Pensionable Earnings

Pensionable earnings are defined within Regulation 27 of the NHS Pension Scheme (Scotland) Regulations 2015 and mean, subject to the provisions of this regulation:

Salary, wages, fees, any amount equal to any part of salary given up under an approved salary sacrifice arrangement, and other regular payments made to a member in respect of their employment.  Pensionable earnings do not include bonuses, payments made to cover expenses, payments for overtime, or pay awards/increases which are expressed by the Scottish Ministers to be non-consolidated.

The difficulty in determining pensionable earnings arises with the use of the phrase "other regular payments", as a large number of different allowances and pay enhancements can be paid by employers, some of which are pensionable, and some which are not.  Further information about payments which may or may not be pensionable can be found on the Pensionable Allowances and Pay Enhancements page. 

If you require information about a specific type of payment which is not mentioned in this section, please contact us for further information.

Total Pensionable Pay (TPP) is used to calculate benefits in the legacy final salary scheme (1995 and 2008 Sections). Those members who qualify for a ‘final salary link’ will have their benefits in the 1995/2008 Sections based on their TPP on or near their retirement, and not at the point they moved to the 2015 Scheme.

1995 Section

The TPP figure is the yearly pensionable earnings in the best of the last 3 years of employment immediately before termination, counting backwards in sets of 365 paid days of pensionable employment. Periods of non-contributing employment e.g. unpaid sick leave, should be excluded from the 365 day calculation and shown separately on any pension application form.

2008 Section

The TPP figure is based on the average of the best 3 consecutive years out of last 10 years of employment immediately before termination, counting backwards in sets of 365 paid days of pensionable employment. Periods of non-contributing employment e.g. unpaid sick leave, should be excluded from the 365 day calculation and shown separately on any pension application form.

There are a number of occasions when a TPP will be required, e. g. benefit estimates and awards, transfer estimates and payments or credits, AVC quotes and purchases etc.

2015 Scheme

TPP is not required for the 2015 scheme as this scheme is a Career Average Revalued Earnings (CARE) scheme. Each year's pensionable earnings are calculated and added to the pension pot with a revaluation added at the end of each financial year.

It is the responsibility of the employer to provide TPP information both accurately and timeously, either on request or automatically when completing benefit application forms.  SPPA will approach employers if any required detail is missing from supplied information.

Where retirement forms have already been sent to SPPA, employers must report any changes in pensionable pay to SPPA immediately so that revision action can be taken if appropriate.

Protection of pay is available to members of the 1995 and 2008 Sections of the scheme who retain a final salary link.

Overview 

Members contributing to the 1995 or 2008 sections of the scheme may be eligible to protect their pensionable pay for the purposes of calculating subsequent benefits provided:

• the member has at least 2 years’ pensionable service
• the member has suffered a reduction in pensionable pay through no fault of their own
• the member applies in writing for such protection within 3 months of the reduction in pensionable pay

Examples of accepted reasons for protection of pay are:

• a change in the nature of the duties performed, for example, due to ill health
• a move to a lower paid post because of pending or actual redundancy
• being transferred to other employment due to reorganisation

Step Down Voluntary protection is only available to members of the 1995 Section who retain a final salary link.

Overview 

Members contributing to the final salary arrangement in the 1995 section of the scheme on or after 1 April 2008, can request protection of their pensionable pay figure for the purposes of calculating subsequent benefits, provided:

• the member has reached the age of 50.
• the member has at least 2 years' pensionable service. the member's pensionable pay (whole-time equivalent pay in the case of part-time members) has reduced by at least 10%.
• the reduction in pay is for at least 12 months.
• the member applies in writing for such protection within 15 months of the reduction in pensionable pay.
• for a period of at least 12 months (ending immediately before the reduction the application is in respect of) the member's pensionable pay had not been subject to any other reduction.
• the member has not already protected their pensionable pay through use of this provision.

Permitted reduction 

The permitted minimum reduction in pensionable pay means 10% of the member's whole-time equivalent basic pensionable pay in the 12 months up to the effective date of the protected pay.

An application for voluntary protected pay is a valid application if all the following apply:

• it is made by an eligible member.
• it is in respect of service under the final salary arrangement of the scheme only.
• the member's notional whole time equivalent basic pensionable pay has decreased by at least the permitted minimum.
• the decrease in pensionable pay is from an amount of pensionable pay that was in effect for at least 12 months immediately before the decrease.
• it is made, in writing, to the scheme administrator within 15 months of the member's pensionable pay being reduced.
• the reduction in pensionable pay referred to above remains greater than or equal to the permitted minimum for at least 12 month.
• there has been no previous valid application.

Members of the 1995 section will have access to new index linked voluntary pay protection arrangements on step down, based on the current pension protection provisions after compulsory step down. 

Voluntary protection of final pensionable pay can take effect at any age after the members minimum pension age (MPA). Voluntary protected pay is intended primarily to operate when a member takes on a less demanding post in the run up to retirement. Members may make one election to preserve their benefits up to the date their pay (whole time comparable pay for part-time membership) reduces. 

Sick Leave – Reduction of Pensionable Pay 

Statutory Sick Pay (SSP) is pensionable pay on which pension contributions are payable. It should be included as pensionable pay in the Total Pensionable Pay (TPP) for benefit purposes, however, it should never be included as deemed pay.

Where a member's earnings reduce during the 8 weeks prior to their period of incapacity for work, e.g. moving from whole time to part time, their earnings during sick leave may be less than the SSP payable. In such a case, pension contributions will be based on SSP, and the TPP will not be uprated for pension benefit purposes.

