Final Pay
The final pay figure that would normally be used to calculate your LGPS benefits is your pensionable pay received over the last 365 days of your employment. If for whatever reason one of the previous 2 years yields a higher figure that will be used, hence the term best of the last 3 years. If you were a part-time employee, whereas membership builds up according to the number of hours you worked, the final pay used is the full-time equivalent rate of pay that you would have received had you been in full-time employment i.e. the pay that an equivalent full-time employee would have earned.
As an example take a member who retires on 31 December. The last year of pay will be 1 January to 31 December but the annual rate of pay increased from £15,000 to £16,000 with effect from 1 April. The final pay figure will be calculated as follows:
1 January to 31 March £15,000 x 3/12ths £3,750
1 April to 31 December £16,000 x 9/12ths £12,000
Total Final Pay £15,750
Pensionable pay includes:
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Basic Pay
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Contractual Overtime
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London Weighting Allowance
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Bonus
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Honoraria
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Shift Allowance
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Sleeping-In Allowance
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Statutory Sick/Maternity Pay (SSP & SMP)
The LGPS regulations define pay as being the total of all the salary, wages, fees and other payments paid to the employee for their own use in respect of their employment and any other payment or benefit specified in the contract of employment as being pensionable.
Pay that is not pensionable includes:
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Non-contractual Overtime
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Travelling or Subsistence Allowances
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Pay In-Lieu of Notice
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Car Allowances
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Any payment made in consideration of a Loss of Holidays
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School Achievement Awards
An alternative final pay period could be one protected by the issue of a certificate of protection of pension benefits as defined under regulation 23 of the LGPS Regulations 1997.
A certificate of protection of pension benefits is issued to a scheme member who, through no personal fault, suffers a material reduction in pay, or the rate at which the pay may be increased is restricted in such a way that it is likely that the rate of retirement benefits will be adversely affected. The three years of pensionable pay immediately prior to the date of material change are recorded on the certificate.
Subsequently recorded on the certificate are up to 10 years pay figures calculated to the date of the anniversary of the material change. Should the member leave within the period covered by the certificate, the pay figure used would be either one of the last 5 years recorded on the certificate, or the average of any 3 consecutive years recorded.
Where the last pay figure recorded on the certificate is greater than the protected pay figure recorded immediately prior to the date of material change, the last pay figure will be used to calculate benefits. Where the last pay figure recorded is less than the protected pay figure detailed immediately prior to the date of material change, the protected pay figure will be used duly increased in line with inflation.
With effect from 1st April 2008, certificates of protection have been removed from the Scheme, although existing certificates will still be honoured. Instead you can elect to choose a different period for final pay purposes if you have suffered a reduction in (full-time equivalent) pay sometime during the last 10 years of your employment. In short, you can choose to have the average of any 3 consecutive years pay during the last 10 years used as your final pay, these years running from 1st April to 31st March each year.
