Management Information Sheet

MI sheet 74/14 outlined the April 2014 changes to the Local Government Pension Scheme (LGPS) and explained that the changes may impact on your school budget. One such change is the requirement to pay 'Assumed Pensionable Pay' in some circumstances when an employee is absent from work.

Assumed Pensionable Pay (APP)

If an employee moves to a period of reduced contractual pay or nil pay as a result of sickness or injury or commences relevant child related leave (i.e. ordinary maternity, paternity or adoption leave and any paid additional maternity, paternity or adoption leave) then the pensionable pay figure used to work out their pension for this period is their APP. Using APP, rather than the amount of pensionable pay they actually receive, means that they continue to build up a pension, as if they were working normally and receiving their usual pay. This means the employer continues to pay their contributions on the notional pay value, even though the employee is receiving less than their normal pay and therefore making a smaller or no pension contribution themselves.

APP is calculated by taking the average of the three complete months (pay periods), prior to going on reduced contractual pay or nil pay. This is then grossed to give an annual figure which is applied for the required period of reduced or nil pay.

Any period of unpaid additional maternity, paternity or adoption leave, and some other types of unpaid leave will not count for pension purposes unless the employee elects to pay Additional Pension Contributions (APCs) to purchase the amount of pension lost during that period of unpaid absence.

Further information

There is a lot more information about the LGPS changes, including APP, on the websites:

LPGS Regulations & Guidance

The Local Government Pension Scheme 2014

The Norfolk Pension Fund

There is also a helpful guide aimed at employees but useful for employers too:

LPGS Regulations & Guidance - Employees Guides

You can contact your finance and HR provider for advice. If that’s NCC - your Finance Support Officer can help you understand how LGPS impacts on your budget and HR Direct can give information on managing absence, pensions and retirement.