Final salary Definition

GLOSSARY

Published by a ��Ӱ�� Pensions expert

What does Final salary mean?

Benefits calculated by reference to salary at date of leaving, irrespective of the contributions paid or investment performance.

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Pension increases and revaluation—statutory minimum

Pension increases and revaluation—statutory minimum Statutory minimum increase rates The table below summarises the current statutory minimum increase that occupational pension schemes must apply annually to each tranche of pension. Period of pensionable service to which pension is attributable (or, in the case of money purchase benefits, period in which contributions were made) Statutory minimum pension increase Source Before 6 April 1997 None, save that in order to refund surplus assets to a sponsoring employer under the Social Security Pensions Act 1975, s 58A, it used to be necessary (up until 5 April 2006) to revalue all pensions in payment (excluding GMPs and money purchase benefits) annually in line with the Retail Prices Index (RPI) subject to a cap of 5% Despite the absence of a statutory minimum increase, many defined benefit pension schemes provided, in practice, at least a modicum of inflation protection on a scheme-specific basis Social Security Pensions Act 1975, s 58A (now repealed) Between 6 April 1997 and 5 April 2005 inclusive For benefits...

Pension consultation requirements—checklist

Pension consultation requirements—checklist THIS CHECKLIST APPLIES TO OCCUPATIONAL AND PERSONAL PENSION SCHEMES Is there a requirement to consult employees? • Check whether the scheme is a trust-based occupational pension scheme. • Check whether there are at least 50 employees. • Check whether the employer is an excluded employer. • Check whether the proposal includes a change that requires consultation. • Check whether the change is being made to comply with statute (eg age discrimination legislation). • Check whether the change has a lasting effect on members' benefits. • If in doubt about whether the change requires consultation, consider checking with the Pensions Regulator. • Check whether there are any affected members. • If the change needs to be made quickly (eg to avoid the risk of insolvency), contact the Pensions Regulator to request that it waives the requirement to consult. • An employer does not need to consult representatives under the ICE Regulations (SI 2004/3426) if it consults those representatives under the Pension Consultation Regs (SI 2006/349). Who needs to...

Changing from final salary to career average accrual rates

Reducing the financial burden of defined benefit schemes on employersRecent years have seen many employers seeking to escape or limit their exposure to the rising costs of defined benefit pension schemes and the risks that the operation of such schemes entail. Many employers have sought to achieve this by either restricting access to their defined benefits scheme (so new entrants are no longer admitted to membership) or, in more extreme cases, closing the scheme to the future accrual of benefits.Alternatively, employers may be able to change the scheme’s operative provisions so that benefits accrue on a less generous basis. One way of doing this is to alter the scheme so that members no longer accrue benefits on a 'final salary' basis (ie by reference to salary at or near to the date on which pensionable service ends) but rather on a “career average” basis (ie by reference to salary averaged over a specified period, typically the relevant member’s period of active membership of the scheme).Making such a change involves the...

Death benefits—final salary schemes

THIS PRACTICE NOTE APPLIES ONLY TO REGISTERED FINAL SALARY OCCUPATIONAL PENSION SCHEMESMost pension schemes provide for benefits upon the death of the members. What those benefits will be depends on:•the type and terms of the scheme•the member’s status at death (ie active, deferred, pensioner), and•what death benefits HMRC permits as an authorised paymentThe scheme rules need to be checked carefully as flexible retirement (which allows members to receive benefits while remaining in active service) has introduced a myriad of benefit provisions into some schemes, with boundaries becoming blurred between the different types of member. For further information, see Practice Note: Flexible retirement.HMRC’s Pensions Tax Manual provides further guidance on the types of death benefit that may be paid from final salary schemes as an authorised payment. Unauthorised payments are subject to a punitive tax charge. For further information, see Practice Note: Authorised and unauthorised payments.Death as an active memberPensionIt is common for the rules of a final salary scheme to provide for a pension to be payable in the event...

