Section 3.5 - Paying for Civil Service pensions

• How do you pay for pensions?
• alpha, nuvos, premium, classic and classic plus schemes
• Standard ASLC rates
• Non-Standard ASLC rates
• Calculating the ASLC
• When service only covers part of the month
• Pay arrears and calculating the ASLC
• Calculating the ASLC where member is paid other than monthly
• partnership pension accounts – Employer contributions
• partnership pension accounts – Employee contributions
• partnership pension accounts – Ongoing payroll action
• Paying contributions and the scheme limits
• Effect on contributions when a member is on secondment
• National Insurance and pensions
• Changes to the Civil Service pensions’ structure
• More information

Pension provision forms a significant part of the total reward package you offer your employees. When you are pay bargaining, you will need to consider the affordability of contributions you pay towards your employees’ pensions.

Depending on the particular schemes members choose, they also bear a share of pension costs by making a contribution from their pay.

You must give your payroll the information in this particular section so that they can correctly calculate the contributions for each of the schemes.

Below is an overview of what you must pay as an employer, and also the percentage of contribution the member makes.

Paying for Civil Service pensions

The contributions you pay for members in these schemes are collectively known as Accruing Superannuation Liability Charges (ASLC). The Scheme Manager sets the ASLC rates based on advice from the Scheme Actuary. You pay a percentage based on the pay band the member falls into. The Scheme Actuary reviews the pay bands each year. We will tell you in an Employer Pension Notice (EPN) the salary bands and ASLC rates that will apply from the following April. Contribution percentages (usually) change less frequently.

The ASLC rates and pay bands that you must use are set out on the Employer Contribution Rates page.

In some circumstances you may want to offer individual pension arrangements for a special or senior appointment. You must get approval from the Scheme Manager on all non-standard arrangements. You must consult the Scheme Manager in advance so that they can assess the extra costs and agree an ASLC percentage.

Step1 Calculate permanent pensionable earnings.

A member’s permanent pensionable earnings are their basic salary and any other pensionable emoluments. An emolument is any form of remuneration (allowances and bonuses) paid to an employee in addition to basic salary.

This includes non-cash pensionable benefits such as uniform allowances. You should ignore any reduction in pay that results from a salary sacrifice arrangement.

If the member works part time, you need to identify the correct ASLC salary band by calculating the full-time equivalent salary to ensure the correct percentage contribution is used.

You only pay contributions up to the earnings cap, (please note the earnings cap does not apply to nuvos or alpha).

Step 2 Look up the percentage rate.

You should use the permanent pensionable earnings you have calculated in step 1 to decide which percentage rate applies to the member. The percentage rates that apply to each pay band can be found on the Employer Contribution Rates page.

Step 3 Calculate actual pensionable earnings.

You should calculate the actual pensionable earnings that you will be paying the member for the month. Please note that for this step, you should use the actual rate of pay for a member who works part time, not the full time equivalent. If the member’s earnings are restricted by the earnings cap, then you should only use pensionable earnings up to the earnings cap.

Step 4 Apply the percentage.

The ASLC you should pay for the member is the percentage from step 2 applied to the earnings figure from step 3.

Example

A member works part time on half the normal conditioned hours and earns £12,000 a year. This month they will receive a pensionable bonus* of £100.

Their permanent pensionable earnings are £24,000 (FTE).

The relevant percentage rate (2018-2019 ASLC rates) is 20.9%.

Their actual pensionable earnings for this month are £1,000 basic pay plus a bonus of £100. The total is therefore £1,100.

Therefore, the ASLC you should pay is 20.9% of £1,100, which is £229.90.

*Bonuses are generally non-pensionable. If you wish to make a bonus pensionable you must seek authorisation from the Scheme Manager first. See section 10 (‘Pensionable Earnings’) for further information.

3.5.7   You must pay the ASLCs once the month’s calculations have been completed, together with the appropriate employees’ contributions, including added pension, to Cabinet Office Civil Superannuation Vote. For methods of payment and where to send them, see Annex 3A (‘How do you pay over ASLCs?).

3.5.8   You must also send the Scheme Manager a breakdown report of the pension contributions when you pay them. A template of the report is in Annex 3B (‘Breakdown of the Monthly Pension Contributions’). You must email the report to the Scheme Manager at csvote@cabinetoffice.gov.uk. Do not send supporting documentation. The Scheme Manager only requires the Annex 3B report.

If service begins or ends with part of a month, your payroll must calculate the ASLC using the percentage rate for the relevant full-time salary band for a whole month and apply that to the actual amount of pensionable earnings.

Pay arrears do not take a member into a higher salary band for the purpose of determining which ASLC percentage rate applies, unless the new annual full time salary takes them into a higher band.

Pay arrears would, however, affect the level of actual pensionable earnings to which the correct percentage is applied.

