Are contracted backdated pay rises pensionable?

[Johnnew]

I found after retiring the backdated contracted pay increase that covered when I was employed, but agreed after I left, has not been included as my final pensionable pay.

No one appears to be able to formally advise me with facts, are contracted backdated pay rises pensionable?

Any help guidance appreciated.

 

[Silverlinky]

I found after retiring the backdated contracted pay increase that covered when I was employed, but agreed after I left, has not been included as my final pensionable pay.

No one appears to be able to formally advise me with facts, are contracted backdated pay rises pensionable?

Any help guidance appreciated.

T'is a good question. One thing I noticed when the thousands of pounds of backpay rolled in was that there were no additional pension contributions levied against it, and neither presumably did Companies pay their contributions on the increase either.
Something about "forward pensionable only" rings a bell.

 

[Sir Felix Pole]

I found after retiring the backdated contracted pay increase that covered when I was employed, but agreed after I left, has not been included as my final pensionable pay.

No one appears to be able to formally advise me with facts, are contracted backdated pay rises pensionable?

Any help guidance appreciated.

'Pensionable Pay' is only calculated annually at the year-end ( March / April). It is for all pensionable payments (including arrears) actually made in that year, and determines the fixed four-weekly / monthly contributions to be made for the coming year. If arrears for that year are subsequently paid after year-end, the pensionable pay is not retrospectively adjusted.

When you retire, the pensionable pay applicable for the last year of service is examined. So for a four-weekly payroll, if you retire at the end of Period 6 the 'final salary' will be an average of 6/13 of pensionable pay applicable for the new year and 7/13 of pensionable pay applicable for the old-year.

So to answer your question, no, the late arrears are not included in your final salary calculation.

== Doublepost prevention - post automatically merged: 17 Jul 2025 ==

T'is a good question. One thing I noticed when the thousands of pounds of backpay rolled in was that there were no additional pension contributions levied against it, and neither presumably did Companies pay their contributions on the increase either.
Something about "forward pensionable only" rings a bell.

Pension contrbutions are fixed for the year, depending on the pensionable-pay at year-end.

 

[Johnnew]

T'is a good question. One thing I noticed when the thousands of pounds of backpay rolled in was that there were no additional pension contributions levied against it, and neither presumably did Companies pay their contributions on the increase either.
Something about "forward pensionable only" rings a bell.

'Pensionable Pay' is only calculated annually at the year-end ( March / April). It is for all pensionable payments (including arrears) actually made in that year, and determines the fixed four-weekly / monthly contributions to be made for the coming year. If arrears for that year are subsequently paid after year-end, the pensionable pay is not retrospectively adjusted.

When you retire, the pensionable pay applicable for the last year of service is examined. So for a four-weekly payroll, if you retire at the end of Period 6 the 'final salary' will be an average of 6/13 of pensionable pay applicable for the new year and 7/13 of pensionable pay applicable for the old-year.

So to answer your question, no, the late arrears are not included in your final salary calculation.

== Doublepost prevention - post automatically merged: 17 Jul 2025 ==


Pension contrbutions are fixed for the year, depending on the pensionable-pay at year-end.

Sir Felix Pole, that is a detailed reply, but appearing to intentionally avoid answering the fundamental question.

Your reply would appear to imply, there is a loop hole in the pension final salary calculation, some or all TOCs and companies may be using, to abuse the criteria of not including backdated contracted pay rises in their pension calculation.

If the criteria is as Silverlinky said “only forward pensionable”, it would, in my opinion, allow the TOCs to unethically manipulate the agreement of contracted pay rises until after staff had retired, saving themselves vast amounts of money at the expense of those wishing to retire.

This would make members of pension schemes tasks of planning when to retire at the most optimal time impossible, as they have no control when the company will actually agree a contracted backdated pay deal.

I believe Sliverlinky, may have seen the relevant criteria that allows the TOCs to carry out this practice, when he mentions seeing something about “forward pensionable only” and hitting the nail on the head, why some or all TOC’s may be manipulating the final salary pension scheme for their personal reason, that it avoids them having to pay pensions contributions on all the backdated contracted pay rises.

