The Government wants to make sure that the pension savings people make are at an adequate level.

So, it has set out certain rules about the minimum amount of earnings on which pension contributions
must be based for employers and employees. In other words, it h as defined which elements of pay must be counted as ‘pensionable pay’.

Currently, Plan contributions are based on some, but not all, earnings. For example, pension contributions are not made in respect of annual bonus payments. The Plan’s definition of ‘pensionable pay’ satisfies the Government’s new criteria in most respects, but currently excludes ‘holiday pay’ which must in future be treated as pensionable. These payments are not common but some employees do receive pay in lieu of holidays, for example, if they leave the company with holiday owing to them or if they come back from maternity leave with a balance of holiday outstanding. From 1 April 2013 these payments will be considered pensionable and both the Plan member and his/her employer will pay contributions on them.