Notional pay applies to 2008 Scheme related pay otherwise known as final salary pay.

This is the member’s basic pay that they would have received had they not been off sick, on child related leave or reserve forces leave.

You must include final salary pay components such as bonuses, performance related pay etc, which the employee would have otherwise received. You should not include excess hours or non-contractual overtime, as these are not final salary pay components.

Any employee who was a member of the pension fund before 1 April 2014 will have final salary pay membership.

APP is a version of notional pay which relates to the 2014 Scheme and should, therefore, be included in CARE pay figures you provide.

The key difference between APP and notional pay is that excess hours or non-contractual overtime is included for APP, not for notional pay. If no non-contractual overtime is worked then we would normally expect notional pay and APP to be the same.

Calculating APP

APP should be calculated based on the average of the CARE pay received in the three complete months or 12 complete weeks before the start of the ‘relevant period’.

The ‘relevant period’ starts on the day the employee went onto:

• reduced pay due to sickness (not usually the date they went off sick)
• ‘relevant’ child related leave (ordinary maternity/paternity/adoption leave/shared parental leave/additional paid leave/neo-natal care leave)
• reserve forces service leave

You should then gross this up to an annual pay figure, so you can work out APP for the relevant period.

If the employee has not had three complete months or 12 complete weeks of pay, use whatever complete pay periods are available to work out the annual pay.

APP example

Mrs Smith went on reduced pay on 1 April and returned to work on 16 April (15 days of reduced pay). You would then take the pay from 1 January to 31 March:

1. Divide it by three
2. Multiply this figure by 12 to get your annual rate of APP
3. Divide this by 365
4. Multiply by 15 (days) to reach your APP for the 15 days of reduced pay.

If a member’s pay was reduced due to strike or unpaid authorised absence, the reduction needs to be ignored from the previous complete three months or 12 complete weeks. This is because the strike action or authorised absence is out of the ordinary and would not be expected again in the following period.

The following should not be included in the calculation of APP:

• Any pay increase or increment a member would have received whilst on reduced pay, child related leave or reserve forces service leave, which was not received in the three complete months before.
• Any annual lump sum bonus in the three months before the start of the ‘relevant’ period (because the member would not receive this again for another year and it would artificially inflate their APP).
• Any other periodic lump sum payments that the member would not normally be expected to receive in the period they are off sick/on relevant child related leave/on reserve forces service leave.
• Unpaid additional maternity, paternity or adoption leave available at the end of relevant child related leave. This is treated as an unpaid leave of absence and no assumed pay builds up during that period.

If a member was in the 50/50 section before going on to no pay due to sickness they should be put back in the main section of the Scheme from the beginning of the first pay period after going onto no pay (as long as they are still on no pay at the beginning of that pay period).

To help you to calculate the member’s APP, please use the following calculator.