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Nilgosc


Contribution Rates

 

Should employers make an assumption for overtime when assessing pensionable pay?

Yes, if overtime is paid regularly then it should be included when assessing the contribution band for a member.  Guidance is provided in the Employers' Guide.


Overtime varies, how are accurate contribution bands determined for members?

Non-contractual overtime should be included in the ‘pay’ used for determining a member’s contribution rate.  The possibilities for determining a member’s contribution rate are:
a)    The annual rate of contractual pay
b)    The annual rate of contractual pay plus an estimation of non-contractual overtime or hours
c)    The hourly rate multiplied by an estimate of the number of hours to be worked in a full year
d)    The weekly contractual rate multiplied by 52.143 (or whatever multiplier the employer deems appropriate)
e)    The weekly contractual rate multiplied by 52.143 plus an estimate of other pensionable payments to be made on a full year (or whatever multiplier the employer deems appropriate).


How are contribution bands determined for casual employees?

In these cases employers will need to either:
a)    make a reasonable assessment of the number of hours the member is likely to work on an annual basis, perhaps taking into account the hours worked by the previous holder of the post and subsequently review the band allocation the following April or on a material change to the member’s terms and conditions during the Scheme year, or
b)    allocate the employee to the lowest band (5.5%) and subsequently review the band allocation the following April or on a material change to the member’s terms and conditions during the Scheme year, or

c)    allocate the member to the 6.5% band (on the basis that this is the average contribution rate for Scheme members) and subsequently review the band allocation the following April or on a material change to the member’s terms and conditions during the Scheme year.


If a member who earns £20,000pa salary (contribution rate 5.8%) works £2,000 worth of overtime which the employer did not anticipate at the beginning of the year this would move them from the 5.8% band to the 6.5% band.  What does NILGOSC expect the employer to do in this case?

NILGOSC would hope that such matters would be treated in a similar way across all employers.  The issue of non-contractual overtime has made this much more difficult.  Guidance is provided in the Employers' Guide.


Would the employer in the scenario above have to pay a balancing amount at the end of the year?

No.  NILGOSC would expect the employer to have made their best estimate at the beginning of the year.  If an employer regularly underestimates the members’ contribution rates it would be expected that this would impact on that employer’s underlying funding position and could result in being removed from the main group of employers who all pay the same employer contribution rate.

 

Can contribution bands be changed mid-year?

Contribution bands can be changed when there is a change in employment e.g. promotion, contractual hour change or when there is a material change that affects his/her pensionable pay.


Are contributions still automatically taken from a member for the first 30 days of a break?

No.  There is no longer any facility to deduct contributions for the first 30 days of a break.  If a member wishes to cover the break they must take out an APC.


Will NILGOSC provide template letters employers can use when advising employees of contribution rates or changes in rates during the year? (including the statutory details such as right of appeal etc)

We do not have template letters as this is an employer responsibility.  Under the regulations an employer is required to provide the following information in respect of any decisions that it makes:

82  Notification of first instance decisions

(1)    Every person whose rights or liabilities are affected by a decision under regulation 80 (first instance decisions: general) or 81 (first instance determinations: ill-health) shall be notified of it by the Committee or the employing authority which made it as soon as is reasonably practicable.
 
(2) A notification shall include-
(a) in the case of a decision that the person is not entitled to a benefit, the grounds for the decision;
(b) in the case of a decision as to the amount of a benefit, a statement showing how the amount is calculated;
 (c) in the case of a notification under paragraphs (a) or (b) a conspicuous statement directing the person's attention to-
(i) the address from which that person may obtain further information about the decision, including details of any calculation of employment or benefits;
(ii) that person's right under regulation 84 (right to apply for an appointed person to review a decision) to make an application to an appointed person within the time limit referred to in that regulation, the address at which the appointed person may be contacted and the appointed person's job title; and
 (iii )that person's right under regulation 86 (reference of disagreement to the Committee) to apply to the Committee for a reconsideration of the matter within the time limit referred to in that regulation; and
  (d) in the case of a decision by an employing authority made under regulation 80, a conspicuous statement directing the person's attention to-
(i) the employing authority's address from which the person may obtain further information about the decision; and
 (ii) the person's right of appeal to the county court under regulation 89 (referral of decisions under regulation 80(1) to the county court).
    
Employers may wish to advise employees of their normal appeals process as the right of appeal to the county court should only be when internal processes are exhausted.