Date posted: 18/12/2002
Issue: This Notice supplements the guidance given in EPN15 on:
- the use of sick pay at pension rate;
- the payment of contributions for those whose pensionable earnings exceed the permitted maximum (the earnings cap).
Action: Employers should note the contents of this Notice and, in particular, ensure that everyone involved in sick pay policy is made aware of this information.
- EPN15 issued on 6 August explained the calculation of member contributions and ASLCs under the classic plus and premium schemes and employer/employee contributions under the partnership pension account. It explained the implications of the new pension arrangements for sick pay at pension rate, and how contributions should be assessed for those whose pensionable earnings exceed the permitted maximum (the earnings cap). This Notice amplifies and clarifies that information.
Sick pay at pension rate (SPPR)
- Departments and agencies have delegated authority under 9.5 of the Civil Service Management Code (CSMC) to decide whether to pay SPPR after entitlement to paid sick leave has ended. SPPR is a rate of pay equal to the pension that would be payable if the employee was retired early on the grounds of ill-health. The basic principle underpinning the payment of SPPR has always been that individuals should not be deprived of funds (no pay or pension) whilst their employer decides their working future. SPPR is only appropriate if there is a reasonable prospect of return to work. Using SPPR for the reason for which it has always been intended, and as part of a structured rehabilitation plan, can be an effective tool. However, employers may wish to consider whether linking SPPR to rates of pension continues to be appropriate now that employees can be members of different pension schemes.
- The rehabilitative aspect of SPPR is lost when payment is made automatically without regard to the employee’s prospects for returning to work. Employers should therefore consider their current practice in relation to SPPR. The rehabilitation plan, backed up by the time-limited payment of SPPR, might include:
- making adjustments to premises or allowing home-working;
- part-time working, either temporarily or permanently; altering the employee's working hours, either temporarily or permanently;
- allocating some of the employee's duties to another person;
- allowing the employee to be absent during working hours for rehabilitation;
- giving the employee additional training;
- acquiring or modifying equipment, including workstations; or
- transferring the employee to an alternative position.
The list is not exhaustive and employers may identify other ways for rehabilitating employees and returning them to work. The occupational health adviser should always be consulted before offering such tools.
- Paragraph 11 of EPN15 states that when determining SPPR for members of classic plus and premium, employers may wish to consider in conjunction with BMI whether the upper tier or lower tier of ill-health pension benefits is likely to be appropriate. After further consideration of SPPR as a rehabilitative tool, we have concluded with the Cabinet Office’s Conditions & Job Evaluation Unit that it would be appropriate for SPPR to be based on the lower tier benefits, and that there is therefore no need to consult BMI. Where lower tier SPPR is in payment, but the person later leaves on ill-health retirement with upper tier benefits, the lower tier SPPR can be revised retrospectively to upper tier to reflect the changed circumstance.
- Under classic plus and premium, members have the option to exchange (commute) some of their pension for a lump sum. Employers have asked whether they should base SPPR on the pension that would be paid before or after commutation. This is a matter for employers to decide when exercising their delegated authority under the CSMC. However, if an objective is parity of treatment with members of classic (where a lump sum is automatically paid), then it would seem appropriate to base SPPR on the pension that would remain if the member had opted to take the maximum lump sum available.
The permitted maximum (earnings cap)
- Paragraph 14 of EPN15 states that under classic, pensionable earnings under classic plus, premium and partnership must not exceed the earnings cap. However, the earnings cap only applies to those who became active members on or after 1 June 1989 (or those who have elected to be treated as such).
- The earnings cap does not apply in the following circumstances to members who became active members on or after 1 June 1989 but who were members of another scheme before 1 June 1989 and have served continuously since:
- members who join from a by-analogy scheme (mirror image to the PCSPS);
- members who are compulsorily transferred to the Civil Service with their work (either a Machinery of Government change or a TUPE transfer);
- (with the agreement of the Inland Revenue and approval of CSP) members who join from other Public Service schemes where employment is related (eg. those who join the Department of Health from NHS Trusts or Health Authorities).
- The cap will also not apply to members who joined the Civil Service before 1 June 1989 and who cease to be active members but return either:
- after a break of one month or less; or
- from a secondment or posting to another employer provided that there has been no break in service and, at the time of the secondment or posting, there was a definite expectation of return.
Enquiries about pensions implications for SPPR, and the earnings
Enquiries about distribution of EPNs: