Glossary

The factor used to calculate benefits in a defined benefit scheme. For example, a scheme with an accrual rate of 1/60th, will provide 1/60th of pensionable salary for each year of pensionable service.

An occupational pension scheme member who is earning new defined benefit scheme benefits or paying defined contribution scheme contributions.

A reduction made to a pension paid early to the member of a defined benefit scheme.

An assessment of a defined benefit scheme's ability to meet its liabilities. Carried out by the scheme actuary at least once every three years.

The individual appointed by the trustees of an occupational pension scheme to carry out valuations and advise on funding matters.

6 April 2006 - the effective date of pensions simplification, when HMRC introduced a single tax regime for all UK pension schemes.

A provision of some defined benefit scheme for building extra pensionable service in return for additional contributions.

The earnings related part of the state pension, paid in addition to the basic state pension.

A facility provided by occupational pension schemes for members to boost retirement savings.

The legal principle that employers, trustees and managers of pension schemes cannot discriminate against members or prospective members on the basis of age.

Annual payment by NICO to a a contracted out defined contribution pension scheme.

Allows a pension scheme member to defer purchasing an annuity at age 75. A defined level of income can be drawn on the invested funds until the member decides to purchase an annuity or dies.

The maximum pension input (earned in a defined benefit scheme and contributions paid into a defined contribution scheme) a pension scheme member is allowed each year without giving rise to a tax charge.

The administration fee levied each year on a defined contribution scheme, a personal pension plan or a stakeholder pension scheme.

A policy that provides an income in retirement.

Shows the movement of the scheme assets of an occupational pension scheme. Prepared annually by the scheme auditor.

An individual appointed by the trustees of an occupational pension scheme to audit the annual accounts.

The payment of additional retirement benefits, funded by the employer, for a pension scheme member.

An arrangement where an employer automtically enrols an employer into a pension scheme.  This arrangement is to become compulsory from October 2012.

The benefit provided at state pension age to those with a sufficient National Insurance Contribution record.

A type of defined benefit scheme that calculates retirement benefits using the average of revalued pensionable salaries over the member's pensionable service.

The amount offered to a member of an occupational pension scheme who wants to transfer to another pension scheme.

Those in a same sex relationship who have entered into a Civil Partnership in accordance with the Civil Partnership Act 2004.

Contribution paid by the employed (not self-employed), calculated as a percentage of pay.

Flat-rate contribution paid by the self-employed 

Voluntary contribution paid to improve basic state pension entitlement.

Profit-based contribution paid by the self-employed in addition to the Class 2 contribution.

An occupational pension scheme where the membership is no longer open to new employees.

Guidance for occupational pension scheme on how to comply with pensions law. Produced by The Pensions Regulator.

A statement that shows both estimated pension scheme and state pension benefits. Issued voluntarily by pension schemes.

Used to calculate how much pension from a defined benefit scheme is given up in exchange for a tax-free lump sum.

The principle allowing someone to pay into more than one pension scheme at the same time.

Used by pension schemes to calculate pension increases. CPI measures the average changes month-to-month in prices of consumer goods and services purchased in the UK.

The deduction applied to a person's SERPS entitlement for the period they were contracted out between 1978 and 1997.

A part of the DWP, it administers pension scheme members' contracting out records.

The facility to opt out of the state additional pension and build up benefits in a pension scheme.

A director who owns or controls, either in his or her own right or with one or more associates, at least 20% of the ordinary share capital of the employing company.

An event where pension benefits become payable i.e. annuity purchase, death, starting an unsecured pension etc, and at which time a test against the lifetime allowance is carried out.

An occupational pension scheme member who has left service with a deferred pension or fund.

The benefit awarded to a defined benefit scheme member who has left service early.

An occupational pension scheme that provides benefits based on accrual rate, pensionable service and pensionable salary.

A scheme that provides retirement benefits based on the build up of a 'pot' of money, accumulated through the investment of contributions paid by both the employee and the employer.

The government department with overall responsible for the rules governing pension schemes and the administration of the state pension.

An individual who is eligible to receive retirement benefits, i.e. pension and or lump sum, following the death of a pension scheme member.

