Shropshire County Pension fund

Taking care of your Local Government Pension in Shropshire

Pensionable pay and assumed pensionable pay

These pages are for employer use only. Member information can be found on the home page.

What is pensionable pay?

Pensionable pay within the LGPS has two definitions based on the regulations in place – the 2008 and 2014 scheme definitions.

The definition of pensionable pay in the 2014 scheme is very similar to the 2008 scheme. See below for the differences.

What is the definition of pensionable pay in the 2014 regulations?

An employee’s pensionable pay is the total of:

  • All the salary, wages, fees and other payments (including overtime and additional hours) paid to the employee
  • Any benefit specified in the employee’s contract of employment as being a pensionable emolument

But an employee’s pensionable pay does not include:

  • Any sum which has not had income tax liability determined on it
  • Any travelling, subsistence or other allowance paid as expenses incurred in relation to the employment
  • Any payment in consideration of loss of holidays
  • Any payment in lieu of notice to terminate a contract of employment
  • Any payment as an inducement not to terminate employment before the payment is made
  • Any amount treated as the monetary value to the employee of the provision of a motor vehicle or any amount paid in lieu of such provision
  • Any payment in consideration of loss of future pensionable payments or benefits
  • Any award of compensation (excluding any sum representing arrears of pay) for the purpose of achieving equal pay in relation to other employees
  • Any payment made by the scheme employer to a member on reserve forces service leave
  • Returning officer, or acting returning officer fees other than fees paid in respect of
    1. Local government elections
    2. Elections for the National Assembly for Wales
    3. Parliamentary elections or European Parliamentary elections.

What is the definition of pensionable pay in the 2008 regulations?

For the purpose of calculating pension remuneration figures for members with pre-April 2014 service under the LGPS Benefits, Contributions and Membership Regulations 2007, the definition of pensionable pay is given below:

An employee’s pensionable pay is the total of:

  • All the salary, wages, fees and other payments paid to him for his own use in respect of his employment
  • Any other payment or benefit specified in his contract of employment as being a pensionable emolument

But an employee’s pensionable pay doesn’t include:

  • Payments for non-contractual overtime;
  • Any travelling, subsistence or other allowance paid in respect of expenses incurred in relation to the employment
  • Any payment in consideration of loss of holidays
  • Any payment in lieu of notice to terminate his or her contract of employment
  • Any payment as an inducement not to terminate his employment before the payment is made
  • The amount of any supplement paid –
    1. By the environment agency
    2. To an employee in recognition of the difference in contribution rates between, members of the Principal Civil Service Pension Scheme and the LGPS. These would be members that have transferred on 1 April 2010, under a staff transfer scheme from the Learning and Skills Council for England, to either a local authority or London Council Limted
    3. Any award of compensation (excluding any sum representing arrears of pay) for the purpose of achieving equal pay in relation to other employees.

What is assumed pensionable pay from April 2014 onwards?

Assumed pensionable pay is the pay the employee would have received in cases of reduced contractual pay or nil pay as a result of sickness or injury; or during relevant child related leave (i.e. ordinary maternity, paternity or adoption leave and any paid additional maternity, paternity or adoption leave).

When does it apply?

In most cases of reduced or nil pay, assumed pensionable pay applies instead of normal pensionable pay for active members in the following circumstances and for periods covering the following:

  • The member is on leave due to sickness or injury and is on reduced contractual pay or no pay
  • The member is on relevant child-related leave (i.e. ordinary maternity, paternity or adoption leave and any paid additional maternity, paternity or adoption leave but NOT unpaid additional maternity leave)
  • The member is absent on reserve forces services leave

For ill-health tiers 1 & 2 and death in service

For all ill-health retirements tiers 1 & 2 and death in service cases, we would work out the ill-health enhancements and death grants respectively using assumed pensionable pay.

 How is it worked out?

Assumed pensionable pay attempts to recreate the scenario of what a person would have been earning if they had worked as normal. Assumed pensionable pay should be worked out as an annual rate then applied to the relevant period as a proportion of that rate. Examples of how to work this out (including any employee whose pay periodically is other than monthly (e.g. weekly, fortnightly, lunar, quarterly, half yearly) can be found on the lgpsregs.org website.