APP for adding to cumulative pay
APP is the average pensionable pay for the 3 months/12 weeks before the start of the pay period when reduced/ no pay, child-related leave etc began, less non-regular lump sums. This figure is then grossed up to the annual rate plus any regular lump sums received. If the calculated APP figure is materially different from what the member would normally have received, then the employer may substitute a revised level of pay to reflect what the member would have normally received.
APP for ill-health enhancement/ death in service
APP is the average pensionable pay for the 3 months/12 weeks before the start of the pay period when the ill-health or death occurred (including any APP credited to the cumulative), less non-regular lump sums. This figure is then grossed up to the annual rate plus any regular lump sums received. If the calculated APP figure is materially different from what the member would normally have received, then the employer may substitute a revised level of pay to reflect what the member would have normally received.
Examples of APP Calculations
The following examples indicate how APP is calculated for a range of employment types as well as illustrating the different method of calculating APP for ill-health enhancement or death benefits.
Member’s rate of pay:
1 April 2021 to 31 March 2022 – £3,148.17 per month (£37,778.04 per annum)
1 April 2022 to 31 March 2023 – £3,211.08 per month (£38,532.96 per annum)
1 April 2023 to 15 June 2023 – £3,211.08 per months (£38,532.96 per annum)
Periods of half pay and no pay
9 June 2022 – Member goes onto half pay sick
9 December 2022 – member goes onto no pay sick
15 June 2023 – member retires on ill-health grounds
APP applies when a member goes onto reduced contractual pay or no pay due to illness or injury. It ensures that the member’s pay for pension purposes is protected at the pre-half pay level. An APP figure is substituted during reduced contractual pay or no pay period.
Calculation of APP for CARE pension
APP applies from 9 June 2022 to 15 June 2023 (while on half pay and no pay due to illness)
To calculate APP, take the last three months of full pay immediately before the reduced pay i.e. March, April and May 2022
March 2022 £3,148.17
April 2022 £3,211.08
May 2022 £3,211.08
Total £9,570.33 for 3 months
Bring up to 12 month pay = £9,570.33 x12/3 = £38,281.32 (£3190.11 per month section 6a)
Is this figure materially different from the pay that they would have earned if they had not been absent? If yes, you will need to substitute the calculated APP with the notional pay.
Calculate APP from 9 June 2022 to 31 March 2023
The method will vary depending on how each employer normally calculates a day’s pay. We have used the following method:
9/6/2022 – 30/06/2022 – 22 days/30 days = £3,190.11 x 22/30 = £2339.41 (APP component for CARE)
1/7/2022 – 31/03/2023 – 9 months x £3,190.11 = £28,710.99 (APP component for CARE)
Total APP Component for CARE pay for year ended 31 March 2023 = £31,050.40.
Total CARE pay for year ended 31 March 2023 =
CARE pay to 9 June 2022 + APP Component to 31 March 2023
CARE pay to 9 June 2022 = £3,211.08 + £3,211.08 + (8/30 X £3,211.08) = £7,278.45
Plus APP component = £7,278.45 + £31,050.40 = £38,328.85
Contributions due for 2022/23
The member pays contributions on the pay that they actually receive. The employer pays contributions on the full pay received and on any APP that applies during periods of half pay or no pay due to sickness.
Pay member actually receives 1/4/2022 – 31/3/2023 is:
01/04/2022 – 08/06/2022 = (£3,211.08 x 2) + (8/30 x £3,211.08) = £7,278.45
09/06/2022 – 08/12/2022 = (22/30 x £3,211.08/2) + (5 X £3,211.08/2) + (8/31 x £3,211.08/2)
= £1,177.40 + £8,027.70 + £414.33 = £9,619.43
Pay received 1/4/2022 – 8/12/2022 = £7,278.45 + £9,619.43 = £16,897.88
Employee contributions payable on reduced pay of £16,897.88 are £16,897.88 x 6.5% = £1098.36 (Section 7)
Employer contributions at 19.5% on unreduced pay (£7,278.45) plus APP (£31,050.40) for 2022/23 = £38,328.85 x 19.5% = £7,474.13 (Section 7)
Calculate APP from 1 April 2023 to 15 June 2023
01/04/2023 – 15/06/2023 = £3,190.11 + £3,190.11 + (15/30 x £3,190.11) = £7,975.28 (Section 5 and 6b)
Employer contributions for 2023/24
01/04/2023 – 15/06/2023 = £7975.28 x 19% = £1515.30 (Section 7)
Member’s rate of pay :
1 April 2022 to 3 January 2023 – £332.42 per week
4 January to 31 March 2023 – £339.72 per week
1 April 2023 to 27 June 2023 – £339.72 per week
Period of half pay
6 February 2023 to 4 April 2023 – Member on half pay sick
5 April 2023 – member goes back to full pay
27 June 2023 – member retires on ill-health grounds
APP applies when a member goes onto reduced contractual pay or no pay due to illness or injury. It ensures that the member’s pay for pension purposes is protected at the pre-half pay level. An APP figure is substituted during reduced contractual pay or no pay period.
Calculation of APP for CARE pension
APP applies from 6 February 2023 to 4 April 2023 while on half pay due to illness.
To calculate APP for a weekly paid member, take the last twelve whole weeks before the pay period where the member went onto reduced pay i.e. 14/11/2022 – 05/02/2023. The calculation must be split into two parts as there is a pay increase during this period.
14/11/2022 – 03/01/2023 – 7 + 2/7 weeks x £332.42 = £2,421.92
04/01/2023 – 05/02/2023 – 4 + 5/7 weeks x £339.72 = £1,601.54
Total pay for 12 weeks = £2,421.92+ £1,601.54= £4,023.46
The weekly rate of APP = £4,023.46/12 = £335.29(Section 6a). This APP rate applies from 6 February 2023 to 4 April 2023 while the member is on half pay sick.