An occupational pension scheme member who leaves service before reaching their normal retirement age.

The payment of retirement benefits from a pension scheme before a member's normal retirement date. 

Provides a spouse with a share of a pension scheme member's pension rights on divorce. Spouse's share is paid when the member draws their benefits.

Now defunct, it used to be the remuneration limit on calculating occupational pension scheme benefits.

Employers with 5 or more staff but with no pension arrangement in place must designate a stakeholder pension scheme and offer access to qualifying employees.

Previously known as FURBS and UURBS. These are unapproved schemes with no tax reliefs, that an employer funds to provide a member with a lump sum and/or income.

If a member is worried their pension rights exceed, or may exceed, the lifetime allowance, they can safeguard them against a tax charge.

Following a ruling by the European Court of Justice in 1990, occupational pension schemes cannot discriminate between men and women with regards retirement ages and scheme benefits.

A non-revaluing pension built up whilst contracted out of the state graduated pension scheme through an occupational pension scheme.

The increments applied to a pension in payment.

An occupational pension scheme for selected directors and senior staff.

Notication by a member to their pension scheme of how they wish their lump sum death benefits to be paid.

An occupational pension scheme that provides benefits based on accrual rate, pensionable service and pensionable salary.

An government funded scheme, operated by the DWP, set up in 2005 to pay compensation to wound up occupational pension scheme members who have lost pension rights following an employer's insolvency.

An independent, levy funded body that considers complaints between consumers and financial firms.

An independent, government funded body that regulates the financial services business in the UK.

An independent, levy funded body that compensates consumers who cannot complete claims because their provider is insolvent.

Levy funded and operated by the PPF, this fund compensated occupational pension schemes that have suffered financial injustice as a result of dishonesty.

A facility provided by insurance companies for members to boost their occupational pension scheme savings.

Now known as an EFRBS. These are unapproved schemes with no tax reliefs that an employer funds to provide a member with a lump sum and/or income.

A government department that provides actuarial advice and guidance to the government and public sector schemes.

Alternative name given to the state additional pension between April 1961 and April 1975.

A collection of personal pension plans provided by an employer to its staff.

The benefit built up in a defined benefit scheme as a result of being contracted out of the state additional pension.

A government department, successor to the Inland Revenue and Customs & Excise, that handles the tax approval of pension schemes and taxation of contributions and benefits.

Available to carers and those looking after children, this benefit reduces the number of qualifying years required for the basic state pension.

An occupational pension scheme that calculates retirement benefits as some combination of two alternatives, defined benefit scheme or defined contribution scheme.

If an occupational pension scheme member is unable to work as a result of a medical condition, they may be entitled to draw retirement benefits early (sometimes enhanced) at any age (no later than 75).

A member of a defined contribution scheme may be able to claim an immediate annuity on enhanced terms if they are suffering from poor health, such as as high blood pressure, diabetes, heart condition, kidney failure, certain types of cancer, multiple sclerosis and chronic asthma.

Also known as an unsecured pension. Allows a pension scheme member to continue to invest a fund whilst drawing a limited income. Available to under 75s only.

Also known as an unsecured pension. Allows a pension scheme member to continue to invest a fund whilst drawing a limited income. Available to under 75s only.

A trustee with no links to the pension scheme, the employer or the members. In some circumstances there is a legal requirement to appoint an Independent Trustee such as on the winding up of a defined benefit scheme where the employer is insolvent.

When a company goes into administration, liquidation or is wound up.

The formal grievance procedure for occupational pension scheme members and beneficiaries who want to complain against their scheme trustees.

The payment of retirement benefits from a pension scheme after a member's normal retirement date.

An investment stragegy on defined contribution schemes where a member's investments are switched automatically as they get older to more secure holdings, such as cash.

The maximum value of fund a pension scheme member can accumulate without incurring a tax charge.

The change in the Retail Price Index between 1 October and the following 30 September, capped at 5% (from April 1997 to April 2005) and 2.5% (since April 2005). Used by pension schemes for pension increases and revaluation.

