Pay

Remuneration on which Employees' Contributions are Payable

For pension purposes, an employee's pay is all the salary, wages, fees and other payments paid to an active member for his own use, in respect of his employment. It may also include any other payment or benefit specified in his contract of employment as being a pensionable emolument.

However, pay CANNOT 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 contract of employment
• Any payment made as an inducement not to terminate his employment before the payment is made
• 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, but see Appendix 4 for the position of any employee in service prior to 1st January 1993
• Any award of compensation (excluding any sum representing arrears of pay) for the purposes of achieving equal pay in relation to other employees

Final Pay

This is used to calculate a member's benefits, along with their length of membership in the Scheme. You should notify us of the final pay figure when an active member leaves the Scheme by completing form LG/102.

Normally this figure will be the pay on which pension contributions have been deducted in the final 365 days of the employment. The Regulations allow an active member to go back to an earlier year if the final pay figure is greater than the final year. However, unless a Certificate of Protection has previously been issued in relation to a reduction or restriction in pay which occurred before 1st April 2008 or the member suffered a drop in pay on or after 01.04.2008, the employee cannot go back more than three years prior to retirement.

Where pay has been reduced or suspended because of ill-health, the normal pay that would have been paid had the ill-health not occurred should be used.

Where pay has been suspended in the final year for any other reason (e.g. an industrial dispute), then unless the member elects to repay contributions, final pay is the pay received for all the days which the employee worked during the last year of employment, divided by the number of days worked in last year of employment, multiplied by 365. Following the introduction of the 2008 Regulations, you should no longer base final pay on the last 365 days on which contributions have been paid.

EXAMPLE

LDS: 25.10.08 Unpaid leave (not repaid): 01.04.08 - 30.04.08

Pay rates: April 2007 £25,000, April 2008 £28,000

Pay received 26.10.07 - 31.03.08 = (5 6/31 x 25000) /12 = £10,819.89

Pay received 01.05.08 - 25.10.08 = (5 25/31 x 28000)/12 = £13548.39

Total = £24,368.28/335 x 365 = £26,550.51

Where employment ceases after the date to which contributions have been paid (e.g. following a period of leave without pay) then, again, unless the member elects to repay contributions, final pay is the pay received during the last year of that employment, divided by the number of days that the member worked during that year, multiplied by 365 (the regulations state that the multiplier is to be 365, so this figure must be used even if the last year of employment contains a leap day).

EXAMPLE

LDS: 25.10.08 Unpaid leave (not repaid): 01.09.08 - 25.10.08

Pay rates: April 2007 £25,000, April 2008 £28,000

Pay received 26.10.07 - 31.03.08 = (5 6/31 x 25000) /12 = £10,819.89

Pay received 01.04.08 - 31.08.08 = (5 x 28000)/12 = £11,666.67

Total = £22,486.56/310 x 365 = £26,476.11

The above method is also to be used if the member has been in employment for less than a year.

A member's pay for any period of maternity, paternity or adoption absence during the final pay period, in respect of which they pay or are treated as having paid contributions, is the pay he or she would have received had they not been absent. See the chart in paragraph 5.6 for nil pay periods of maternity, paternity or adoption absence that count in full as if the employee had been at work.

IF YOU ARE IN ANY DOUBT, PLEASE CONTACT THE LPFA

Completing Final Pay Details on Form LG/102

Where the last year's pay is being used, please input the annual pay rates (for part-timer employees please use the full-time equivalent pay rates) and the dates for the period in which they apply. If the member had any periods of unpaid leave for which contributions were not repaid during the last year, please also list this information.

EXAMPLE

Last day of employment is 30.09.08

Where it is possible that one of the previous two years (ending with the anniversary of the member's last day of employment) would provide a higher final pay figure, please also list the pay rates for those 2 years and any unpaid leave taken during those years for which contributions were not repaid.

Final Pay for a Member with a Certificate of Protection

If an active member has been awarded a Certificate of Protection due to a reduction or restriction in pay which occurred before 1st April 2008 (see paragraph 5.10) and leaves your employment within ten years of the date of the pay restriction mentioned in the certificate, then you will need to provide us with the member's pay rates going back 13 years from their last day of employment.

Final Pay for a Member who had a Drop in Pay after 31.03.2008

If an active member's pay in a continuous period of employment is reduced because he chooses to be employed at a lower grade or with less responsibility (see paragraph 5.10), he will be entitled to use pay from a previous year for the purpose of calculating his pension if the drop in pay occurred within ten years of the member's last day of employment. In such cases, final pay will be the average pay from the best consecutive three years in the last ten. Therefore please provide all the pay rates for the member going back 13 years from their last day of employment.

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