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									Service & Pay                Abatement: 9.contents




                Service and Pay




Section 9          Abatement of
                   pension
                   on re-employment




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Abatement: 9.contents                                        Service & Pay




9.1     Staff affected by abatement under the PCSPS

        What is abatement?
        When abatement applies
        Disapplication of abatement in exceptional circumstances

        Annex A         Inter-service abatement


9.2     Calculating abatement

        How abatement is applied
        The re-employed salary and the salary of reference
        The old rules: salary of reference
        The old rules: re-employed salary
        The new rules: salary of reference
        The new rules: re-employed salary
        Pension in payment
        The value of the pension
        Ill health pensions
        Further examples

        Annex A         Fee-paid staff – calculation of abatement
        Annex B         Members who left under the interim arrangements
        Annex C         Factors


9.3     Changes after re-employment

        Changes requiring recalculation of abatement
        Pay and pension increases
        Temporary promotion
        Deputising
        Absence and special leave without pay




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Service & Pay                                            Abatement: 9.1




9.1 Staff affected by
    abatement
              under the PCSPS


What is abatement?
9.1.1   Abatement is the reduction or suspension of a Civil Service
pension when a pensioner is re-employed in the Civil Service.

9.1.2     The principle of abatement is that civil servants must not
receive more by way of Civil Service pay and pension on re-
employment than their actual rate of salary on the last day of their
earlier service.

9.1.3  There is another type of abatement outside the rules of the
PCSPS known as inter-service abatement. This is explained in
Annex A.



When abatement applies
9.1.4    Abatement applies when a former civil servant, who left the
Civil Service with an award of pension under the PCSPS (or the
Superannuation Acts), is re-employed in:

         • the Civil Service; or

         • an employment or office to which the PCSPS applies
         (a Schedule 1 body).

9.1.5  Abatement applies whether or not the civil servant is a
member of the PCSPS on re-employment.

9.1.6    Abatement applies to industrial and non-industrial staff.




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Abatement: 9.1                                                                  Service & Pay


9.1.7       Abatement applies to re-employed pensioners who retired:

            • at or after the pension age; or

            • before the pension age, with:

                  -     preserved awards which have subsequently been put
                        into payment (whether before or after the pension
                        age);
                  -     ill health pensions;
                  -     actuarially reduced pensions; or
                  -     pensions or annual compensation payments on early
                        retirement.

            NOTE: An annual compensation payment (following compulsory or
            flexible early retirement) is regarded as a pension for the purpose of
            abatement.

9.1.8     Abatement of pension does not apply when a Civil Service
pensioner is over 75, or is employed or engaged in an appointment
listed in table 1.


Table 1: Appointments to which abatement does not apply
          Appointment                                            Notes
Posts outside the Civil Service
and not in employments or offices
to which the PCSPS applies.

Independent contractors (not          The distinction between independent contractor and
employees).                           employee is not a simple one. Tax treatment is not
                                      conclusive, see 9.1.12 below. Departments must seek
                                      legal advice in doubtful cases.

Interviewers engaged by the
Recruitment and Assessment
Services Agency.

Appointments on a casual basis        Whether this exception applies depends on the period
for less than 15 days in any period   during which there is a contract of employment (the
of 91 consecutive days.               number of days from the starting date of the re-
                                      employment to its finishing date, inclusive of both dates),
                                      not the number of days within that period of re-
                                      employment on which work was actually performed.


9.1.9       Abatement of pension also does not apply to:

            • staff whose pensions were awarded under any scheme other
            than the PCSPS or the Superannuation Acts (but see inter-
            service abatement Annex A);
            • employees of the Post Office or British Telecom who retired
            after 30 September 1969.




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Service & Pay                                                 Abatement: 9.1


9.1.10 Except when inter-service abatement applies (     see Annex A)
a pension awarded under a by analogy scheme (a scheme which is by
analogy with the PCSPS) is not subject to abatement when the person
is employed in an employment or office to which the PCSPS applies.
Similarly, a Civil Service pension is not abated when a person is
employed in an employment in which a by analogy scheme applies.

9.1.11   Employing departments must seek advice from the Cabinet
Office when there is a doubt about whether a particular employment is
subject to abatement.

                         Information                      Reference
  Further
                                             Pensions Manual
information
              Schedule 1 bodies              Administration & Finance




9.1.12     A member who retires and is re-employed on a fee paid basis
is still subject to abatement. The member is only exempt from
abatement if they are engaged as a genuine contractor. Whether the
member is a genuine contractor is a matter of judgment and should be
based on a full assessment of the contractual relationship between the
employer and the member. No one factor is conclusive but examples
of factors that should be considered are given below. If the member’s
position is unclear the employer should consider taking legal advice
since this is a matter of employment law.

9.1.13     A genuine contractor would:
    •    have control of who delivers the service. In this case this
         would mean that a self-employed Associate Investigator would
         have the right to engage someone else to deliver the service on
         their behalf, so long as the required level of service was
         maintained;
    •    be VAT registered (unless their turnover is below the relevant
         threshold) and would include VAT when invoicing the
         employer for the service they have delivered;
    •    have a range of customers requiring similar services rather than
         the employer being their only customer for the service
         provided;
    •    be regarded by HMRC as self-employed rather than being
         regarded as employed for income tax purposes;
    •    be contracted following a competitive tendering process rather
         than a recruitment process.