When a member is paid other than monthly - for example, every week - the ASLC calculation must be done at the end of each month and include figures from all pay dates for that member that fall in that month.

Employer contributions to partnership pension accounts come in three parts:

• You pay an age-related contribution, based on the employee’s age at the beginning of the current tax year (6 April last). You pay this regardless of whether or not the employee chooses to contribute. See the Employer Contributions Rates for the age-related contribution rates. 
• You match the employee’s gross contribution up to a maximum of 3%. 
• You must also pay a mini ASLC of 0.5% of pensionable earnings to cover the cost of risk benefits as a result of death-in-service or ill health retirement. You pay this mini ASLC to Cabinet Office Civil Superannuation Vote by using any one of the methods detailed in Annex 3A. You must also complete the ‘partnership’ box on the breakdown report (see Annex 3B) and send it to the Scheme Manager as soon as you make the payment.

In some cases, you may want to pay a higher contribution than the standard age-related rate. You can do this as long as you can justify that it is necessary to recruit or keep the member. You must report these cases to the Scheme Manager.

partnership contribution percentages could change in the future.

You calculate the age-related contributions using gross pay. You must take care when working out matching contributions, as the aim is to match on a gross basis. This means that the amount the employee pays to the provider and your matching contributions are not in fact the same.

You only pay matching contributions to match the employee’s regular contributions. If an employee decides to make a one-off lump sum contribution, you will not have to pay a matching contribution. An employee can make an additional lump sum payment through payroll or directly to the provider.

Employee contributions are worked out before the deduction of basic rate tax is taken from the employee’s pay. This applies whatever the tax status of the employee.

Your payroll must follow the Legal & General ‘Manage Submissions Interface Guide’ issued in EPN533 for ongoing action.

Effect on classic members

The limit to reckonable service under classic is 45 years in total. Prior to 1 March 2008, the limits were:

• 40 years by the scheme pension age (age 60 for most members), or 
• if a member was re-employed after the scheme pension age, re-employed reckonable service was limited to 5 years (45 years in total).

Although the service limit for all was increased to 45 years from 1 March 2008, service accrued before 1 March 2008 remained limited as described in the above two bullets.

Members of classic must contribute a percentage of their pay towards the cost of providing benefits for their widow, widower or surviving civil partner after their death (the Widow(er)s’ Pension Scheme (WPS)). In addition they will pay a percentage of their pensionable earnings towards their personal benefits.

If a member completes 45 years’ service, they will continue to pay the WPS contribution at a rate of 1.5% until they leave service or reach age 75, whichever is earlier. The employer contributions must also continue to be paid. However, the contributions that the member pays in addition to the 1.5% WPS contributions will cease when the service limit is reached. You will need to liaise with the Scheme Administrator (MyCSP) to confirm how they will inform you of those members who are approaching the service limit to ensure that you cease their additional contributions at the right time.

Effect on classic plus & premium members

The reckonable service limit in classic plus and premium is also 45 years (prior to 1 March 2008 the limit was 40 years). Member contributions should stop when the member reaches the 45 year service limit. Employer contributions should continue to be paid. You will need to liaise with the Scheme Administrator to confirm how they will inform you of those members who are approaching the service limit to ensure that you cease their contributions at the right time.

Effect on partnership members

Member contributions should cease at age 75; however employer contributions should continue to be paid.

Effect on nuvos and alpha members

Reckonable service is not applicable to alpha or nuvos. A nuvos member’s pension will be restricted to 75% of their final pay. This limit does not apply to alpha.

You must clarify and agree with the member and with the borrowing employer which pension scheme the member belongs to before secondment begins. Section 5.5 - Secondment gives information on the things you need to consider when allowing someone to go on secondment. Table 2 below gives an overview of what payment arrangements are needed depending on the type of secondment.

The borrowing employer normally pays the ASLC or employer contributions if the member is in partnership. However, according to the agreement, the member (or the member and the employer borrowing them) can pay it instead. The member must pay through the employer.

Table 2 - Member stays in the CSP arrangements during secondment

alpha, nuvos, classic, classic plus and premium

partnership

The level of National Insurance employers and employees pay depends on how much the employee earns. You can find further information on the rates you need to apply by visiting www.hmrc.gov.uk.

The Scheme Manager is responsible on behalf of the Civil Service Minister, for making any changes to the benefit structure of each of the schemes. If the Scheme Manager makes any improvements to the benefit structure, they have to consider the impact on you the employer.

The Scheme Manager will meet with a representative body of employing departments to consider any significant changes in our scheme structure. Major changes are discussed with the Cabinet Secretary and representative Permanent Secretaries. Under the Superannuation Act 1972, we must consult with the Trade Union about any proposed changes.

If any changes to the contributions are introduced, these will be announced in an EPN as far in advance as possible so that:

• you can give sufficient notice to staff should employee contributions change, and
• you can factor in increased ASLCs in your overall pay reward budget and pay negotiations.