Following our recent Pay and Contributions Event organised by the Stakeholder Engagement Team and a number of queries raised about the member contributions introduced on 1 October, we have compiled information on the most common queries in this article.
This guidance supports the information contained in our payroll provider requirements issued to employers, with the updated version also included in our November employer newsletter article on contribution rates for part time members. The 10 most common queries we have received from you are:
When to assess the tiered contribution rate
Where there is a significant change to members pensionable pay which takes them into a different contribution tier, either up or down.
You must assess the tiered contribution rate from the 1 October 2022 when the changes were introduced.
From April 2023 (and each subsequent year) you must check if a members contribution tier to see if it requires revision.
For completeness – Definition a significant change in pensionable pay is one that causes a member to move to a different contribution tier either up or down.
Use the previous year’s total pensionable pay (TPP) for contributions from 1 October 2022 unless there has been a significant change
From the 1 October 2022 you should use the previous years’ total pensionable pay (TPP) unless there has been a significant change. A significant change could be as a result of a pay award, a permanent decrease or increase in hours or promotion etc.
If there has been a significant change, the contribution rate needs to be assessed and calculated using the member’s new estimated annualised pay.
When a member has a pay award
If there has been a significant change then the contribution rate will need to be assessed and calculated using the member’s new estimated annualised pay.
For example, if a member receives a pay award on 1 October 2022, then their contribution rate should be calculated on the new estimated annualised pay from this date.
When the change in member contributions was implemented from 1 October 2022, the AfC pay award for 2022/23 had already been announced and backdated to 1 April 2022.
The tiers introduced on the 1 October 2022 were in line with the 2022/23 AfC pay rises. All pay awards on or after the 1 October 2022, including promotions, require the contribution rate to be re-assessed to confirm if the award takes the member into a new contribution tier.
Assessing the contribution rate where there are enhancements for unsocial hours
Enhancements for unsocial hours are pensionable regardless of whether the member is part or whole time.
For example, if the enhancement (e.g. in April) causes the member to change contribution tier, then you must re-assess the tier and apply that from the next month (May). The pay for next month (May) remains higher (due to Bank Holidays) so there is no change. If the pensionable pay in a subsequent month (e.g. June when there are no Bank Holidays) falls to a lower level tier, then from July the tier must be changed to the lower tier.
Guidance on secondments to Coronavirus (COVID-19)/flu vaccination clinics can be found on the Employer Hub.
Assessing the tiered contribution rate for bank staff if they have only worked a few sessions/hours
From the 1 October 2022 you should use the previous years’ total pensionable pay (TPP) unless you do not have any previous years pensionable earnings to base the contribution rate on for existing bank members.
If you have a new member (brand new to the bank) and you do not know what hours they are likely to work, you should initially, use the default rate of 6.1%. However, you must continue to check to see if you able to establish a consistent working pattern and adjust the tier accordingly. If the working pattern remains erratic, then they remain on the default percentage rate (6.1%).
Alternatively, if the new bank member will be working an established pattern e.g. four afternoons per week, you must work out the contribution tier accordingly.
Reassessment the tiered contribution rate for additional hours for part-time staff
For part-time members additional hours up to whole time are pensionable provided they are paid at their plain rate. Any additional hours paid at a high rate than the plain time rate is non-pensionable with the exception of the enhancements described in item four.
If the member is paid a different plain rate of pay, then these should be recorded separately to allow the calculation of the notional whole time (NWT).
For example, if the additional hours (e.g. in April) causes the member to change contribution tier, then you must re-assess the tier and apply that from the next month (May). The pay for next month (May) remains higher but within the same tier (due to the same additional hours worked) there is no change. If the pensionable pay in a subsequent month (e.g. June when there are no additional hours worked) then falls to a lower level tier, then from July the tier must be changed to the lower tier. This process must be repeated, if there is a change in the members working pattern.
Assessing the contribution rate where there is more than one post
If you are assessing the contribution rate where there is more than one post the contribution rate should continue to be calculated individually for each post. The rate should be calculated using the actual annualised pensionable pay figure.
Treatment of annual leave when assessing the tiered contribution rate
Annual leave is pensionable and must be reflected in the members pensionable membership, pay and for part-time members their pensionable hours. Therefore, payments for annual leave are included when assessing the tiered contribution rate.
Assessing the tiered contribution rate for different types of leave
Special leave – maternity, paternity & adoption leave:
Members can continue to pay pension contributions throughout a period of special leave.
The members pension contributions will be based on the level of pay they are actually receiving. For example, full pay/half pay (contributions are payable) equal to the month immediately prior to any period of no pay or statutory maternity pay.
Pensionable pay to determine the tier should be based on their actual (reduced) rate of pay and contributions should be deducted from the actual amount of (reduced) pay they receive.
Sick leave:
Again, the members pension contributions will be based on the level of pay they are actually receiving. For example, full pay/half pay sick (contributions are payable) equal to the month immediately prior to any period of no pay sick.
The rules for deemed pay have not changed with the introduction of these changes.
Disallowed days due to unpaid sick leave or strike days are not pensionable.
Re-assessment if there is a significant change for less than 12 months
Any significant change to pensionable pay must be reassessed regardless of the length of change.