Assumed Pensionable Pay (APP) is the pay figure used to represent normal pay when an employee has reduced contractual pay, or no pay.
When APP applies
The employer should provide Assumed Pensionable Pay (APP) when an employee has a period of:
- Reduced or Nil Pay Sick leave.
- Reduced Pay Ordinary Maternity / Adoption leave (first 26 weeks).
- Reduced Pay Additional Maternity / Adoption leave (27-39 weeks).
- Reduced Pay Shared Parental leave.
- Reduced Pay Paternity Leave.
- Reserve Force leave (whole period).
- Reduced Pay Parental bereavement leave.
In the above circumstances the employer will calculate and submit the employee’s APP figure instead of their pensionable pay figure. Once the employee returns to work, the employer will return to submitting their actual pensionable pay.
When APP doesn’t apply
APP is not applicable during nil pay periods for:
- Unpaid Maternity, Adoption, Shared Parental, Paternity, and Parental bereavement leave, or
- Situations where the member’s Pensionable Pay figure is higher due to a Keeping in Touch (KIT), Shared Parental Leave In Touch (SPLIT) or Stringer day.
Employers should provide the APP figure as part of their i-Connect monthly uploads.
If the APP period crosses into a new scheme year you should apply the APP up to the 31st March. Then start the Cumulative Pensionable Pay (CPP) figure anew from the 1st April onwards for the next scheme year.
Calculating Assumed Pensionable Pay (APP)
You take the last 3 months of full pay before any reduction in pay. If the employee is paid weekly, the employer will use the last 12 weeks before the APP period applies.
- Remove any lump sums before calculating.
- Ignore any arrears not applicable to the period.
- Ignore any reduction in pay due to a strike break, or authorised leave.
- If period covers a previous APP period, use the previous APP figure in calculation.
Divide the figure by 3 to get an APP average month.
- Multiply the average month APP figure by 12 to get an Annual Assumed Pensionable Pay (AAPP) figure.
Lump sums
- The employer will remove any lump sums from the previous 3 months pay (or 12 weeks) before the APP period applies.
- The employer will consider any lump sums paid in the previous 12 months before the APP period applies. They will consider whether these lump sums are regular payments.
- The employer will ignore irregular lump sums.
If considered a regular payment, the employer will include the lump sum in the APP figure.
There are two ways the employer can do this:
Option 1: Add regular lump sum to the Annual Assumed Pensionable Pay figure and divide by 12
Option 2: Divide the regular lump sum by 12 and add onto the APP month figure.
APP Adjustment
The APP figure will be adjusted if the period the employee is away from work crosses two 31st March dates. The employer will adjust the APP figure immediately after the second 31st March date by the percentage adjustment figure specified in the relevant HM Treasury Public Service Pensions Revaluation Order.
- If the employee’s APP period then went over a third 31st March date, the employer would adjust the APP figure again (and at each following 31st March)
- A separate APP figure is needed for each employment.
Assumed Pensionable Pay calculation example
Example 1: Marie is on reduced pay maternity leave
Maternity start date: 01/04/2023
Maternity end date: 31/12/2023
January 2023 pay = £1,500
February 2023 pay = £1,700 – including overtime
March 2023 pay = £1,500
APP Month figure
£1,500 + £1,700 + 1,500 = £4700
£4,700 / 3 = £1,566.67 (APP month)
AAPP figure
£1,566.67 x 12 = £18,800.04 (AAPP)
APP Period Figure
Maternity leave reduced pay period 01/04/2023 – 31/12/2023 = 9 Months
£1,566.67 (APP Month) x 9 = £14,100.03 – this is the APP figure to submit.
Example 2: Lump sums
Scenario A – Amelia has a lump sum.
Lump sums between 01/04/2022 – 31/03/2023 = regular £1,000 lump sum
Option 1: £18,800.04 + £1,000 = £19,800.04 (AAPP) / 12 = £1,650 (APP month)
Option 2: £1,000 / 12 + £1,566.67 = £1,650 (APP month)
Maternity leave reduced pay period 01/04/2023 – 31/12/2023 = 9 Months
£1,650 (APP Month) x 9 = £14,850 – this is the APP figure to submit.
