Annual Allowance Letters
Many of you will have recently received a letter from the Scottish Public Pensions Agency (SPPA) providing details of a breach your pensions Annual Allowance. PLEASE DO NOT IGNORE THIS LETTER.
At the ASPS Executive Meeting last week concerns were raised that the information provided in the letters is not easily understood. The purpose of this circulation is to provide some insight into the calculations and also what ASPS is doing to improve members understanding. You will only have received a letter if you have breached your Annual Allowance Limit. This does not necessarily mean you will be due any money but please follow the instructions provided.
The Police Service of Scotland provides the SPPA with details of your pay during the Pension Input Period (PIP).
Pensions Input Period The calculations are not straightforward in part due to changes in the PIP. In simple terms the PIP has changed by a few days to starting on 6 April each year with some adjustments having to be made from when that decision was made (8/7/2015). Although a figure of £80000 appears in effect AA has been £40000 per annum since it fell from £50000 in2014.
Pension input Amount
This is the increase of your pension input from one year to the next. The first calculation for your pensionable salary for those still fortunate enough to be in the 87 Pension Scheme that will be pensionable salary for the previous PIP x 20/60ths for your first 20 year service and a double accrual period of 2/60ths for each of the following years x CPI for those in the CARE 2015 Scheme the pensionable salary is determined by increased pensionable salary by a multiplier of 1/56 x CPI + 1.25% The difference between this sum and the following years pensionable salary gives you the increase to your pension pot. This is then multiplied by 16 to give your Pension Input Amount.
Whole Time Equivalent Pay
Because you will have received a pay increase from 1 Sept each year and promotions and increment will impact at different times of the year the pay calculations are not always straightforward.
Even with an increment only increase members can fall foul of the £40000 limit and then rely on previous periods of underspend as Annual Allowance can be spread over a 3 year period. There is a link to an HMRC Calculator through the SPPA Website which can assist in calculations.
Like any Tax Calculations from HMRC the SPPA letters can be confusing and ASPS will through the Scottish Police Pensions Board and through links to the Joint Scottish Police Authority Police Service of Scotland Service Level Agreement and directly with the SPPA continue to press for easy to understand communications from the SPPA.
General Secretary ASPS