Glossary
- Terms beginning with 'A'
- Terms beginning with 'B'
- Terms beginning with 'C'
- Terms beginning with 'D'
- Terms beginning with 'E'
- Terms beginning with 'F'
- Terms beginning with 'G'
- Terms beginning with 'H'
- Terms beginning with 'I'
- Terms beginning with 'J'
- Terms beginning with 'K'
- Terms beginning with 'L'
- Terms beginning with 'M'
- Terms beginning with 'N'
- Terms beginning with 'O'
- Terms beginning with 'P'
- Terms beginning with 'Q'
- Terms beginning with 'R'
- Terms beginning with 'S'
- Terms beginning with 'T'
- Terms beginning with 'U'
- Terms beginning with 'V'
- Terms beginning with 'W'
- Terms beginning with 'X'
- Terms beginning with 'Y'
- Terms beginning with 'Z'
| A-Day |
| 6 April 2006. The effective date of pensions simplification, when HMRC introduced a single tax regime for all UK pension schemes. |
| Accrual Rate |
| 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. |
| Active Member |
| An occupational pension scheme member who is earning new defined benefit scheme benefits or paying defined contribution scheme contributions. |
| Actuarial Valuation |
| 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. |
| Added Years |
| A provision of some defined benefit scheme for building extra pensionable service in return for additional contributions. |
| Additional Voluntary Contribution (AVC) |
| A facility provided by occupational pension schemes for members to boost retirement savings. |
| Alternatively Secured Pension (ASP) |
| 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. |
| Annual Allowance (AA) |
| 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. |
| Annual Management Charge (AMC) |
| The administration fee levied each year on a defined contribution scheme, a personal pension plan or a stakeholder pension scheme. |
| Annuity |
| A policy that provides an income in retirement. |
| Audited Accounts |
| Shows the movement of the scheme assets of an occupational pension scheme. Prepared annually by the scheme auditor. |
| Basic State Pension |
| The benefit provided at state pension age to those with a sufficient National Insurance Contribution record. |
| Career Average Scheme |
| A type of defined benefit scheme that calculates retirement benefits using the average of revalued pensionable salaries over the member's pensionable service. |
| Cash Equivalent Transfer Value (CETV) |
| The amount offered to a member of an occupational pension scheme who wants to transfer to another pension scheme. |
| Civil Partner |
| Those in a same sex relationship who have entered into a Civil Partnership in accordance with the Civil Partnership Act 2004. |
| Closed Scheme |
| An occupational pension scheme where the membership is no longer open to new employees. |
| Code Of Practice |
| Guidance for occupational pension scheme on how to comply with pensions law. Produced by The Pensions Regulator. |
| Combined Pension Forecast (CPF) |
| A statement that shows both estimated pension scheme and state pension benefits. Issued voluntarily by pension schemes. |
| Commutation Factor |
| Used to calculate how much pension from a defined benefit scheme is given up in exchange for a tax-free lump sum. |
| Contracted Out Employments Group (COEG) |
| A part of the DWP, it administers pension scheme members' contracting out records. |
| Contracting Out |
| The facility to opt out of the state additional pension and build up benefits in a pension scheme. |
| Controlling Director |
| 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. |
| Crystallisation Event |
| 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. |
| Deferred Member |
| An occupational pension scheme member who has left service with a deferred pension or fund. |
| Deferred Pension |
| The benefit awarded to a defined benefit scheme member who has left service early. |
| Defined Benefit (DB) Scheme |
| An occupational pension scheme that provides benefits based on accrual rate, pensionable service and pensionable salary. |
| Defined Contribution (DC) Scheme |
| 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. |
| Department for Work and Pensions (DWP) |
| The government department with overall responsible for the rules governing pension schemes and the administration of the state pension. |
| Dependant |
| An individual who is eligible to receive retirement benefits, i.e. pension and or lump sum, following the death of a pension scheme member. |
| Early Leaver |
| An occupational pension scheme member who leaves service before reaching their normal retirement age |
| Earnings Cap |
| Now defunct, it used to be the remuneration limit on calculating occupational pension scheme benefits. |
| Employer Access |
| 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. |
| Employer Funded Retirement Benefit Scheme (EFRBS) |
| 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. |
| Enhanced Protection |
| If a member is worried his pension rights exceed, or may exceed, the lifetime allowance, he can safeguard them against a tax charge. |
| Equalisation |
| 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. |
| Equivalent Pension Benefit (EPB) |
| A non-revaluing pension built up whilst contracted out of the state graduated pension scheme through an occupational pension scheme. |
| Executive Pension Scheme (EPP) |
| An occupational pension scheme for selected directors and senior staff. |
