Members will build up CARE pension based on the actual pay received. If the furlough pay is 80% of what the member would normally receive then the pension they will build up will be 80% of what they would normally have built up. The member can choose to buy additional pension to make up for the pension that was ‘lost’. The employer may split the cost of this additional pension purchase with the member but is not obliged to do so. The employer could also choose to award additional pension to the member, based on the pension ‘lost’ due to the pay reduction. Employers may wish to check their policy statements regarding this discretion.
Any pension benefits that a member may have that are final salary benefits (relating to membership before 1 April 2015) are usually calculated on the final year’s pay or the best one of the last three years if an earlier pay is higher. This should prevent the final salary element of a member’s pay being affected by being on furlough.
It is also sometimes possible that where a member’s final salary pay in a continuous period of employment is reduced or restricted the average of any three consecutive years’ pay in the last 10 years may be used if that is higher.