The Bermuda Police Association and Government have ended a long-running pay dispute after Government agreed to make pension payments on officers’ total earnings.Today Minister of Public Safety David Burch announced the legal action, due to be heard by the Privy Council in London later this year, has been discontinued.He also announced retroactive pay increases and a new wage agreement that ties officers’ pay rises to the Government rate of inflation until 2013.He 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.In a Bermuda Court of Appeal hearing police argued that the allowance, which amounts to $6,878.38 per year for a police constable, has always been subject to payroll tax.Government wanted the combined allowance to be treated as an allowance only and not part of officers’ salaries, which means it is not pensionable. The distinction between an allowance and salary saved the Government millions of dollars in extra pension payouts.Today, 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.The 2011 to 2013 increases will be calculated by the Department of Statistics.Sen Burch said: “These terms and conditions have been endorsed by an overwhelming majority of the members of the BPA and I should like to thank them for their willingness to put an end to these matters.“I must also note that the contract agreements reached to 2013 set a new paradigm in contract negotiations Island-wide that I encourage other unions to follow.“With these issues resolved no further valuable time and energy will be devoted to questions of money and wage increases.“The certainty that this agreement brings is in the best interests of Bermuda as it will permit the men and women of their Police Service to focus squarely on the prevention and investigation of crime.”The agreements were signed at Cabinet today.