10.1.11 An allowance is a payment that is normally paid on a permanent basis, typically in recognition of specific skills/qualifications or additional duties/responsibilities.

10.1.12 Fluctuating allowances or non-consolidated payments are terms that define any part of an employee’s earnings that you do not pay on a fixed basis and are not included in basic pay in future years. It can include such things as non-consolidated bonuses. They are usually one-off performance related payments that have to be ‘re-earned’ every year. Normally they are non-pensionable. In classicclassic plus and premium fluctuating allowances can only be made pensionable if they are averaged over the last three years. The reason for this is to prevent the deliberate increase of pension entitlement in the last year of service. You must take into account the above advice before contacting the Scheme Manager, Cabinet Office to make such allowances pensionable.

10.1.13 The Minister for the Civil Service has discretion to treat allowances and/or non-consolidated pay as pensionable. In practice, the Scheme Manager, Cabinet Office carries out this work on the Minister’s behalf. If you are considering making an allowance or an element of non-consolidated pay pensionable, you must first get authorisation from the Scheme Manager, Cabinet Office (see procedure outlined below).

Please note: The Scheme Manager, Cabinet Office will not normally agree to an allowance or non-consolidated payment being made pensionable unless it will be pensionable for everyone who receives it and there is no scope for the individual to manipulate the circumstances in which the payment is received.

10.1.14 You should be aware that it does not always benefit members (particularly with classic benefits) to make non-consolidated bonuses pensionable where they receive them outside the period for reckoning pensionable earnings. While you and the member will pay contributions on the bonuses they will not increase the final pensionable earnings unless they fall within the pay period(s) for calculation. For example, the pay period for classic members remains their last three years of reckonable service.

10.1.15 There is a danger that making such payments pensionable may have issues for equal treatment and leave you open to legal challenge. You should therefore seek your own legal advice before submitting a request to the Scheme Manager, Cabinet Office to make a non-consolidated bonus pensionable.

10.1.16 There are no past service cost issues in relation to CARE benefits for nuvos or alpha members.  However, there will be past service costs in respect of any ‘linked’ final salary benefits in nuvos, or any ‘banked’ service in the PCSPS for transition members of alpha.

10.1.17 Once you have established the past service costs you will not normally have to pay past service costs for new staff working in posts eligible for the non- consolidated pensionable payment as the general turnover of staff should balance any future liabilities. However, if you want to increase significantly the number of staff to whom you want to give the new pensionable pay element, you will have to ask the Government Actuary’s Department (GAD) for a further assessment of past service costs.

10.1.18 Once past service costs are agreed you will not require further past service costs assessments if the element of pay is increased as part of the normal annual pay review for all staff.

10.1.19 For new pensionable pay elements, members of classicclassic pluspremiumnuvos and alpha will all pay employee contributions. There may be some historical reason why classic members may not have to contribute on existing pensionable elements of pay (see 10.1.24). However, these are not precedents for new elements.

Published:
5 January 2022
Last updated:
5 January 2022