Fact sheet - Average Salary
Feb 2009
What is average salary?
- This is the salary used in the calculation of your benefits at the date your pension becomes payable. It is based upon information provided by your employer.
What is the payable date?
- This is the date you become entitled to receive your pension benefits.
Is it always calculated in the same way?
- No, it depends on when your benefits become payable and when you left service.
- You can be assured that, of the calculations relevant to your circumstances, we will use the highest average salary value when we calculate your benefits.
What method is used if I left service before 1 January 2007?
- The highest amount of full salary for any consecutive 365 days of reckonable service, whether continuous or not, during the last three years of pensionable employment.
- Reckonable service is those years and days that count towards your pension benefits.
What method is used if benefits become payable on or after 1 January 2007?
The better of the following calculations will be used:
- The salaries for the last ten years are increased at each salary change to current day value in line with the RPI. The average of the best consecutive three years re-valued salaries in those ten years is used;
- The pensionable salary received in the last 12 months of employment before the date or retirement.
- If benefits become payable between 1 January 2007 and 31 December 2008, the method in existence before 1 January 2007 will be used if this provides the highest salary.
Are there circumstances where the average salary may differ from the methods above?
Yes, There are two circumstances where the average salary may be calculated in a different way. These are:
- Where the method of calculating benefits is based on 365 days, if the rate of salary has increased by more than 10% above the standard salary increase in your sector or institution in the three years leading up to retirement, the full amount will not be used in the calculation of retirement benefits unless the employer pays an additional contribution to the scheme;
- Where a member has a break in service (and at that point has sufficient service to qualify for a pension and lump sum) retirement benefits are calculated using the average salary at the break and these benefits are then increased in line with the RPI. The resulting amount is compared with the usual method of calculating benefits and the better of the two is put into payment. In most cases this alternative or ‘hypothetical’ calculation uses the whole of the reckonable service but if the final salary at the break is higher than at retirement, then only the reckonable service up to the break is used.