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Abatement: 9.1                                               Service & Pay



Disapplication of abatement in exceptional
circumstances

9.1.14  The scheme rules allow the abatement to be disapplied in
exceptional circumstances, for example in cases of national crisis or
emergency. A business case must be provided which covers:

    •    Why the individual, or class of individuals, concerned is
         uniquely qualified to fill the post in question.
    •    Details of when the individual started to received benefits from
         the PCSPS and what these benefits are. Please note that the
         abatement of an annual compensation payment will not be
         suspended or reduced.
    •    Why it is essential to the Government that the work in question
         is completed.
    •    The cost of any alternative mechanism for completing the work
         in question.
    •    The cost of the proposed suspension or reduction.
    •    The duration of the proposed suspension or reduction.
    •    Details of how the work in question will be carried forward at
         the end of the proposed period.

Note: Employing departments must, in all cases, consult the Cabinet Office.

9.1.15  The final decision will be taken by the Minister for the
Cabinet Office after he has consulted the Chief Secretary to the
Treasury.

9.1.16 Abatement will always be applied to an annual compensation
payment.




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Service & Pay                                               Abatement: 9.1 Annex A




9.1 Annex A                                            Inter-service
                                                       abatement
1        A public service pension (such as a pension under the PCSPS
or the Armed Forces Pension Scheme) is normally not abated when a
pensioner is employed in a different service in the public service.

2        There is one exception. This is when a member of a public
service pension scheme retired early. Abatement is applied when:

          • the member is not recruited to the Civil Service through fair
          and open competition, or the Civil Service appointment is
          restricted to people with particular public service experience;
          and

          • the person is being employed in the Civil Service before the
          pension age for the public service scheme from which the
          pension is payable.

3        Abatement is applied by the Paying Authority to the pension
(or by the pension paying authority when the pension is not being paid
by the Paying Authority) until the person reaches the pension age for
the scheme from which the pension is paid. Alternatively, the person
may choose to have the abatement applied to the Civil Service salary.

                           Information                             Reference
  Further                                              Public Service Pensions Team,
information    Advice about inter-service abatement.   HM Treasury




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Service & Pay                                                                Abatement: 9.2




9.2 Calculating abatement
Abatement is calculated and applied by the Paying Authority. Action by
employing departments is given in 9.4.

How abatement is applied
9.2.1       The way abatement is applied is given in table 1.

Table 1: Application of abatement
        When abatement is applied                           Amount of abated pension

 Employed at a new rate of pay equal to, or higher than the salary of reference.

 Always.                                    No pension is paid. Civil service pension is fully abated. No
                                            calculation is necessary.


 Employed at a new rate of pay lower than the salary of reference.

 Pension is abated when pension plus        Pension paid is the lesser of:
 salary on the first day of re-employment
 is greater than the salary of reference    • the pension in payment on the first day of re-employment;
 (see below).                               and

                                            • an abated pension of:

                                               salary of reference (see below); less
                                               re-employed salary (see below).


 Appointment on a fee-paid basis or on irregular attendance patterns.

                                            See Annex A.



NOTE: The level of abatement for persons re-employed before 1 April 1997 was determined by
reference to grade on re-employment, rather than salary. Members who are re-employed
full-time, in the same or higher grade, had their pension fully abated. Those re-employed
part-time or in a lower grade had their pensions partially abated.


9.2.2   The level of abatement remains unaltered unless there are
subsequent changes in the circumstances of re-employment (9.3).

9.2.3   A fresh abatement calculation is made when a pensioner has
completed a period of re-employment and is re-employed again.




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Abatement: 9.2                                               Service & Pay


9.2.4    The new level of abatement is calculated using:

         • a revised salary of reference. This is the former salary of
         reference increased to reflect any pensions increase to the
         date of re-employment (table 2); and

         • the re-employed salary.

9.2.5    The recalculated abatement is applied to the pension in
payment (including any pensions increase) on the date that the fresh
period of re-employment starts.

9.2.6    When a person with a preserved pension is re-employed, the
pension is subject to abatement when the member:

         • has opted to take a separate award for the re-employed
         service; and

         • continues in the Civil Service after the preserved pension
         comes into payment.

9.2.7   Abatement is calculated as though the re-employment had
begun on the date that the preserved pension came into payment.

         NOTE: Abatement is calculated in the same way, whether or not
         the person rejoins the PCSPS.

The re-employed salary and the salary of reference
9.2.8   The salary which is compared with the re-employed salary
when calculating abatement is called the salary of reference.

9.2.9    The calculation of the new rate of pay and the salary of
reference differs depending on whether the member’s previous service
ended before 1 April 2007, or on or after that date. These two method
are described below as the old rules and the new rules.

9.2.10    A member who left before 1 April 2007 may opt for the new
rules to apply to them.

         NOTE: This option must be made on 1 April 2007 if they are
         already re-employed on this date or on re-employment of this is
         later.

9.2.11   When a person has more than one preserved Civil Service
pension, a salary of reference is worked out for each period of service
which gave rise to a pension. The largest salary of reference is used to
calculate abatement.




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Service & Pay                                                              Abatement: 9.2


Table 2: Pensions Increase
                  Circumstances                                      Pensions increase

 Pensioner is re-employed without a break in          The salary of reference is applied without
 service.                                             pensions incraese.


 Pensioner is re-employed after a break in service.   The salary of reference is increased by pensions
                                                      increase (NOTE A).