Scenario B – Sabita does not have a lump sum.
No regular lump sums between 01/04/2022 – 31/03/2023
APP month = £1,566.67
Maternity leave reduced pay period 01/04/2023 – 31/12/2023 = 9 Months
£1,566.67 (APP Month) x 9 = £14,100.03 – this is the APP figure to submit.
KIT, SPLIT, and Stringer Days
If the member has a Keeping In Touch (KIT), Shared Parental Leave In Touch (SPLIT) or Stringer day during a period of AAP, they will be paid their full pay (Pensionable Pay) for this day. If the member’s Pensionable Pay is higher than their APP figure due to a KIT, SPLIT or Stringer Day, the Pensionable Pay should apply for that day instead of the APP figure. APP should NOT be recalculated after a KIT, SPLIT, or Stringer Day.
Keep In Touch Days (KIT)
During a period of maternity and adoption leave the member has the option to work up to 10 KIT days.
Shared Parental Leave In Touch Days (SPLIT)
During a period of shared parental leave the employee has the option to work up to 20 SPLIT days.
Stringer Days
Annual Leave continues to be built up during periods of sick leave. The employee can take these annual leave days while being on long term sick. The annual leave days will be paid using the member’s full pay (pensionable pay).
Example 3:
Marie is on maternity leave and works a KIT Day on the 15/11/2023:
APP monthly figure = £1,566.67
Pensionable Pay (PP) month figure = £1,650
How to calculate Nov 2023 CPP figure:
APP – £1,566.67 / 30 x 29 = £1,514.45
PP - £1,650 / 30 = £55
£1514.45 + £55 = £1569.45 - CPP November figure to submit
CARE APP for 01/04/2023 – 31/12/2023 = £1,566.67 x 8 + £1,569.45 = £14,102.81
Annual Assumed Pensionable Pay
An Annual Assumed Pensionable Pay (AAPP) is the yearly APP figure. If this figure is lower than the pay the member usually receives, the employer can substitute it with a higher figure. A separate AAPP figure will need to be provided for each employment.
We require the employer to provide an AAPP figure to enable us to calculate the following:
- Death in service lump sums.
- Enhanced Spouses, Co Habiting Partner, and Dependant pensions.
- Enhanced Ill Health Pensions (Tier One and Two).
The AAPP figure should be provided on the LGPS 15 Leaver form.
If the Independent Registered Medical Practitioner (IRMP) certifies that the member reduced their hours because of ill health which led to retirement or death, then the employer will ignore the hour change when calculating AAPP. The IRMP will indicate on the LGPS17A - Ill Health Certificate for a Current Employee form whether the AAPP figure should ignore any hour changes.
Employee and employer contributions during a period of APP
- Employee contribution % banding remains unchanged; they should stay on the % banding before any drop in pay.
- Employee contribution % will be based on their actual pay.
- Employer contribution % will be based on the member’s APP figure.
Example: Reduced Pay Long Term Sick
Robyn is on long term sick and for January 2024 the following applies:
- Reduced pay of £400
- APP figure of £800
- Employee contribution rate is 5.5%
- Employer contribution rate is 18.7%
Employee contributions paid = £400 x 5.5% = £22
Employer Contributions paid = £800 x 18.7% = £149.60
APP and the 50/50 section
Where APP applies, and the employee receives no pay and is in the 50/50 section, the employer will move them back into the Main section of the CARE scheme from the beginning of the next pay period if they are still on Nil Pay.
The employee will then remain in the Main section until they elect to join the 50/50 section. For Reserve Force leave the member will remain in the 50/50 section the duration of the whole period even if the member drops to nil pay.
Short periods of sickness where the employer has a policy to not pay staff for the first X days of sickness: If this period crosses two pay periods, the employee will be moved back into the Main section.