As it is accepted that we, on average, put in less than 50% of our pensions worth, as the company puts in the greater amount.

Then all those that understand delayed gratification, will be shouting at their union reps and the Directors of the companies, to close this loop hole down and make backdated contracted pay rises pensionable.

As the present situation clearly benefits the company at the expense of the employees, especially as some recent contracted pay deals were delayed being implemented for over 1 year.

The TOCs that practice this, what appears unethical practices are directly saving themselves millions at the direct expense of those wishing to retire.

Sir Felix Pole, you appear informed, do all TOCs and all pension schemes under the Railway pensions run with as Sliverlinky implies, making delayed backdated contracted pay rises “only forward pensionable”?

Is this criteria that backdated contracted pay rises are not forward pensionable documented anywhere and who agreed these terms?

 

[Sir Felix Pole]

I suggest you ring RPS at Darlington to get confirmation of these rules. Your fixed pension contributions are based on the pensionable pay at the end of the financial year, so your final salary is also based on the applicable pensionable pay. If you hadn't retired then the late arrears would be included in the pensionable pay calculation for the following financial year.

 

[Johnnew]

T'is a good question. One thing I noticed when the thousands of pounds of backpay rolled in was that there were no additional pension contributions levied against it, and neither presumably did Companies pay their contributions on the increase either.
Something about "forward pensionable only" rings a bell.

Silverlinky, I think you hit the nail on the head, with this response, when you say presumably neither did the companies pay their contributions on the increase on our delayed backdated contracted pay increases.

I do consider whoever agreed to these terms, on the employee side, must struggle with the concept of delayed gratification. (It is accepted a lot of children understand this concept after the age of about 2, (have one ice cream now or have two in an hour).

With an aging workforce and this appearing to have become a pattern, with the companies delaying implementing our contracted pay rises for years at a time.
This issue must effect thousands of recently retired Railway staff and thousands of staff planning to retire in the very near future.

I consider this strategy that some/all tRailway With the companies delaying implementing our contracted pay rises, then making these delayed contracted pay rises non pensionable, appears something that the consequences should be intelligently understood discussed and widely negotiated, when these Railway companies repeatedly delay implementing our contracted pay increases.

I suggest you ring RPS at Darlington to get confirmation of these rules. Your fixed pension contributions are based on the pensionable pay at the end of the financial year, so your final salary is also based on the applicable pensionable pay. If you hadn't retired then the late arrears would be included in the pensionable pay calculation for the following financial year.

Sir Felix Pole,
I am formally calling you out.
I believe you may misunderstand the situation, either unknowingly or intentionally?

RPS Darlington is RailPen the rebranded Railway Pension scheme.

It is my understanding that it is the companies that agree if these pay rises are pensionable or not and they update RailPen accordingly, RailPen will then update the persons final pensionable pay on the information supplied by the company.

I think Silverlinky, hit the nail on the head, with this response, when he said presumably neither did the companies pay their contributions on the increase on our delayed backdated contracted pay increases.

I do consider whoever agreed to these terms, on the employee side, (if these terms have been formally agreed on the employee side) must struggle with the concept of delayed gratification. (It is accepted a lot of children understand this concept after the age of about 2, (have one ice cream now or have two in an hour).

With an aging workforce and this appearing to have become a pattern, with the companies delaying implementing our contracted pay rises for years at a time.

This issue must effect thousands of recently retired Railway staff and thousands of staff planning to retire in the very near future.

I consider this strategy that some/all Railway companies employ of delaying implementing our contracted pay rises, then making these delayed contracted pay rises non pensionable, appears something that the consequences should be intelligently understood discussed and renegotiated.

When these Railway companies repeatedly delay implementing our contracted pay increases, this becomes a pattern that only benefits the companies concerned at the direct detriment of the final salary scheme members who retire.

 

[Sir Felix Pole]

Silverlinky, I think you hit the nail on the head, with this response, when you say presumably neither did the companies pay their contributions on the increase on our delayed backdated contracted pay increases.