For the year 1 April 2022 to 31 March 2023
CARE pay received for period 01/04/2022 to 03/01/2023 = £332.42 x (39 +5/7 weeks) = £13,201.82
CARE pay received for period from 04/01/2023 to 05/02/2023 = £339.72 x (4 + 5/7 weeks) = £1,601.54
APP for period from 06/02/2023 to 31/03/2023 = £335.29 x (7+5/7 weeks) = £2,586.52
Reduced pay for period from 06/02/2023 to 31/03/2023 = £339.72/2 x (7 + 5/7 weeks) = £1,310.34
Employee contributions are paid on pay actually received i.e. £13,201.82 + £1,601.54 + £1,310.34 = £16,113.70 x 5.8% = £934.59. (Section 7)
Employer contribution are paid on the unreduced pay plus APP = £17,389.88 x 19.5% = £3,391.03 (Section 7)
For the year 1 April 2023 to date of leaving, 27 June 2023
01/04/2023 – 04/04/2023 APP as on half pay = £335.29 x 4/7 = £191.59 (Section 5 and 6b APP Component)
01/04/2023 – 04/04/2023 half pay received = £339.72/2 x 4/7 = £97.06
05/04/2023 – 27/06/2023 normal pay received = £339.72 x 12 weeks = £4,076.64
01/04/2023 – 27/06/2023 total pay received = £97.06 + £4,076.64 = £4,173.70 (Section 7)
Total CARE pensionable pay = £191.59 + £4,076.64 = £4,268.23 (Section 5 CARE pay)
Employee contributions on reduced pay = (£97.06 + £4,076.64) x 5.8% = £242.07 (Section 7)
Employer contributions on unreduced pay (Full pay and APP) = (£191.59 + £4,076.64) x 19% = £810.96 (Section 7)
APP for ill-health enhancement
Go back 12 weeks before the pay period where the ill-health retirement occurred – 5 April to 27 June
12 weeks at £339.72 per week = £4,076.64
One year’s pay = £4,076.64/12 x 52.14 = £17,713 (Section 6c – APP for ill-health or death)
Member’s rate of pay:
1 April 2022 to 31 March 2023 – £638.68 per four weeks
1 April 2023 to 31 May 2023 – £638.68 per four weeks
History:
13 November 2022 – 12 May 2023 – member on half pay sick
13 May 2023 – member goes on unpaid sick leave
31 May 2023 – member retires on ill-health grounds
APP applies when a member goes onto reduced contractual pay or no pay due to illness or injury. It ensures that the member’s pay for pension purposes is protected at the pre-half pay level. An APP figure is substituted during reduced contractual pay or no pay period.
Calculation of APP for CARE pension
APP applies from 13 November 2022 to 31 May 2023 while on half pay and no pay due to illness.
To calculate APP, take the last twelve whole weeks before the pay period where the member went onto reduced pay i.e. 25/07/2022 – 16/10/2022. Assume the last full pay period ended on 16/10/2022.
25/07/2022 – 21/08/2022 (all holiday) = £0
22/08/2022 – 18/09/2022 (1.429 weeks holiday and 2.571 weeks pay) = £638.68/4 x 2.571 = £410.51
19/09/2022 – 16/10/2022 ( 4 weeks pay) = £638.68
Total pay for 12 weeks = £410.51 + £638.68 = £1,049.19
Annual term-time APP = £1,049.19/6.571 x 46.4 = £7,408.68 or £638.68 four weekly or £159.67 weekly (Section 6a).
APP is only applied to the contractual weeks the member would have been paid for e.g. it will not be applied in July if they did not work the month of July as per their contract.
For the year 1 April 2022 to 31 March 2023
CARE pay received for period 01/04/2022 to 12/11/2022 = £638.68 x {(32+2/7 weeks – 5.8 weeks)/4] = £4,228.97
CARE pay received for half pay period from 13/11/2022 to 31/03/2023 = £638.68/2 x (19 + 6/7 weeks)/4 = £1,585.28
APP for period from 13/11/2022 to 31/03/2023 = £638.68 x (19 + 6/7 weeks)/4 = £3,170.59
Employee contributions are paid on pay actually received i.e. £4,228.97 + £1,585.28 = £5,814.25 x 5.5% = £319.78. (Section 7)
Employer contribution are paid on the unreduced pay plus APP = £4,228.97 + £3,170.59 = £7,399.56 x 19.5% = £1,442.91 (Section 7)
For the year 1 April 2023 to date of leaving, 31 May 2023
01/04/2023 – 12/5/2023 APP as on half pay = £638.68 x 6 weeks/4 = £955.02 (Section 5 and 6b APP Component)
01/04/2023 – 12/05/2023 half pay received = £638.68/2 x 6/4 weeks = £479.01
13/05/2023 – 31/05/2023 no pay, APP applies = (£638.68 x 2 5/7 weeks) /4 = £433.39
01/04/2023 – 31/5/2023 total pay received = £479.01 (Section 7)
Total CARE pensionable pay = £955.02 + £433.39 = £1,388.41 (Section 5 CARE pay and 6b)
Employee contributions on reduced pay = £479.01 x 5.5% = £26.35 (Section 7)
Employer contributions on unreduced pay (All APP) = (£955.02 + £433.39) x 19% = £263.80 (Section 7)
APP for ill-health enhancement
Go back 12 weeks before the pay period where the ill-health retirement occurred – 9 March to 31 May 2023
12 weeks at £638.68/4 = £1,910.04
One year’s pay = £1,916.04/12 x 46.4 = £7,408.69 (Section 6c – APP for ill-health or death)