The tax-free lump sum paid to a member of a pension scheme when their benefits come into payment.

An adjustment made to the value of a With Proft fund to reflect the difference between the market and actuarial values of the fund.

A person who is voted by fellow members to the board of a corporate trustee of an occupational pension scheme.

A person who is voted by fellow members to be a trustee of an occupational pension scheme.

Predecessor of scheme specific funding. Valued the assets and liabilities of a defined benefit scheme against a statutory benchmark to ensure sufficient funds to pay members' benefits.

A scheme that provides retirement benefits based on the build up of a 'pot' of money, accumulated through the investment of contributions paid by both the employee and the employer.

A new low cost pension scheme being introduced in 2012.  Employers will be able to automatically enroll their employees into this arrangement.

Payments deducted from pay or declared through self assessment, used by the DWP to fund the state pension and other state benefits.

A part of HMRC. They administer the collection of National Insurance Contributions.

The contractual age that retirement benefits are paid from an occupational pension scheme.

The date that an occupational pension scheme member reaches normal retirement age.

A scheme set up by an employer to provide retirement benefits to employees (excluding death-in-service only arrangements).

A member's pension rights are offset against other assets as part of a divorce settlement.

A provision of defined contribution schemes allowing members to transfer funds at retirement to draw an immediate annuity with another provider.

The status given to a personal pension plan when a member chooses to cease contributing.

Tells the trustees of a defined benefit schemes how much the employer and employees will contribute.

The tax-free lump sum paid to a member of a pension scheme when their benefits come into payment.

Provides a spouse with a share of a pension scheme member's pension rights on divorce. Spouse's share is paid when the member draws benefits.

Incorporated into a pension once put into payment. It ensures that pension instalments for a specified period are paid, even if the member dies before the period expires.

The increments applied to a pension in payment.

A member's pension rights are offset against other assets as part of a divorce settlement.

An independent, levy funded body that compensates members of occupational pension schemes who have lost pension benefits as a result of an employer's insolvency.

Provides a spouse with a share of a pension scheme members retirement benefits on divorce. Spouse is given a credit to put towards their own retirement benefits.

Operated by The Pension Service. Pension scheme members are able to trace lost pension schemes.

Earnings used to calculate retirement benefits in a defined benefit scheme.

Length of qualifying time in a defined benefit scheme used to calculate retirement benefits.

A professional trustee that, prior to 6 April 2006, had to be appointed to carry out defined administrative functions for small self administered schemes.

An occupational pension scheme member who has drawn their scheme pension.

A means-tested benefit that boosts a pensioner's state pension to ensure they have a minimum level of income.

An independent, levy funded individual who determines complaints by scheme members and beneficiaries about the way a pension scheme is run against scheme trustees, managers, administrators and employers.

The name given to the changes introduced by HMRC on A-Day. One single tax regime was introduced to replace the previous eight.

A type of defined contribution scheme. Provides retirement benefits based on the build up of a 'pot' of money, accumulated through the investment of contributions.

An independent, levy funded individual who determines complaints against the PPF and the FAS.

Introduced in 1975, compels occupational pension schemes to offer deferred pensions to early leavers with the minimum service (five years between 1975 and 1988 and 2 years since 1988).

An occupational pension scheme member who has left service with a preserved pension or fund.

The benefit awarded to a defined benefit scheme member who has left service early.

A pension scheme member who may have pension rights valued in excess of the lifetime allowance can safeguard some or all of their accrued benefits against a tax charge.

The fund built up in a defined contribution scheme from rebates paid as a result of being contracted out of the state additional pension.

An occupational pension scheme set up by the government to benefit those in government funded employment, i.e. teachers, police, civil servants.

An overseas pension scheme that meets HMRC rules that allow overseas transfers. 

A year in which an individual has paid, or is is treated as having paid, National Insurance contributions.

Produced by an employer, it records how much they and their employees will contribute to the designated stakeholder pension scheme.

The comparison of the benefits provided by a contracted-out defined benefit scheme with those under the reference scheme that they are at least equal, as required under section 12B of the Pension Schemes Act 1993. The scheme actuary must certify that the scheme complies with the reference scheme test.