 Earlier service ended before the pension age with
 a preserved pension and the person is
 re-employed after the pension has been put into
 payment.



NOTE A: The factor for pensions increase is the proportion by which a pension of the same
amount, payable on the day following the last day of service, would have been increased by the
date of re-employment under the pensions increase arrangements (example 1). The qualifying
conditions for pensions increase do not apply for this purpose.



                A member's last day of service was 31 July 1995.
                Salary on the last day of service was £20,000, including London weighting.

  Example       The member was re-employed on 1 September 1997.
     1
                A pension beginning on 1 August 1995 would have been increased by 1.0475 under the
                pensions increase arrangements.


 The salary of reference is:

             £20,000 x 1.0475 = £20,950.




The old rules: salary of reference

9.2.12   The annual rate of pay is used to calculate the salary of
reference is the annual rate in payment on the last day of service:

            • including, where appropriate, London weighting, London
            allowance and local pay additions; and

            • excluding all other pensionable or additional emoluments.

9.2.13      Table 3 explains how to deal with particular circumstances.

Table 3: Salary of reference: calculating the annual rate of pay
        (NOTE A)
                  Circumstances                                          Annual rate

 Member was employed on a part-time basis on          Actual part-time salary.
 the last day of service (including service which
 ended with formal retirement).


 A pay settlement including staged increases.         The annual rate in payment, not the full
                                                      promulgated rate.


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Abatement: 9.2                                                                  Service & Pay




 Pay on the last day of service (including service       The full-time rate (example 2).
 which ended with formal retirement) was at a
 reduced rate.


 A period of non-reckonable service immediately          The annual rate of pay the person would have
 preceded the last day of service (including service     been receiving on the last day of actual (non-
 which ended with formal retirement).                    reckonable) service if the non-reckonable service
                                                         had not occurred (example 3).

NOTE A: When the pensioner is re-employed after a break in service, pensions increase is
applied, when applicable, to the annual rate of pay (table 2).


   Example       A full-time member was paid sick pay at half rate on the last day of service.
      2

 The annual rate of pay is the full-time rate on the last day of service.




   Example       A part-time member was paid sick pay at pension rate on the last day of service.
      3

 The annual rate of pay is the part-time rate the member would have been receiving on the last day of
 service if the sick leave had not occurred.




                                       Information                                    Reference
    Further                                                                 Pensions Manual
  information
                   Applying pensions increase.                              Members Benefits: 6.3




The old rules: re-employed salary

9.2.14    The re-employed salary used in the calculation of abatement
is the annual rate of salary as at the first day of re-employment:

            • including, where appropriate, London weighting, London
            allowance and local pay additions;

            • excluding all other pensionable and additional emoluments.

9.2.15   This is not affected by subsequent changes in pay except in
the circumstances given in 9.3.

9.2.16  The actual part-time salary is used when a person is
re-employed on a part-time basis.

9.2.17    Fee-paid staff and those engaged on unpredictable working
patterns are treated differently. The calculation for these staff is given
in Annex A.


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Service & Pay                                               Abatement: 9.2




The new rules: salary of reference

9.2.18    The salary of reference is the rate of pay that would have
been used to calculate death in service benefits if the member had died
on their last day of service.

9.2.19     This means that the actual pay received in a 12 month period
is used:

           • including, where appropriate, all permanent pensionable
           pay additions; and

           • excluding all other pensionable or additional emoluments.

9.2.20     Where a member works part time then the part time rate is
used.


The new rules: re-employed salary

9.2.21    The re-employed salary used in the calculation of abatement
is the annual rate of salary as at the first day of re-employment:

           • including, where appropriate, all permanent pensionable
           pay additions; and

           • excluding all other pensionable or additional emoluments.

9.2.22   This is not affected by subsequent changes in pay except in
the circumstances given in 9.3.

9.2.23  The actual part-time salary is used when a person is
re-employed on a part-time basis.

9.2.24    Fee-paid staff and those engaged on unpredictable working
patterns are treated differently. See Annex A for more detail.

Pension in payment

9.2.25   For abatement purposes an annual compensation payment
(ACP) (following compulsory or flexible early retirement) is regarded
as a pension.

9.2.26  The total of all civil service pensions is taken into account
when calculating abatement.

           NOTE: Abatement is applied first to the most recent pension. This

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Abatement: 9.2                                                              Service & Pay


            preserves as much pensions increase as possible.

The value of the pension
9.2.27   The amount of the pension includes any increases paid under
the pensions increase arrangements.

9.2.28   A pensioner may have changed the amount of his or her
pension or ACP in one or more of the following ways:

            • by commuting the retirement lump sum;

            • through the repackaging arrangements;

            • by allocating part of his or her pension or annual
            compensation payment.

9.2.29      The effect of this on the pension in payment is given in
table 4.

Table 4: Calculating pension in payment (see examples 5 and 6)
               Pension                                          Abatement

 Increased pension (or ACP) on       Abatement is calculated on the pension (or ACP) which was
 leaving the Civil Service by:       awarded.

 • surrendering part or all of the   Any increase resulting from the surrender of the lump sum (or
 retirement lump sum; or             repackaging) is ignored.

 • repackaging early retirement      Awarding departments must advise the Paying Authority
 benefits.                           whenever this arises.