I do consider whoever agreed to these terms, on the employee side, must struggle with the concept of delayed gratification. (It is accepted a lot of children understand this concept after the age of about 2, (have one ice cream now or have two in an hour).

With an aging workforce and this appearing to have become a pattern, with the companies delaying implementing our contracted pay rises for years at a time.
This issue must effect thousands of recently retired Railway staff and thousands of staff planning to retire in the very near future.

I consider this strategy that some/all tRailway With the companies delaying implementing our contracted pay rises, then making these delayed contracted pay rises non pensionable, appears something that the consequences should be intelligently understood discussed and widely negotiated, when these Railway companies repeatedly delay implementing our contracted pay increases.

Sir Felix Pole,
I am formally calling you out.
I believe you may misunderstand the situation, either unknowingly or intentionally?

RPS Darlington is RailPen the rebranded Railway Pension scheme.

It is my understanding that it is the companies that agree if these pay rises are pensionable or not and they update RailPen accordingly, RailPen will then update the persons final pensionable pay on the information supplied by the company.

I think Silverlinky, hit the nail on the head, with this response, when he said presumably neither did the companies pay their contributions on the increase on our delayed backdated contracted pay increases.

I do consider whoever agreed to these terms, on the employee side, (if these terms have been formally agreed on the employee side) must struggle with the concept of delayed gratification. (It is accepted a lot of children understand this concept after the age of about 2, (have one ice cream now or have two in an hour).

With an aging workforce and this appearing to have become a pattern, with the companies delaying implementing our contracted pay rises for years at a time.

This issue must effect thousands of recently retired Railway staff and thousands of staff planning to retire in the very near future.

I consider this strategy that some/all Railway companies employ of delaying implementing our contracted pay rises, then making these delayed contracted pay rises non pensionable, appears something that the consequences should be intelligently understood discussed and renegotiated.

When these Railway companies repeatedly delay implementing our contracted pay increases, this becomes a pattern that only benefits the companies concerned at the direct detriment of the final salary scheme members who retire.

I think you misunderstand - pensions are paid by the relevant scheme on retirement not the TOC. There is no advantage in TOCs 'manipulating' the payment of arrears as you put it - well apart from their immediate cash flow but that applies to active staff as well!

It is not unreasonable that as your fixed pension contributions for the year ahead are based on the pensionable pay at year end, that your final salary is also based on this. You can't have it both ways!

 

[Silverlinky]

I sit in the middle with the two posters on here. It would be quite unreasonable to expect a pension fund section to make higher pension payments without having had both the employers and employees contributions for however long the backdated payrise covered, in some cases wasn't it three years? There would soon be a deficit in each section if that was replicated across the board.
Of course there was an upside for the TOC not to have to put in their (higher) share but there was also an upside for the employee who didn't see 13% approx of their backpay disappear.

The fairest way for it all to have been done would have indeed been for both employers and employees contributions on the arrears to be paid, then both current employees and those who had retired in the time that the backdated pay covered would have all seen the benefit, but for whatever reason the deal didn't turn out like that, and that must have been negotiated and agreed by the TOC's, DFT (Government) and the Unions.

I thought it was generally accepted that the DfT/Government of the day had tight control of the pursestrings and it was they, rather than the privately owned (but publicly financed) TOC's who allowed the pay impasse and subsequent disputes to continue for as long as they eventually did?

 

[Johnnew]

I think you misunderstand - pensions are paid by the relevant scheme on retirement not the TOC. There is no advantage in TOCs 'manipulating' the payment of arrears as you put it - well apart from their immediate cash flow but that applies to active staff as well!

It is not unreasonable that as your fixed pension contributions for the year ahead are based on the pensionable pay at year end, that your final salary is also based on this. You can't have it both ways!

Sir Felix Pole

I am formally calling you out.

You appear to be trying to confuse the situation, you are doing this either unintentionally, due to a complete lack of knowledge on the subject, or intentionally.

Employees pension money is paid by the employees and your employer TOCs into the pension fund, then paid out by the pension scheme on retirement, please do not try to confuse the situation.

