- HR managers
- Payroll managers
- To work with your payroll provider to ensure that changes to employee contribution rates and salary thresholds can be applied from 01 April 2020.
- To ensure your payroll provider can implement a change to the method used to determine which salary threshold a member falls within based on their pensionable earnings.
- You should commence work immediately with your payroll provider about preparations to implement change.
- Following the end of the consultation process on 17/02/2020 and consideration of consultation responses rates and salary thresholds for 2020/21 will be confirmed.
Changes to salary thresholds
1. The Cabinet Office has commenced a consultation with member representatives. The proposal is to continue 2019/20 member contribution rates from 01 April 2020, and 2019/20 salary thresholds will increase slightly.
Table 1 - Employee pension contributions rates from 01 April 2020 being consulted upon with member representatives.
|Annualised rate of pensionable earnings||Member contribution rate|
2. The above set of rates and salary thresholds are being consulted upon, and the outcome of the consultation may be a different set of rates or salary thresholds.
3. We are publishing the proposed rates and salary thresholds in the consultation to assist your preparations with your payroll providers due to the short period remaining before the rates and salary thresholds will take effect.
Changes to calculation of pensionable earnings definition for pension contributions
4. There are also proposed changes to calculation of pensionable earnings definition for pension contributions.
5. Currently, backdated pay is added to regular monthly salary to determine which contribution band a member falls within. The contribution rates applied are determined each month, based on a pro-rata of the annual threshold.
6. It is proposed that backdated pay should not be included when determining the contribution tier. This would be achieved by basing the salary used to determine contribution tier only on actual basic pay and any pensionable allowances. For avoidance of doubt, part-time workers would continue to have their salary threshold worked out using their actual pay, and not their full-time equivalent salary.
7. This contribution rate should be applied against all pensionable earnings paid in the period, i.e. to both salary and any backdated pay.
Worked example (based on 2019/20 salary thresholds)
8. A member who has an annual salary of £51,000 receives a pay rise in September 2019 of £500 P/A.
9. The pay increase of £500 is equal to £41.67 per month. The pay increase is not received by the member until their November 2019 pay. In November, the member receives their new monthly salary and the backdated pay increase i.e. £4,291.67 + £83.33 (new monthly salary plus 2 months backdated pay award).
|Current system||Proposed system|
|Annualise total pensionable earnings, including backdated pay in that month: (£4,291.67 + £83.33) x 12 = £52,500.||Annualise total pensionable earnings, excluding backdated pay in that month: £4,291.67 x 12 = £51,500.|
|£52,500 income means a pension contribution rate of 7.35%.||£51,500 income means a pension contribution rate of 5.45%.|
|For November’s pensionable earnings the member’s contribution will be 7.35% of (£4,291.67 + £83.33) i.e. £321.56.||For November’s pensionable earnings the member’s contribution will be 5.45% of (£4,291.67 + £83.33) i.e. £238.44.|
10. We will issue another EPN as soon as possible, with confirmed rates following consideration of consultation responses. Legislative amendments to the Scheme Rules to affect this policy will be laid on 04 March 2020.
For more information, contact Emily Clifton from the Civil Service Pensions team email@example.com
If you have a question about the distribution of EPNs, or would like to receive them in a different format, please contact EPN@MyCSP.co.uk.
You can find electronic copies of the Employer Pension Guide, all current EPNs and forms in the Employer section.
This notice is for employers and should not be issued to scheme members.
Members can find information about their pension by visiting www.civilservicepensionscheme.org.uk/members