 Reduced pension (or acp) on         Abatement is calculated on the acp which was awarded.
 leaving the Civil Service by:
                                     The amount of acp which was surrendered is deducted from the
 • commuting all or part of an       reduced acp.
 annual compensation payment
 under the repackaging or            When the reduced acp is less than the amount of annual
 commutation arrangements.           compensation payment surrendered:

                                     • no acp is paid; and
                                     • the balance of abatement is deducted from the re-employed
                                     salary.

                                     The salary deduction is ignored in the calculation of any revised
                                     pension award.

                                     The Paying Authority arranges the salary deduction with the pay
                                     section of the employing department.


 Reduced pension (or acp) on         Abatement is calculated on the remaining pension after
 leaving the Civil Service by:       allocation.


 • allocating part of a pension or
 annual compensation payment




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Service & Pay                                                        Abatement: 9.2


Ill health pensions
9.2.30   A member who left with an ill health pension has abatement
applied, as necessary, to the remaining pension after any element of
enhancement has been excluded.

            NOTE: When a person who left with an enhanced ill health pension
            is re-employed in the Civil Service, the pension is reduced by
            excluding any element of enhancement which went into the award.
            This applies whether or not the person rejoins the PCSPS on re-
            employment. At the end of re-employment the ill health pension is
            re-instated in full (i.e. including enhancement).

Further examples



               Annual compensation payment                               £ 5,000 pa
               Salary of reference                             £12,000
  Example      Member surrendered £4,000 of the acp.
     7
               Re-employed salary                              £12,000


               Salary of reference              £12,000
   less        Re-employed salary               £12,000

                                                £ nil (maximum acp payable).

               Person has £4,000 deducted from re-employed salary.




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Abatement: 9.2               Service & Pay




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Service & Pay                                             Abatement: 9.2 Annex A




9.2 Annex A                                 Fee-paid staff–
                                            calculation of abatement


How abatement is applied
1        Abatement is calculated in a different way when a pensioner
is re-employed on a fee-paid basis. This is because the annual salary of
a person working on these terms is not known until each year has been
completed.

2        Pensioners who are re-employed on an irregular and
unpredictable attendance pattern (for example, because their work is on
an ‘as needed’ basis) are treated as if they were fee-paid staff.

3       The Paying Authority works out what is known as an annual
earnings margin for the pensioner and notifies the pensioner and the
employing department.
           Annual earnings margin = salary of reference – pension in payment
           NOTE: The pension in payment is the annual pension (including
           any pensions increase) in payment at the start of that period of fee-
           paid employment. The pension in payment terms of 9.2 apply.

4          Table 1 sets out how abatement is applied.

Table 1: How abatement is applied
          Re-employed earnings                               Abatement
Annual earnings are not greater than the     No abatement.
annual earnings margin.

Annual earnings are greater than the         Paying Authority abates the pension (on a £
earnings margin.                             for £ basis) by the amount by which the
                                             annual earnings exceeds the earnings margin
                                             (example 1).

                                             Abatement is normally applied
                                             retrospectively.




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Abatement: 9.2 Annex A                                                       Service & Pay




                 Pensioner is re-employed on a fee-paid basis on 12 May 1992.

    Example 1    Annual earnings margin is £12,000.

                 Pensioner starts work on 12 May 1992 and earns fees as follows:

                 1 May to 28 February 1993:                                          £12,000
                 March – April 1993:                                                 £300

The pension is abated by £300.
The pensioner starts a new abatement year on 1 May 1993. Abatement is not applied again
unless the pensioner again earns more than the annual earnings margin.



5         The earnings margin is not changed until that particular
contract of employment ends unless there is a general increase in the
rate of fee (see below).



Subsequent fee-paid employment
6       The Paying Authority normally calculates a new earnings
margin when a pensioner is re-employed (on a new contract) for a
second or subsequent time.

7       Table 3 sets out the action when the new contract starts within
12 months of the first of the month (or the anniversary of the first of
the month) in which the previous fee-paid contract began.

Table 3: A new contract within the period of a previous earnings margin
        Pensions increase (under the                           Earnings margin
       pension increase arrangements)
No increase since the beginning of the           The previous earnings margin is used.
previous contract.

Pension has increased since the beginning of     The Paying Authority calculates an increased
the previous contract.                           earnings margin. This is applied pro rata for
                                                 the remainder of the 12 month period, and in
                                                 full for any subsequent 12 month period
                                                 (example 2).



                 The contract of the re-employed pensioner in example 1 ends on 30 June
                 1993.
    Example 2
                 A new contract for fee-paid work starts on 1 November 1993.
                 The new earnings margin for the year 1 May 1993 to 30 April 1994 would be
                 £12,432.

The earnings margin is increased pro rata from 1 November 1993 so that for the year 1 May
1993 – 30 April 1994 it is £12,216.

The earnings margin is increased on 1 May 1994 to £12,432.




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Service & Pay                                   Abatement: 9.2 Annex A




Re-employed earnings (annual earnings)
8         Annual earnings are the total of fees (or salary) earned in a 12
month period starting with the 1st of the month in which the contract of
employment began, or any following 12 month period under the same
contract.

9       This arrangement applies whether the re-employment contract
extends over the whole 12 months or a shorter period.



Action following a general increase in fee rates
10       When there is a general increase in the rate of fee:

         •     the annual earnings margin is increased by the percentage
               which was applied to the fees;

         •     the revised annual earnings margin is applied to the whole
               of the year in which the increase in fees occurred.