So readers, please note this in reading the responses from Sir Felix Pole, when he states:- There is no advantage in TOCs manipulating the payment of arrears, as you put it - well apart from their cash flows but that applies to active staff as well”

Well all readers think just how much money the TOCs are actually saving by this practice, of not making back dated contracted pay rises pensionable, that if made pensionable, this money would be paid into the Railways pension fund and be part of your final salary pension calculation. which I consider is the ethically right thing to do, with regards to contracted delayed pay rises.

Just to give readers a favour of the amount the TOCs Railway are, let’s say, (avoiding paying) by manipulating the contracted backdated pay awards to be non pensionable:-

Assuming 64k Railway workers
Assuming an average 40k salary
Assuming an average 7% company contribution.
Assuming an average 5% pay rise delayed for one whole year.

That equates to 9 million rounded to one decimal place, so assuming a stack averaging error of say 30%, this equates, that every year, this is practice of delaying a contracted pay rise is completed, the TOCs/rail companies save an estimated 6.3 -11.5 million.

So there is a massive advantage to the Railway companies, for doing this, I assume Sir Felix Pole is a Director or PR of a Railway company, maybe paid a bonus on money not paid into the railway pension scheme.

Anyone recently retired, i.e over the last 3-4 years, may have been effected by this practice and all those that retire in the future, (think about that) will be effected by this practice. if the companies involved, continue to delay our contracted pay increases and then when eventually paid, are not made pensionable, which I consider is not in line with the ethos and core principles of the final salary pension.

Does anyone on this forum, have actual detailed knowledge, when and how, the practice of delayed contacted pay rises, not being made pensionable, was allowed to be rolled out, how this was done, who authorised and agreed to this practice to originally start and how this practice has been agreed year on year unchecked?

 

[74A]

The railway pension has not been a final salary scheme for the last ten years. It is now based on you career average salary. A significant difference.

 

[Snow1964]

I think Silverlinky, hit the nail on the head, with this response, when he said presumably neither did the companies pay their contributions on the increase on our delayed backdated contracted pay increases.

Exactly, a person decides to retire, and knows what current paid up position is, and therefore how much they will get, you can't expect some future unknown to be included at a later date.

The pension administrators already have a big unknown (how many years it will be paid out) so can't expect them to accept other unknown future changes to.

I consider this strategy that some/all Railway companies employ of delaying implementing our contracted pay rises, then making these delayed contracted pay rises non pensionable, appears something that the consequences should be intelligently understood discussed and renegotiated.

When these Railway companies repeatedly delay implementing our contracted pay increases, this becomes a pattern that only benefits the companies concerned at the direct detriment of the final salary scheme members who retire.

I think you might be misguided, referring to a contractual rise, no one delays it. In most industries pay is negotiated and will be effective from x date (usually an annual change date, couple of months in future)

The Railway unions take a topsy turvey approach of not wrapping up the negotiations in time to do implement the change in pay rates ahead of the agreed change date. All the problems you mention are a direct consequence of this.

I have no idea what was said in the pay negotiations but seems to me backpay was agreed for both current employees and those who left, but no one agreed to change pensions of the already retired (although happy to be corrected if anyone has wording of agreement)

 

[Johnnew]

Member 74A Just to update you, some schemes were changed to career average schemes, some years ago, as you correctly report. But not all schemes as you state, some schemes, I believe, most TOCs, still remain final salary pension schemes.

Snow 1964, my understanding it is common in other industries, for contractual delayed backdated pay rises to be made pensionable.

This issue will effect all staff who retired from I believe late 2021 - September 2024, so that probably effects thousands of staff who have retired in this time period.
Plus, if it is not changed and the companies continue to do the practice of significantly delaying the introduction of the contractual pay rises, it will continue to affect all future staff who retire.

When the present deal was struck, Mick Whelan stated it was a “No-strings deal”

Well, to all those retiring, this is an issue.

To be completely clear, if you understand the principles of “delayed gratification” then the only long term beneficiary of this criteria, is the TOCs//Railway companies concerned, at the direct detriment of all employees.