Used by pension schemes to calculate pension increases. It is the average measure of change in the prices of goods and services bought in the UK.

The predecessor of the personal pension plan. Available before April 1988 to the self-employed and those in employment who did not have access to an occupational pension scheme.

The increase, normally in line with inflation, of a deferred pension between the date the member leaves service and their NRA.

An arrangement between an employer and an employee where the employee forgoes part of their pay for a correspending employer contribution to the pension scheme.

An occupational pension scheme that provides benefits based on accrual rate, pensionable service and pensionable salary.

Produced by the scheme actuary, it shows the trustees of a defined benefit scheme how much the employer and employees will contribute.

The individual appointed by the trustees of an occupational pension scheme to carry out valuations and advise on funding matters.

An individual appointed by the trustees of an occupational pension scheme to audit the annual accounts.

The successor to the minimum funding requirement. A defined benefit scheme is required to have sufficient and appropriate assets to meets its liabilities.

An insurance policy designed to accept transfers from defined benefit schemes.

The age chosen by a personal pension plan member to draw retirement benefits.

A type of personal pension plan that gives an individual more investment control.

A temporary annuity that runs for no longer than 5 years. Allows an individual to draw an income whilst deferring purchasing a full annuity. Available between 50 and 75.

An occupational pension scheme, usually for small businesses, that gives members more investment control.

The process followed by an employer who is not exempt from the employer access requirements. The employer must choose a stakeholder pension scheme and provide access to their employees.

A type of personal pension plan, offering a low-cost and flexible alternative and which must comply with requirements laid down in legislation.

The earnings related part of the state pension, paid in addition to the basic state pension.

Alternate name given to the state additional pension between April 1978 and April 2002.

Alternative name given to the state additional pension between April 1961 and April 1975.

Administered and paid by The Pension Service, this benefit is made up of the basic state pension and the state additional pension.

The earliest age that the state pension can be taken.

The earliest date that the state pension can be paid.

On reaching state pension age, a pensioner can defer taking their state pension in exchange for a higher pension or lump sum in the future.

An illustration provided by The Pension Service giving an estimate of what state pension an individual may receive at state pension age.

Alternate name given to the state additional pension since April 2002.

A statement in which the trustees of a defined benefit scheme set out how the statutory funding objective will be met.

The trustees of a defined benefit scheme must ensure that the scheme's liabilities are covered by appropriate and sufficient assets.

Annual statements issued to defined contribution scheme members, giving forecasts of benefits now and at retirement (in today's terms).

Incentive given to those contributing to pension schemes. The government pays 20% (non-earners and basic rate tax payers) or 40% (higher rate tax payers) of a members gross contribution.

A pension scheme that has been approved to operate by HMRC.

A part of the DWP. Responsible for administering and paying the state pension.

An independent, government funded body that provides general information about pensions to the public and also helps resolve pension disputes through mediation and conciliation.

A government body that regulates the running of occupational pension schemes.

Provides pension protection for employees whose employment is transferred from one employer to another.

Comes in two forms - primary and enhanced. Allows an individual to protect accrued pension rights that may exceed the lifetime allowance, thereby avoid a tax charge on the excess.

Allows a pension scheme member to withdraw all pension benefits as a lump sum. Member must be at least 60 and have total pension rights valued at less than 1% of the lifetime allowance.

The legal document that sets up an occupational pension scheme and defines how it should be operated.

Responsible for the administering the assets and liabilities of a bankrupt.

A payment made to a member of employer by a pension scheme that is not authorised by HMRC.  This is subject to a tax charge.

Now known as an EFRBS. These are unapproved schemes with no tax reliefs that an employer funds to provide a member with a lump sum and/or income.

Also known as income drawdown or income withdrawal. Allows a pension scheme member to continue to invest a fund whilst drawing a limited income. Available to under 75s only.

The process of terminating an occupational pension scheme, usually by transferring member's benefits to individual arrangements.

The order in which members' benefits are distributed on the winding up of a defined benefit scheme with an insolvent employer and a funding shortfall.