits are calculated using the better of: the member s pensionable pay in the last 12 months; the member s pensionable pay in either of the previous 2 years; or the member s pensionable pay as an average over 3 consecutive years in any of the 7 years prior to that. The 2015 regulations also protect accrued rights for transition members (members with accrued rights under the 1987 or 2006 scheme who become members of the 2015 scheme) so that they retain the final salary link. This means their pension benefits accrued under the 1987 or 2006 scheme are calculated using APP in the last twelve months of leaving service or one of the previous two years if the pay during this period was higher. You may wish to supply pensionable pay figures (under either the PPS 1987 or PPS 2006 definition) for the year in which the member leaves the scheme and, if applicable an earlier years pay Actual pensionable pay rates should be entered in the top table, and the whole-time equivalent (where the member worked on a part-time basis) should be entered into the second table. APP is calculated a year back from the date of leaving, using a whole time equivalent pay earned (not paid) i during that period. So, for example, if the leaving date is 30 November 2015 the pay would be calculated over the period 1 December 2014 to 30 November If you are using a previous year then you should always calculate it to the anniversary of the date of leaving for example if you were using the previous year in this case you would go from 1 December 2013 to 30 November Example Period From To Annual Rate of Pay Days Pensionable Pay 1 01/12/ /08/ /09/ /11/ Total 01/12/ /11/ You need to calculate period 1 at the rate of and period 2 at the rate of The days should always add up to 365, unless the officer retires during a leap year when the denominator of 366 days should be used.

6 Page 6 First period ,758 = 19, Second Period 91 27, = 6, Average Pensionable Pay = 26, Pensionable pay for any given period is the Whole Time Equivalent rate plus the monetary amount of pensionable extras. However, if the additional element paid is in direct proportion to the contractual hours then it should be scaled upward for part time members. APP should not be reduced if the employee has had: a temporary reduction in pay during a period of sickness/maternity/paternity leave, or unpaid sickness/maternity/paternity leave in respect of which the member has paid contributions. Part time adjustment If, for example a member works 20 hours per week part time, of a possible 40 hour week and receives , this is adjusted to reflect part time hours and provide a whole time equivalent (WTE) x 40/20 = WTE Has the member received pay in the final tax year relating to an earlier tax year? Final salary benefits are based on pensionable pay that relates to the final pay period in question i.e. the pay earned during the best of the last three years membership. This means, for example, that if a member is awarded a retrospective pay increase and is paid a lump sum in one final pay period that relates to a previous pay period, that proportion of the arrears is disregarded when calculating the Average Pensionable Pay (APP). However, for annual allowance purposes, HMRC rules dictate that when we calculate pension growth, any pay received for an earlier Pension Input Period (PIP) after that PIP has been closed is ignored for the purpose of calculating pension growth. The amount of pay relating to the earlier period is also ignored in the PIP during which it is physically paid to the officer. For this reason, if the member has received pay relating to an earlier period, you must provide details to the Pensions Unit under separate cover. i Earned pay is the pay that should have been paid for that period had it been paid at the correct time. For example, a backdated pay award that is paid after the year end in which it should have been paid is regarded as paid in the year it was paid but earned in the previous year and therefore has to be allocated to the correct years accordingly