How is pensionable pay calculated.

sarflee

I am a member of my company's final salary pension scheme and they deduct 5% of my gross pay, after deducting the £3900 NI lower earning limit.

I currently earn approx £35000pa however my estimated pensionable earnings for the 2009-2010 tax year is £31100. Is this because of the £3900 disregard and are pensionable earnings calculated differently by different companies?

chesky369

Is this because your company's financial year is probably different from the Inland Revenue tax year. When do you get your salary increases? Beginning of the 'annual' year - 1 January? Or some other date? It probably isn't 6th April (think it's the 6th but not sure) which is the UK tax year. That might account for the difference.

Debt_Free_Chick

Pensionable pay is unique to each scheme and defined in the rules/booklet.

It could be basic pay only; it could include bonus/commission; it could "disallow" a certain amount - as in your case, the Lower Earnings Limit is common. And it could be fixed on a certain day of the year and not change until the following year.

Do you have a booklet? Pensionable pay should be described in that or ask the scheme admininstrators.

chesky369

Also, does pensionable salary in this case mean the average of the final three years?

MrChips

As DFC says, each pension scheme will have its own way of calculating pensionable pay. Generally, this is the version of pay that contributions are derived from and there are hundreds of permutations - basic salary, basic salary with (LEL/BSP/something else) offset, basic salary on a particular date (with or without offset), all the above including bonus/overtime/commission etc...

Final Pensionable Salary is the definition of salary on which your actual benefits are based when you leave employment. This could be the same as Pensionable Salary or could be a bit different and could also involve some sort of averaging, e.g. average salary over the three years before leaving, best consecutive 12 months of salary in the three years before leaving etc.

If you can quote the definition from your own scheme (see member booklet, or formal Rules), we can help a bit more.

cyclonebri1

Or as mine was;
based on total earnings, the average of the best 2 out of the last 10, which actually makes sense as many are less able, ill or work shorter hours as retirement approaches, so do not get penalised for that.:T