I assume, within this forum, there must be some members who have actual factual information on how within the Railway, it was agreed to make these contracted delayed backdated pay rises, non pensionable?

When was this originally formally decided and agreed?

Who agreed to this criteria?

Where is this factually documented?

Considering how many Railway employees this affects and the amount that implementing this saved the Railway companies and TOCs, I would assume this information on this decision would be readily available?

 

[Haywain]

I would suggest that if you have an issue of this nature you can take it up with any, or all, of the pension scheme (RPS), the employer or your former trade union. However, my personal view, which you are absolutely free not to like, is that @Sir Felix Pole is closer to the right answer than you want them to be. The one certainty is that posting here won't change anything - if anything it seems to be increasing your level of anger.

 

[Johnnew]

I would suggest that if you have an issue of this nature you can take it up with any, or all, of the pension scheme (RPS), the employer or your former trade union. However, my personal view, which you are absolutely free not to like, is that @Sir Felix Pole is closer to the right answer than you want them to be. The one certainty is that posting here won't change anything - if anything it seems to be increasing your level of anger.

Haywain

I have no anger, just frustration with people replying and commenting that appear not to have any knowledge or factual information on the subject.

It is not a RPS or RailPen issue, please do not reply, if you have no actual factual information to add on the issue.

So back to my original question, put out to this forum.

I assume within this forum, there must be some members who have actual factual information on how within the Railway, it was agreed to make these contracted delayed backdated pay rises, non pensionable?

When was this originally formally decided and agreed?

Who agreed to this criteria?

Where is this factually documented?

 

[Snow1964]

When was this originally formally decided and agreed?

Who agreed to this criteria?

Where is this factually documented?

It would have been decided when you joined as an employee.

Need to look at your original contract from when you joined. It will say something like you are eligible for a pension, based on a formula of x multipled by y qualifying years service multipled by salary on date of leaving. If you signed the contract on joining, then you agreed it.

The key is does it say salary on date of leaving, or salary plus any future pay increases. I suspect you know the answer.

Dig out your contract and pension info supplied when you joined, and check the clauses. As has already been mentioned some more recent joiners have different rules. If you have lost the documents you will have to ask the pension provider and hope they are trustworthy because have no evidence to disprove anything they say from what you originally signed upto.

 

[Sir Felix Pole]

Haywain

I have no anger, just frustration with people replying and commenting that appear not to have any knowledge or factual information on the subject.

It is not a RPS or RailPen issue, please do not reply, if you have no actual factual information to add on the issue.

So back to my original question, put out to this forum.

I assume within this forum, there must be some members who have actual factual information on how within the Railway, it was agreed to make these contracted delayed backdated pay rises, non pensionable?

When was this originally formally decided and agreed?

Who agreed to this criteria?

Where is this factually documented?

I repeat - pensionable pay is fixed at the year end. Arrears are pensionable - it depends on when they are paid as to which year-end they are included in. Employee and employer contributions are fixed as a result of the pensionble pay calculation so it is not unreasonable. Them's the rules - I don't make them - and do calm down.

 

[greatkingrat]

This is the wording of the paydeal that ASLEF sent out. (I don't know if the RMT deal has the same wording or not).

For employees that are members of the Railways Pension Scheme and receive a backdated pay award following agreement of the 2022/23, 2023/24, and/or 2024/25 pay awards, for pensions purposes: 
1. Contributions will continue to be based on pensionable pay as at 1 April 2024. 
2. Contributions will next be updated from July 2025 based on pensionable pay on 1 April 2025 (which will take into account pay awards preceding that date). 
3. In the event the member leaves pensionable service, the calculation of their scheme benefits will be calculated as if the pay award had been made on the date it is backdated to, rather than the date it is awarded. 
4. Any back-pay lump sum awarded will not be pensionable (for contribution purposes) and will only be pensionable to the extent necessary to give effect to (3) above. 
This applies regardless of whether previous offers of backpay have been treated differently and is subject to the existing terms of any pensionable pay capping arrangements in place.