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Legal due diligence questionnaire—private M&A—share purchase

Legal due diligence questionnaire—private M&A—share purchase Dated [insert date] Introduction This legal due diligence questionnaire relates to the proposed purchase by [insert buyer name] (the Buyer) of the entire issued share capital of [insert name of target company] Limited incorporated in England and Wales under number [insert company number] (the Company) from [insert seller name] (the Seller) (the Proposed Acquisition). This questionnaire is designed to enable the Buyer, the Buyer's solicitors and other professional advisers involved in the Proposed Acquisition to obtain the information which the Buyer requires to assist in its valuation of the Company. Please answer every question fully. Please provide your answers in italics underneath each question and provide copies of all relevant documentation, ensuring that all answers and documents are clearly marked by reference to the appropriate paragraph of this questionnaire. We reserve the right to raise further enquiries in respect of both your responses to this questionnaire and generally. Definitions Business • means the business of [insert...

Unsecured employee loan agreement—company and employee—short-form

Unsecured employee loan agreement—company and employee—short-form This Agreement is made on [insert date] Parties 1 [insert name of employee borrower], of [insert address] (Employee); and 2 [insert name of employer lender], a company incorporated in England and Wales with registered number [insert company number] whose registered office is at [insert address] (Employer). It is agreed as follows: 1 Definitions 1.1 In this Agreement, unless otherwise provided: Drawdown Date • means [insert date]; Event of Default • has the meaning given to it in Clause 6; Loan • means the sum of £[insert figure] (£[insert amount in words] to be lent by the Employer to the Employee under this Agreement, to the extent not repaid; Repayment Date • has the meaning given to it in Clause 4. 2 The Loan 2.1 Subject to the terms of this Agreement, the Employer makes the Loan available to the Employee for the purpose of [buying an annual gym membership OR buying an annual travel season ticket OR [insert description]]. 2.2 The Loan will...

Dive into our 20 Precedents related to Final salary

Where an employee is entitled to an annual salary paid on a monthly basis, how is the employee’s final salary payment calculated where the employment terminates part-way through the month?

Where an employee is entitled to an annual salary paid on a monthly basis, how is the employee’s final salary payment calculated where the employment terminates part-way through the month? Unless the employment contract stipulates otherwise, salary is deemed apportionable and accrues from day to day. Where an employee is entitled to an annual salary paid on a monthly basis, this means that, if the contract comes to an end by death, dismissal or some other event, the employee (or his estate) is entitled to an apportioned part of the month’s salary payment. In Hartley, the Supreme Court considered the case of teachers paid an annual salary, where monthly payments were made every month, including when the teachers were on holiday, and covered not just teaching during ‘directed time’ but other undirected duties which were regularly carried out outside normal term-time hours, ie during weekends, evenings and/or annual leave. In those circumstances, the Supreme Court held that the teachers’ annual salary accrues at the rate of 1/365 each...

The wife of a deceased member has requested information regarding the deceased member's pension from the trustees of a pension scheme in order to support a medical negligence claim, but the wife is neither a current or prospective beneficiary under the scheme. In these circumstances: (i) if the scheme trustees do not disclose the information and the wife complained to the Pensions Ombudsman, would the complaint fall within the remit of the Ombudsman, and (ii) if the complaint does fall within the Pensions Ombudsman’s remit and the complaint is successful, what award could the Ombudsman make?

The wife of a deceased member has requested information regarding the deceased member's pension from the trustees of a pension scheme in order to support a medical negligence claim, but the wife is neither a current or prospective beneficiary under the scheme. In these circumstances: (i) if the scheme trustees do not disclose the information and the wife complained to the Pensions Ombudsman, would the complaint fall within the remit of the Ombudsman, and (ii) if the complaint does fall within the Pensions Ombudsman’s remit and the complaint is successful, what award could the Ombudsman make? It is stated that the wife of the deceased member is neither a current or prospective beneficiary under the pension scheme. However, it is not specified if the occupational pension scheme was contracted-out of the State Earnings Related Pension Scheme (SERPS) or was a contracted-in scheme. For example, since 1978, all occupational pension schemes (and personal pension schemes) which contracted-out of SERPS had to provide for a survivor’s pension for a...

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No provision in scheme rules to waive application of early retirement reduction when calculating underpin pension (Dr H, CAS-43565-P2H7)

Pensions analysis: The Deputy Pensions Ombudsman has rejected a complaint about the application of an early retirement reduction. Martin Scott of gunnercooke LLP looks at the decision.

Government consults on CDC expansion to multi-employer schemes

Law360: The government on 8 October 2024 floated plans to create new pooled pension funds spanning multiple employers, which will have the financial firepower to invest in UK economic growth.

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