11       This does not apply to a fee increase resulting from a change
in grade. In these circumstances, the person is treated as newly re-
employed.



Staff who were re-employed before 1 June 1993
12       Before 1 June 1993, abatement was calculated by means of a
quarterly earnings margin.

13       The abatement year for fee-paid staff who were in post on
1 June 1993 started on 1 June 1993. The annual earnings margin was 4
times their quarterly earnings margin.




service\9.2a                        (3)               Issue 5: April 2006
Service & Pay                                 Abatement: 9.2 Annex B




9.2 Annex B Members who
            left under the
            interim
            arrangements
1        Members (including former members who had opted out of
the PCSPS), who left on compulsory early severance (CES) under the
interim arrangements, received a CES lump sum payment, plus an
additional, reserved rights top up amount which together, provide for a
lump sum payment equivalent to the benefits provided under the
former early retirement provisions.

2        Where re-employment commences on or after 1 April 1997
and before normal pension age, the annual value of the reserved rights
top-up amount is deemed to be in payment for abatement purposes but
reduced by the value of the enhancement to the individual’s pension
from age 60 and the value of the net enhancement to the individual’s
retirement lump sum and after the application of factors provided by
the Scheme Actuary (see example 4).

3       The amount to be abated will be taken from gross salary unless
the individual opts for the special tax arrangements described in
paragraph 6 when a lower amount will be taken from net salary. This
option should be beneficial to standard rate tax payers but higher tax
rate tax payers are unlikely to find it attractive.

4      The abatement should normally have pensions increases applied
from date of departure on CES terms until re-employment ceases, but
the abatement should cease at normal retirement age, even if the
individual continues in employment afterwards.




service\9.2b                         (1)          PC272: January 2007
Abatement: 9.2 Annex B                                                       Service & Pay




                     Individual left on redundancy on 8 March 1996, with CES reserved rights benefits.
                     Date of birth: 7 March 1953 (age at redundancy 43 years 0 months).
                     Normal retirement age: 60.
                     Pensionable earnings at redundancy: £17,585.12.
                     Individual re-employed at same salary level.

    Example          Details from the original CES reserved rights calculation
                     CES award (non-reserved rights terms)               £52,755.36
                        lump sum limited to 3 years pensionable earnings
                     Top-up payment                                      £22,691.60 (A)
                     Total CES award                                     £75,446.96
                     Capital value of pension enhancement from age 60                   £6,462.53 (B)
                     Net enhancement to lump sum (ie net of WPS deduction)              £1,318.88 (C)

                     Period from day following redundancy until day prior to age 60 is 16 years 363 days =
                     16.9945 years (P)



The reduced amount of top-up payment deemed to be in payment for abatement purposes is calculated by
means of the formula: A – (B + C)
                           Px F
where:
A = The additional compensation payment, or ‘top-up’ element, of the reserved rights CES lump sum
      paid on redundancy.
B = The capitalised value of the pension enhancement from age 60 which formed part of the original CES
      reserved rights calculation.
C = The net enhancement to the lump sum (or net deduction from the gross lump sum) used in the
      reserved rights calculation.
P = The period from the day following redundancy until the day prior to age 60 (or earlier normal pension
      age for preserved benefits). The period should be expressed in years and days in decimal form.
F = The factor based on age at redundancy from the table at Annex C.

The reduced amount for abatement purposes is, therefore:

     £22,691.60 – (£6,462.53 + £1,318.88)
     16.9945 x 0.78 (factor for someone aged 43 years 0 months)

   = £14,910.19 = £1,124.81 pa (before the application of pensions increase)
     13.2557




service\9.2b                                     (2)               PC272: January 2007
Service & Pay                                                 Abatement: 9.2 Annex B




5         If re-employment is at the same or higher salary level, the
whole amount of the figure calculated by means of the formula in
example 4 (adjusted for pensions increase) will be deducted from
salary. If re-employment is at a lower salary level, the deduction will
be lower – see example 5.

The adjusted deduction should be calculated as: A + B – C where:

A            = salary on re-employment (see 9.2.22 to 9.2.25.

B        = the deduction in accordance with paragraph 2 and uprated
for PI up to the date of re-employment.

C         = the pensionable earnings at redundancy uprated for PI to
the date of re-employment.

                       Pensionable earnings at redundancy on 8.3.96 £17,585.12.Deduction
                       before PI of £1,124.81 (see example 4).
                       Re-employed 3.12.01
        Example        The April 2001 multiplier for a PI beginning date of 9.3.96 is 1.1438
           5           thereby increasing the amounts to £20,113.56 respectively.
    (Re-employment     Starting salary on re-employment of £19,000.
    on lower salary)   The adjusted deduction will be:

                       £19,000 + £1.286.56 - £20,113.86 = £172.70 p.a. w.e.f. 3.12.2002 (see
                       note i).



NOTES:
i.     The adjusted deduction of £172.70 should increase in line with
       future annual pensions increases e.g. 1.7% in April 2002.
ii.    If the adjusted deduction is negative (which will apply in the above
       case if the starting salary is less than £18,827.30) then no
       deduction should be applied.
iii.   The adjusted deduction can never be greater than the deduction
       calculated in accordance with paragraph 2 (after allowing for
       pension increases).
iv.    The adjusted deduction may be further reduced in accordance with
       the special tax treatment in paragraph 6 and then should be
       applied to net salary.
v.     The deduction and adjusted deductions should be reassessed if
       there is a ‘change in circumstances’ see 9.3.

