Example Calculations

Example 1 – Agenda for Change PayScale:

An NHS employee on the 1st April 2019 moved up to AfC Band 8A point 37 (£48,324) from point 36 (£46,331).   The employee was a full time active member of the pension and their accrued service went from 30 to 31 years. The relevant rate of inflation (CPI) in this case was 2.4%.  they were in the 1995  Section.

  • Step 1: £46,331 (1 x 30/80) = £17,374.13 pension on 6th April 2019
  • Step 2: £48,324 (1 x 31/80) = £18,725.55 pension on 5th April 2020
  • Step 3: £17,374.13 + 2.4% = £17,791.11 pension after allowing for inflation
  • Step 4: £18,725.55 – £17,791.11 = £934.44 real increase in pension over the PIP
  • Step 5:  £934.44 x 3   = £2,803.32 real increase in lump sum over the PIP
  • Step 6: £934.44 x 16 = £14,951.04
  • Step 7: £2,803.32 + £14,951.04 = £17,754.36.  This is the total deemed contribution or PIA

In this case the employee is under the allowance so has no immediate concerns.

Example 2 – Consultant Contract Pay Scale:

A 14th year consultant moves up the Consultant pay-scale from Band 6 (£93,459) to Band 7 (£99,254). .  They had a Level 6 Clinical Excellence Award (CEA) (£18,096). They are a full time active member of the 1995 Section and their accrued service increased from 30 to 31 years. The relevant rate of CPI in this case is 2.4%.

  • Step 1: £111,553 (1 x 30/80) = £41,832.38 pension on 6th April 2019
  • Step 2: £117,348 (1 x 31/80) = £45,472.36 pension on 5th April 2020
  • Step 3: £41,832.38 + 2.4%     = £42,836.35 pension after allowing for inflation
  • Step 4: £45,472.36 – £42,836.35 = £2,636.01 real increase in pension over the PIP
  • Step 5:  £2,636.01 x  3   = £7,908.03 real increase in lump sum over the PIP
  • Step 6: £2,636.01 x 16  = £42,176.16
  • Step 7: £7,908.03 + £42,176.16 = £50,084.19. This is his total deemed contribution or PIA.

In this case the employee is over the annual allowance, so further work is required.

The consultant has additional income resulting in an adjusted income figure of £170,000.  Therefore, assuming no carry forward or any other pension payments his liability is:

  • Pension Growth: £50,084.19
  • Tapered AA: £30,000 (Adjusted income of £170,000 reducing standard AA by £10,000)
  • Excess: £20,084.19
  • Income tax @ 40%: £8,033.68

What about other pension benefits you may hold?