Pensionable Pay

This is the pay on which employees normally pay pension contributions.

Pensionable pay is relevant to any pension calculations after 1 April 2014. For final salary pension, up to 31 March 2014, the pension is calculated on Final Pay (for pre-1 April 2014 membership).

Typically pensionable pay includes

your normal salary or wages
bonuses
overtime (both contractual and non-contractual)
maternity, paternity, adoption and shared parental pay
shift allowance
additional hours payments if you work part-time
any other taxable benefit specified in your contract as being pensionable

You do not pay contributions on

any travelling or subsistence allowances
pay in lieu of notice
pay in lieu of loss of holidays
payment as an inducement not to leave
any award of compensation (other than payment representing arrears of pay) made for the purpose of achieving equal pay
pay relating to loss of future pensionable payments or benefits
pay paid by your employer if you go on reserve forces service leave
the monetary value of a car or pay received in lieu of a car
any sum which has not had tax liability determined on it

Difference between CARE and Final Salary

There are three main differences to your pensionable pay that is calculated for your CARE pension (after 1 April 2014) and Final Salary (up to 31 March 2014), they are:

non-contractual overtime has been removed from the exclusions list and so, from 1st April 2014, non-contractual overtime becomes pensionable
a payment in consideration of loss of future pensionable payments or benefits is, from 1st April 2014, not pensionable
any actual pay paid by the Scheme employer to a reservist during Reserve Forces Service Leave is not pensionable

The structure of the definition of Pensionable Pay is basically the same in the 2014 Scheme as it was in the 2008 Scheme in as much as all earnings in respect of the job are pensionable apart from those listed in the regulations as exclusions.

However, there are some differences in the definitions, so what is pensionable for CARE accrual (from 1 April 2014) is different to what is pensionable (and what will constitute final pay) for final salary linked benefits in respect of pre-1 April 2014 membership. The following table shows the definitions of pensionable pay in both schemes side by side:

2014 Scheme	2008 Scheme
Regulation 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.	Benefits Regulation 4(1) An employee's pensionable pay is the total of - (a) All the salary, wages, fees and other payments paid to him for his own use in respect of his employment; and (b) Any other payment or benefit specified in his contract of employment as being a pensionable emolument.
Regulation 20 (2) But an employee's pensionable pay does not include -	Benefits Regulation 4(2) But an employee's pensionable pay does not include -
	(a) Payments for non-contractual overtime
(a) any sum which has not had income tax liability determined on it	Separate Regulation 4 (3) No sum may be taken into account in calculating pensionable pay unless income tax liability has been determined on it.
(b) any travelling, subsistence or other allowance paid in respect of expenses incurred in relation to the employment;	(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;	(c) any payment in consideration of loss of holidays;
(d) any payment in lieu of notice to terminate a contract of employment;	(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;	(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. See note below regarding cars	Unrevoked 1997 Regulation 13(2) (f) (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 See note below regarding cars
(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;	(g) any award of compensation (excluding any sum representing arrears of pay) for the purpose of achieving equal pay in relation to other employees;
(f) 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— 1. local government elections, 2. elections for the National Assembly for Wales, Parliamentary elections, or European Parliamentary elections.	Similar provisions (but making pensionable certain returning officer fees than de-pensioning certain others) are to be found in 2008 Administration Regulation 11
(2014 Transitional Regulation 8(1)) Any supplement paid (a) to an employee whose employment transferred on 1st April 1996 to the Environment Agency or to such an employee who subsequently transferred on 1st April 2013 to the Natural Resources Body for Wales; or (b) to an employee whose employment transferred on 1st April 2010 from the Learning and Skills Council for England to a local authority or to London Councils Limited, in recognition of the difference in contribution rates between members of the principal civil service pension scheme and the 2008 or 2014 LGPS Schemes.	The amount of any supplement paid - (i) by the environment agency; or (ii) to an employee whose employment is transferred on 1st April 2010, under a staff transfer scheme, from the Learning and Skills Council for England to a local authority or to London Councils Limited. In recognition of the difference in contribution rates between members of the principal civil service pension scheme and the Scheme;
	Unrevoked 1997 regulation 13(2)(g) (g) in the case of an employee or former employee of the Commission for the New Towns, any payment made under any scheme relating to the termination of the employment of employees by the Commission in respect of the completion before a specified date of specified functions;
	Unrevoked 1997 Regulation 13(2)(h) (h) a payment made in consequence of a School Achievement Award under the scheme established by the Secretary of State known as the School Achievement Award Scheme.

Differences The definition of pensionable pay in the 2014 Scheme is, basically, the same as in the 2008 Scheme - i.e. all payments in respect of the job apart from those listed in regulations as exclusions, but there are three main differences. The first significant change is that non-contractual overtime has been removed from the exclusions list and so, from 1st April 2014, non-contractual overtime becomes pensionable.

The second change is that a payment in consideration of loss of future pensionable payments or benefits is, from 1st April 2014, not pensionable. So, for example, where employer changes an employee's contract to remove contractual overtime and gives a lump sum payment in consideration for the loss of future pensionable payments (because the number of voluntary hours of overtime are expected to be less than the former number of contractual hours of overtime), that lump sum would be non-pensionable. Similarly, where an employer reduces the pay of an employee but offers a 'marked time' payment (e.g. to bring the employee's pay up to the former rate of pay for a limited period of time) the employer could, by defining that 'top-up' sum in the 'marked-time' agreement as a sum to be paid each pay period for a period of X months in consideration of the loss of future pensionable payments make the 'top-up' payment non-pensionable.

The third change is that, from 1st April 2014, any actual pay paid by the Scheme employer to a reservist during Reserve Forces Service Leave is not pensionable. Note that whilst on reserve forces service leave the employee and the Ministry of Defence pay contributions on the amount of Assumed Pensionable Pay.

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Typically pensionable pay includes

You do not pay contributions on

Difference between CARE and Final Salary

Comprehensive breakdown of Pensionable Pay for 2014 and 2008 Schemes

Detailed differences between 2014 and 2008 schemes

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