6         The reduced value of the top-up amount may, if the individual
so opts (see paragraph 2), be further reduced to reflect the tax
treatment of the capital value of the individual's notional ACP, in the
same way as the arrangements for the repayment of lump sum
compensation payments on re-employment which are detailed in 6.7.
When the amount of income tax attributable to the capital value of the
ACP is advised by the tax authorities, this amount is applied to the
reduced top-up payment on the same percentage basis. See example 6.



service\9.2b                                     (3)              PC272: January 2007
Abatement: 9.2 Annex B                                                         Service & Pay




            NOTE: The Paying Authority arranges the reduction in net salary
            with the pay section of the employing department.

            NOTE: These arrangements apply whether or not the person
            becomes a member of the PCSPS on re-employment.
            NOTE: Where re-employment occurred prior to 1 April 1997, the
            notional annual compensation payment, calculated under the
            former early retirement rules, was deemed to have been in
            payment and any reduction of re-employed salary applied in
            respect of that payment. The amount of reduction took into account
            the individual’s tax position, if the individual so wished.



                Details as in example 4 above. Capital value of the acp: £52,825.01 (acp £5,359.24).
  Example       The tax authorities advise that income tax of £17,608 is attributable to the capital value
     6          of the ACP. If the individual opts for the special tax adjustment and lower deduction
                from net pay, abatement t of £1,124.81 should be adjusted as follows:




 £1,124.81 x [ 1 – (£17,608 / £52,825.01) ] = £749.88 (before adjustment for pensions increase from
 March 1996)


 NOTE: This means that, in example 4, where re-employment is at the same or higher salary level, the
 amount to be deducted from net pay would be £749.88 plus pension increases from 9 March 1996 but,
 in example 5, where re-employment is at a lower salary level, the deduction from net pay would be:


 £172.70 x [ 1 – (£17,608 / £52,825.01) ] = £115.13 p.a. However, the £115.13 p.a. should only increase
 in line with annual pensions increases after the date of re-employment e.g. 1.7% in April 2002 because
 increases to April 2001 have already been allowed for in the calculations in example 5.




                                      Information                                    Reference

                                                                          Pensions Manual

                  Commuting the retirement lump sum.                      Members' Benefits: 2.5
   Further        Repackaging.                                            Early Retirement: 4.5
 information      Interim arrangements (staff aged under 40 on            Early Retirement: 5.2
                  1 April 1987).
                  Allocation of pension or annual compensation            Options & AVCs: Section 4
                  payment.




service\9.2b                                      (4)               PC272: January 2007
Service & Pay                                                   Abatement: 9.2 Annex B




                  Based on calculation example at 5.2 Annex B (Early Retirement: volume 4).

                  Member under age 40 and serving in a mobile grade on 1 April 1987 leaves a
    Example       full-time mobile post on compulsory early severance.

                  Age                     43 years 0 months
                  Retiring age            60

                  Reckonable service      20 years 139 days (20.3808 years)
                  Pensionable pay         £17,585.12

The member receives under the current terms:

•    a preserved award which comes into payment at the retiring age. This comprises:

        -     a preserved pension; and
        -     a preserved lump sum;

•    a lump sum compensation payment (payable immediately).

The member also receives an additional compensation payment. This is a lump sum which
represents:

•    the benefits which would have been paid under the former terms (table 1); less

•    the benefits which are being paid under the current terms (table 3).

In order to calculate this lump sum, all payments must be expressed as a current value (lump
sum).

This is set out in tables 1-4 below.




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Abatement: 9.2 Annex B                                                             Service & Pay




Table 1       Benefits that would have been payable under the former
              terms (excluding preserved pension)
Calculate the total current value of the benefits that would have been payable under the
rules applicable before 1 April 1987.

Exclude the preserved pension. This is calculated in table 2.

(a)   Calculate the enhanced reckonable service: 20.3808 + 4 (NOTE A) = 24.3808

(b)   Calculate

      ACP (annual compensation payment)             (£17,585.12 x 24.3808)      = £5,359.24
                                                                     80

      Gross lump sum         (£5,359.24 x 3)        £16,077.72

      Lump sum compensation payment                 £8,792.56
      (6 months’ pensionable pay)

(c)   Convert the ACP to a net present value.

      This is done by using:
       -     the factor from Early Retirement Manual, volume 4, 5.2 Annex A, table 1 (column 1)
             appropriate to the member’s age on the last day of service (43); and
       -     the length of the period from the day following the last day of
                                         th
             service to the eve of the 60 birthday (16.9945 years) (9.3.1996 – 6.3.2013).

      Net present value of ACP: £16.9945 x 0.58 x £5,359.24                 =       £52,825.01

(d)   Calculate the net lump sum by making a notional deduction from the gross lump sum for
      family benefit pension contributions in respect of the enhancement (NOTE B).

      This is the amount of contributions that would have been paid. It is calculated only for the
      purpose of determining the notional value of benefits under the former arrangements. It
      has no affect on the actual WPS deduction to be made from the preserved lump sum
      awarded under the current provisions (or of any refund of contributions which may be
      made).

      The formula for calculating the contributions to be deducted (W) is:

            W = B x 3/2 x 1/80 x PP            B            amount of enhancement
                                                            (the reckonable service for
                                                            which contributions are due).
                                               PP           pensionable pay.

