Your contribution rate is set individually using your rate of pensionable pay on 31 March, or on date of joining the fund if joining mid year.
How does this translate into a
contribution rate?
Your employer will refer to the table published each year by
the scheme’s regulator and apply the rate indicated according to your FTE pay
figure at 31 March.
You can use our contribution rate calculator to get an estimate of your contributions. (opens in a news window courtesy of Strathclyde pension fund.
How is pay at 31 March arrived at?
Your employer will take the rate of full-time equivalent
(FTE) pensionable pay you earn at 31 March and;
turn it into an
annual figure if necessary
add on any
variable elements of pay by averaging the amount received over a period
round down the total to the nearest pound.
Remember, your pension contributions are taken off before you pay tax and National Insurance so you will get tax relief on your contributions and because you are in an approved pension scheme you pay a lower rate of National Insurance (NI). This means the net cost to you is much less.
The table is based on the scheme’s regulations which refer to 5 bands of pay attracting different rates of contribution. For 2009/10 the bands are:
|
Pensionable pay |
Rate (%) |
|
On earnings up to and including £18,000 |
5.5% |
|
On earnings above £18,000 and up to £22,000 |
7.25% |
|
On earnings above £22,000 and up to £30,000 |
8.5% |
|
On earnings above £30,000 and up to £40,000 |
9.5% |
|
On earnings above £40,000 |
12% |
To illustrate how a composite rate is arrived at using the bands above, lets look again at Richard who is on a full-time equivalent salary of £25,000 –
£18,000@5.5% = £990
£ 4,000@7.25%= £290
£3,000@8.5% = £255
£1,535
£1,535 = 6.14% of £25,000.
However, the scheme’s regulations also say that employers are to apply the bands in accordance with guidance issued. That guidance states that the rates are to be applied in accordance with the published table. As this table splits pay into tiers according to the nearest one decimal place, and the rate from the table shows 6.1%, that is the rate your employer would apply. You can view thefull table here or use our contributions calculator to estimate your contribution rate.
What pay is the rate applied
to?
Contributions are applied to all your contractual pay from
the first full pay period in the new tax year.
I have two jobs – what rate
will I pay?
Your employer will work out the rate for each job according
to the rate of pay in each.
I have just joined – what rate
will I pay?
Your employer will set your rate according to your FTE rate
of pay on starting work.
I work term-time only – what
rate will I pay?
If you work term-time as required by your contract, your
employer will not treat you as part-time for the purposes of setting your
contribution rate. However, if you work term-time only as an agreed flexible
working arrangement your employer will treat you as part-time for the purposes
of setting your contribution rate. This means your employer will set your rate
based on your FTE rate of pay.
The LGPS is a contracted out tax free pension scheme, which meets the requirements of both the Department for Work and Pensions and the Inland Revenue. This means that you get tax relief on your contributions. If you pay tax at 20%, every pound you put towards your pension costs you only 80 pence in actual take-home pay. You also pay 1.6% less in national insurance contributions because you do not pay towards the State Second Pension (S2P).