Overview of Absences and Assumed Pensionable Pay

If an employee is on certain types of absence, their main scheme pension benefits are protected to ensure that they aren’t disadvantaged by a reduction in pay during the absence.

In these cases, assumed pensionable pay (APP) is used as the basis to calculate the pension benefits of the eligible employee. Assumed pensionable pay usually replicates the pensionable pay received by an employee before they start the absence.

The assumed pensionable pay calculation is triggered if an employee goes on a child-related absence or if sickness absence pay is reduced. Their APP is calculated using the average pensionable pay of 3 complete pay periods prior to the period of absence (or in the case of assumed pay, the point at which their pay is reduced). For example, if an assumed pay absence starts on April 14, their average pensionable pay is calculated from the pensionable pay from the January, February, and March periods. It is then converted to an annual rate and applied to the relevant period as a proportion of that rate.

Additional Considerations

• If, due to a lack of service, there are insufficient pay periods (less than 3 months or 12 weeks) prior to the absence, the available number of complete periods are used in the APP calculation.
• If there are other approved absences in the 3 months or 12 weeks period (that may not be APP absences), any reduction in pay associated with those absences (e.g. unpaid parental leave) is ignored and the period is treated as a full period for APP calculation purposes.
• Once calculated for a particular period of leave the APP won't be updated, even if the rate of pay changes during the absence.
• APP does NOT apply during any period of unpaid additional maternity, paternity or adoption leave or unpaid shared parental leave available at the end of relevant child related leave; this is to be treated as unpaid leave of absence.
• In periods where there are days with normal eligible compensation and days with reduced or zero compensation due to an absence (for example sickness where a part of this period is paid with 100% and another part is paid with 50%), the employer contributions are calculated on prorated values of Permanent Pensionable Pay and prorated Assumed Pensionable Pay.

The result of the calculation is returned to the input value Assumed Pensionable Pay on element <Base Name> Employer Contributions. (Employee contributions paid through payroll are based on actual pensionable pay and don’t use assumed pay.)