      For the member in this example the deduction is:

            4 x 3/2 x 1/80 x £17,585.12 = £1,318.88

      Net lump sum:       £16,077.72 - £1,318.88 =          £14,758.84

(e)   Total benefits under former terms (excluding preserved pension)

      Net present value of ACP                              £52,825.01
      Net lump sum                                          £14,758.84
      Lump sum compensation payment                         £ 8,792.56
                                                            £76,376.41




NOTE A: Obtain enhancement from 5.1 table 3.

NOTE B: For most members, the WPS contribution is in respect of a half-rate widow’s, widower’s
or civil partner’s pension. The exception relates to some married members who opted to keep
unchanged the contribution in respect of service before 1 June 1972.

For these members, WPS contributions are treated differently (see Family Benefits Volume 4.2).




service\9.2b                                          (6)                PC272: January 2007
Service & Pay                                                  Abatement: 9.2 Annex B




Table 2       Value of the increase in the preserved pension due to
              enhancement under the former terms
Calculate the current value of the increase in pension from age 60 derived from the
enhancement of reckonable service.

(a)       Calculate the increase in the pension from age 60 derived from enhancement:

                       £17,585.12 x 4/80 = £879.256

(b)       Convert the increase in pension derived from enhancement to a current lump sum.

          This is done by using the factor from Annex A, table 1 (column 2) appropriate to the
          member’s age on the last day of service (43). (This table takes account of the extra
          family benefit pension which would derive from the pension.)

          Net present value of increase in
          pension derived from enhancement            (£879.256 x 7.35)       =   £6,462.53




Table 3       Benefits payable under the current terms (excluding
              preserved pension)
Calculate the current value of the benefits under the current terms.

Exclude the preserved pension. This is calculated in table 4.

(a)       Calculate:

          Lump sum compensation payment
          (limited to 3 years’ pensionable pay):          3 x £17,585.12 =        £52,755.36

          Preserved gross lump sum:       £17,585.12 x 20.3808* x 3/80 =          £13,439.96

          (* actual reckonable service)


(b)       Convert the preserved lump sum to net present value.

          This is done by using the factor from Annex A, table 1 (column 3)
          appropriate to the member’s age on the last day of service (43).

          Net present value of preserved lump sum (£13,439.96 x 0.55) = £7,391.98



Net present value of current terms         (£52,755.36 + £7,391.98)       =       £60,147.34
(excluding preserved pension)




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Abatement: 9.2 Annex B                                                         Service & Pay




Table 4       Benefits payable
The member receives the following benefits:

(a)       Preserved benefits under the current arrangements payable when the member
          reaches the retiring age:

          Pension (£17,585.12 x 20.3808 ÷ 80)                   £4,479.99 pa

          Gross lump sum (table 3(a) above)                     £13,439.96



                                    ===================================

(b)       Benefits payable immediately

Lump sum compensation payment:                                                     £52,755.36
(table 3(a) above)

Additional compensation payment.

This is calculated as follows:

•     net present value of benefits (excluding preserved pension)
      under the former terms (table 1):                          £76,376.41 plus

•     net present value of the increase in the preserved pension
      due to enhancement under the former terms (table 2):       £ 6,462.53

                                                                £82,838.94 less

•     net present value of benefits (excluding preserved pension)
      under the current terms: (table 3)                         £60,147.34

                                                                                   £22,691.60
Total value of benefits payable immediately
      (£52,755.36 + £22,691.60)                                 £75,446.96




service\9.2b                                      (8)               PC272: January 2007
Service & Pay                                  Abatement: 9.2 Annex C




9.2 Annex C                                   Factors
1    Table 1 sets out the factors provided by the Scheme Actuary to be
used when calculating the salary deduction (abatement) of those who
left on CES reserved rights terms and are subsequently re-employed.


Table 1: Factors for calculating the salary deduction

               Age at Redundancy                    Factors

          Years and complete months


                  Years – months

           40 -   0   to   40 -    5                    0.75
           40 -   6   to   40 -   11                    0.75
           41 -   0   to   41 -    5                    0.76
           41 -   6   to   41 -   11                    0.76
           42 -   0   to   42 -    5                    0.77

           42 -   6   to   42 -   11                    0.77
           43 -   0   to   43 -    5                    0.78
           43 -   6   to   43 -   11                    0.78
           44 -   0   to   44 -    5                    0.79
           44 -   6   to   44 -   11                    0.79

           45 -   0   to   45 -    5                    0.80
           45 -   6   to   45 -   11                    0.80
           46 -   0   to   46 -    5                    0.81
           46 -   6   to   46 -   11                    0.82
           47 -   0   to   47 -    5                    0.82

           47 -   6   to   47 -   11                    0.83
           48 -   0   to   48 -    5                    0.83
           48 -   6   to   48 -   11                    0.84
           49 -   0   to   49 -    5                    0.84
           49 -   6   to   49 -   11                    0.85




service\9.2c                           (1)              Issue 5: April 2006
Service & Pay                                                               Abatement: 9.3




9.3 Changes after
    re-employment

Changes requiring recalculation of abatement
9.3.1    A fresh abatement calculation is made each time a fresh
period of re-employment starts (9.2). The amount of abatement is also
recalculated after a change in circumstances as given in table 1.

