The Bermuda Police Association and Government have ended a long-running pay dispute after Government agreed to make pension payments on officers’ total earnings.Minister of Public Safety David Burch announced yesterday that the legal action, due to be heard by the Privy Council in London later this year, has been discontinued.Government also agreed to a retroactive pay increase and a new wage agreement that ties officers’ pay rises to the Government rate of inflation until 2013.Senator Burch said: “[The] action before the Privy Council was on the issue of the combined allowance and whether or not it is pensionable.“I don’t think the BPA will mind me saying that we are unlikely to ever agree on the point, but we are agreed that irrespective of the Privy Council’s findings, the issue would not go away.“Therefore, I can also advise that the combined allowance will be abolished as at January 1, 2010 for the purposes of this settlement and from that date the salary of a police officer will be taken to mean what we had referred to as the salary proper, plus the combined allowance.“Accordingly, also with effect from January 1, 2010 that salary will be pensionable, with equal matching contributions made by employer and employee to the Superannuation Fund.”The dispute started after a Permanent Police Tribunal’s June 2008 decision which stated the ‘combined allowance’ should be considered a part of officers’ salaries, and should be taken into account as part of their pension.The officers’ combined allowance is an additional payment to their salary and is based on their unsociable hours and takes into account that they must report to work at least 15 minutes before their shift starts.The allowance is approximately ten percent of their salary, and amounts to $6878.38 per year for a police constable.In a Bermuda Court of Appeal hearing police argued the allowance was already part of their total pay package and always been subject to payroll tax.Government wanted the combined allowance to be treated as an allowance only and not part of officers’ salaries, meaning it would not be pensionable. The distinction between an allowance and salary saved the Government millions in extra pension payouts.Yesterday, Sen Burch also announced that officers would be paid a retroactive pay increase of 1.5 percent per year between 2005 and 2008 in three installments between April and June this year.He added: “Perhaps the most positive aspect of today’s announcement is the fact that in addition to disposing of those issues that have been outstanding, I am pleased to also announce that we have agreed a new wage contract for the period October 1, 2009 through September 30, 2013.“In so doing we are breaking new ground as the formula for the annual percentage increase is now founded in a higher degree of certainty than can sometimes be said of pay negotiations within the public service.”Officers will be paid an annual percentage increase based on the Consumer Price Index.For 2009/2010 a retroactive payment of 1.8 percent of officers’ salaries will be paid. For 2010/2011 officers will receive a payment of 2.4 percent of their salary.