Employer's Statutory Sick Pay - Full Rate Sick Pay 

When a member becomes entitled to sick pay at full rate, the SSP is subsumed into sick pay and both member and employer pay contributions on full rate of pay.

Employer's Statutory Sick Pay - Half Rate Sick Pay

When a member becomes entitled to sick pay at half rate, the SSP is paid in addition to this except when SSP is more than half pay. In which case half Occupational Sick Pay will be adjusted to ensure that this element, when added to SSP, does not exceed full pay.

Employer's contributions are based on unreduced pay and member's contributions on the pay plus SSP received, providing the total does not exceed full pay.

Employer's Statutory Sick Pay - Unpaid Sick Leave

When a member's entitlement to paid sick leave has expired, although still entitled to receive SSP, the latter is treated as superannuable remuneration and contributions should be paid on SSP. 

Employer contribution are based in the unreduced pay. Reckonable service is extended for the period during which SSP is in payment.

Maternity Pay and Leave 

Members who do not intend to return to work

A member who goes on maternity leave and does not intend to return to work pays contributions on Occupational Maternity Pay (OMP), if applicable. Employee contributions are based on the amount of maternity pay actually received, with employer contributions based on the member's salary immediately prior to the period of maternity leave.

Where an employee is not entitled to OMP but has an entitlement to Statutory Maternity Pay (SMP), Employee and Employer contributions cease on the last day of employment.

Members who intend to return to work

A member who intends to return to work following maternity leave is pensionable, regardless of whether the leave is paid or unpaid. Employee contributions, during paid maternity leave, are deducted on the amount of pay actually received. During unpaid maternity leave, contributions are based on the amount the member was receiving immediately before the unpaid maternity leave commenced. 

Employer contributions during paid and unpaid maternity leave are based on the member's salary immediately prior to the period of maternity leave. The member's salary on which employer contributions are based is recalculated for any subsequent pay award.

A member may elect to receive payment of OMP apportioned over the whole period of the maternity leave. 

Employers should still calculate and deduct employee contributions on the basis of the underlying entitlement and dates for which the payments were due.

During a period of unpaid maternity leave, employee contributions will be calculated on the rate last paid i.e. Statutory Maternity Pay (SMP).

Where an employee is not entitled to OMP but has an entitlement to SMP, employee contributions are payable on SMP. Employer contributions are based on the member's salary immediately prior to the period of maternity leave.

Any arrears of pension contributions can be collected when the member returns to work.

Added years contributions will continue to be payable on the normal salary before maternity leave started (the rate in payment immediately before maternity pay started).

Additional Pension contributions will continue to be payable at the agreed monthly rate and should be collected by lump sum on return to work

Member changes option

A member who changes her mind and decides not to return to work shall have their contributions re-assessed based on the "members who do not intend to return to work" paragraph above.

Keep in touch days

An employee who chooses to have "Keep in Touch Days" should have contributions deducted on the pay actually received. Employers contributions are based on the member's normal salary

Any arrears of pension contributions can be collected when the member returns to work .

Contributions

Employers should make members aware that contributions are payable both on paid and unpaid maternity leave when they make a statement of intention to return to work.

Where contributions have been correctly paid on any part of maternity leave, (whether paid or unpaid leave), they should not be refunded to the member.

To avoid an arrears situation, membership should extend to the last day for which contributions have been paid and that date recorded as the date of termination. Employers should advise SPPA of any adjustments.

Paternity Leave, Parental Leave, Adoption Leave

Where the leave is paid the employee's contributions are based on the pay actually received. Employer's contributions are based on the member's normal salary.

Where the leave is unpaid the employee's contributions are based on the rate of pay in force immediately before the period of unpaid leave. Employer's contributions continue to be based on the member's normal salary.

Any arrears of pension contributions can be collected when the member returns to work.

Pensionable service is extended to include payment of untaken annual leave on termination of employment. Where a member takes up pensionable employment with another NHS employer during the time covered by the untaken annual leave, pensionable service with the new employer will commence following the period of untaken annual leave. This is to ensure that there is no overlap in superannuable service and that contributions are not paid twice for the same period

Paid Notice

Paid notice should not be confused with payments made in lieu of notice and employers are advised to work on the following basis:

• the period reckons as contributing membership;
• pension contributions should be deducted on the full amount.

Members must continue to pay contributions based on the amount of pensionable pay they were receiving immediately before they went on leave of absence.

Any arrears of pension contributions can be collected when the member returns to work.

Membership of the 1995 Section was previously restricted to 40 years pensionable membership at age 60 and 45 years overall. Members of the 1995 Section with Mental Health Officer status and Special Class members are restricted to 40 years pensionable membership at age 55 and 45 years overall. Membership of the 2008 Section was restricted to 45 years overall.

Members were prevented from accruing any further pension benefits in the 1995 and 2008 Sections once they reached maximum pensionable service. When the 2015 Scheme was introduced, members of the 1995 and 2008 Sections who had accrued maximum pensionable service in those sections were excluded from joining the 2015 Scheme.

When the 1995 and 2008 Sections closed on 1 April 2022, members with maximum pensionable service remained excluded from joining the 2015 Scheme because they were prevented from further accrual by scheme rules.

With effect from 1 October 2023, members with maximum pensionable service in the 1995 and 2008 are able to join the 2015 scheme and accrue further pension benefits in that scheme. There are no maximum service limits in the 2015 Scheme.