Table 1: Recalculating the amount of abatement
   Change requiring a                                       Notes
     recalculation
A permanent change in         Temporary promotion does not normally lead to a change in
the job weighting of the      abatement (but see below).
post.
                              Temporary promotion must, however, be reported to the Paying
                              Authority, making clear that the promotion is temporary. (See
                              below)

A change in conditioned       This covers:
hours resulting in a
change in the re-             •    a change from full-time to part-time, or vice versa; or
employed salary.              •    a change in the number of conditioned part-time hours
                                   worked each week.

A change in salary or         This covers changes:
wages in payment,
following a retrospective     •    immediately before retirement from the former post (a change
pay award.                         in the salary of reference):
                              •    on the first day of re-employment (a change in the re-
                                   employed salary);
                              •    on the first day following a change referred to above:
                                   - change in the re-employed post to one of different weighting
                                   or
                                   - change in conditioned hours.
A change in the rate of fee   This covers changes which are due, for example, to a change in
being paid, other than a      the weighting of the re-employed post.
general increase.
(NOTE A)

Change in pay due to long     The covers a reduction to half pay, nil pay or SPPR, or any
term ill health               increase after the member returns to work.

Beginning or ceasing to       This only applies to member who has their abatement calculated
receive a permanent           under the new rules.
pensionable allowance


NOTE A: Action following a general increase in fee rates is set out in 9.2 Annex A.



service\9.3                                   (1)                   PC272: January 2007
Abatement: 9.3                                                              Service & Pay




9.3.2  The employing department must notify the Paying Authority
when any of these changes occurs to avoid overpayment of pension
(9.4).

9.3.3    The Paying Authority recalculates the abatement in one of the
ways set out in table 2.

Table 2: Recalculating abatement

                      Pension position
     Change                                           Action by Paying Authority
                      before the change
                     Pension fully         Abatement is recalculated.
                     abated.
                                           The pensioner is treated as newly re-employed on
                                           the date of the change. (NOTE A)
Decrease in pay
                     Pension partially     The pension in payment is increased by an
                     abated                amount corresponding to the decrease in pay
                                           (within the limit of full pension, including any
                                           pensions increase).

                                           In most cases the total of pay plus pension
                                           remains the same.

                     Pension partially     The pension in payment is decreased by an
                     abated.               amount corresponding to the increase in pay.

                                           In most cases the total of pay plus pension
Increase in pay                            remains the same.

                     Pension not abated.   Abatement is recalculated.

                                           The pensioner is treated as newly re-employed on
                                           the date of the change. (NOTE A)

Return to the post   Pension partially     The pensioner is treated as newly re-employed on
of equivalent        abated.               the date of the change (NOTE A). Pension is fully
weighting in which                         abated when the pensioner is re-employed full
the pensioner was                          time.
employed before
retirement.                                See below for temporary promotion and
                                           deputising.

                     Pension not abated.

Staff re-employed on a fee-paid basis.

Change in the rate of fee (other than a
general increase in fee rates).            A new annual earnings margin is calculated (9.2
                                           Annex A)

NOTE A: When a pensioner is treated as newly re-employed on the date of a change, and
abatement is recalculated, the salary of reference is increased (9.2).




service\9.3                                (2)                    PC272: January 2007
Service & Pay                                                             Abatement: 9.3




Pay and pension increases
9.3.4      A re-employed pensioner receives during re-employment:

           •    increases within the pay range of the re-employed post;

           •    normal pay increases; and

           •    pensions increases on the amount of the pension actually
                in payment.

9.3.5     These increases in pay or pension do not normally affect the
level of abatement. The exception is when the increases in pay are
retrospective and affect pay on the last day of service before re-
employment or the first day of re-employment (see table 1).

9.3.6   Increases in fees to staff re-employed on a fee-paid basis are
covered in 9.2 Annex A.



Temporary promotion
9.3.7    Temporary promotion does not lead to a change in abatement
unless the pensioner is temporarily promoted to a post of greater
weighting than the post held immediately before retirement. In such
circumstances, the pensioner is treated as having been newly re-
employed on the date of the change.

9.3.8   To maintain the principle of abatement, the employing
department must keep the Paying Authority informed about temporary
promotion (9.4).

9.3.9      The Paying Authority will adjust the pension if necessary.

                 A pensioner is re-employed full-time.
 Example 1
                 Temporary promotion is granted to the grade in which the member was
                 employed before retirement.

On temporary promotion. Pension is fully abated for the period of temporary promotion.

On reversion. The abated pension in issue before the temporary promotion is reinstated.




service\9.3                                   (3)                 PC272: January 2007
Abatement: 9.3                                             Service & Pay




Deputising
9.3.10   When a member receives the deputising allowance it has no
effect on the amount of abatement. No action is therefore required by
employing departments or by the Paying Authority.



Absence and special leave without pay
9.3.11   Abatement continues as normal:

         •    during any period of unauthorised unpaid absence;

         •    during any period of special leave without pay; and

         •    during any period of absence on sick leave at less than full
              pay.

9.3.12    No action is taken by the Paying Authority and no abatement
action is taken by employing departments.

9.3.13    When the pension is being abated (wholly or in part), the
employing department makes a compensating adjustment to pay. The
action taken by employing departments is set out in 9.4. The exception
is that no adjustment is made when a re-employed pensioner has an
unauthorised unpaid absence.




service\9.3                         (4)             PC272: January 2007

								
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