| Final Salary Scheme |
| See defined benefit scheme. |
| Financial Assistance Scheme (FAS) |
| 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. |
| Financial Ombudsman Service (FOS) |
| An independent, levy funded body that considers complaints between consumers and financial firms. |
| Financial Services Authority (FSA) |
| An independent, government funded body that regulates the financial services business in the UK. |
| Financial Services Compensation Scheme (FSCS) |
| An independent, levy funded body that compensates consumers who cannot complete claims because their provider is insolvent. |
| Fraud Compensation Fund (FCF) |
| Levy funded and operated by the PPF, this fund compensated occupational pension schemes that have suffered financial injustice as a result of dishonesty. |
| Free Standing Additional Voluntary Contribution (FSAVC) |
| A facility provided by insurance companies for members to boost their occupational pension scheme savings. |
| Funded Unapproved Retirement Benefits Scheme (FURBS) |
| 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. |
| Government Actuaries Department (GAD) |
| A government department that provides actuarial advice and guidance to the government and public sector schemes. |
| Group Personal Pension Plan (GPP) |
| A collection of personal pension plans provided by an employer to its staff. |
| Guaranteed Minimum Pension (GMP) |
| The benefit built up in a defined benefit scheme as a result of being contracted out of the state additional pension. |
| HM Revenue & Customs (HMRC) |
| 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. |
| Home Responsibilities Protection (HRP) |
| Available to carers and those looking after children, this benefit reduces the number of qualifying years required for the basic state pension. |
| Hybrid Scheme |
| An occupational pension scheme that calculates retirement benefits as some combination of two alternatives, defined benefit scheme or defined contribution scheme. |
| Ill Health Early Retirement |
| If an occupational pension scheme member is unable to work as a result of his medical condition, he may be entitled to draw retirement benefits early (sometimes enhanced) at any age (no later than 75). |
| Impaired Life Annuity |
| If a member of a defined contribution scheme or personal pension plan is unable to work as a result of his medical condition, he may be able to draw an immediate annuity on enhanced terms. |
| Income Drawdown |
| See unsecured pension. |
| Income Withdrawal |
| See unsecured pension. |
| Independent Trustee (IT) |
| 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 |
| Internal Dispute Resolution Procedure (IDRP) |
| The formal grievance procedure for occupational pension scheme members and beneficiaries who want to complain against their scheme trustees. |
| Lifetime Allowance (LA) |
| The maximum value of fund a pension scheme member can accumulate without incurring a tax charge. |
| Limited Price Index (LPI) |
| 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. |
| Member Nominated Director (MND) |
| A person who is voted by his fellow members to the board of a corporate trustee of an occupational pension scheme. |
| Member Nominated Trustee (MNT) |
| A person who is voted by his fellow members to be a trustee of an occupational pension scheme. |
| Minimum Funding Requirement (MFR) |
| 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. |
| Money Purchase Scheme |
| See defined contribution scheme. |
| National Insurance Contribution (NIC) |
| Payments deducted from pay or declared through self assessment, used by the DWP to fund the state pension and other state benefits. |
| National Insurance Contributions Office (NICO) |
| A part of HMRC. They administer the collection of National Insurance Contributions. |
| Normal Retirement Age (NRA) |
| The contractual age that retirement benefits are paid from an occupational pension scheme. |
| Normal Retirement Date (NRD) |
| The date that an occupational pension scheme member reaches his normal retirement age. |
| Occupational Pension Scheme |
| A scheme set up by an employer to provide retirement and/or death benefits to employees. |
| Open Market Option (OMO) |
| A provision of defined contribution schemes allowing members to transfer funds at retirement to draw an immediate annuity with another provider. |
| Paid Up |
| The status given to a personal pension plan when a member chooses to cease contributing. |
| Payments Schedule |
| Tells the trustees of a defined benefit schemes how much the employer and employees will contribute. |
| Pension Earmarking |
| 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 his benefits. |
| Pension Guarantee |
| 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. |
| Pension Increases |
| The increments applied to a pension in payment. |
| Pension Offsetting |
| A member's pension rights are offset against other assets as part of a divorce settlement. |
| Pension Protection Fund (PPF) |
| 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. |
| Pension Sharing |
| 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. |
| Pension Tracing Service |
| Operated by The Pension Service. Pension scheme members are able to trace lost pension schemes. |
| Pensionable Salary |
| Earnings used to calculate retirement benefits in a defined benefit scheme. |
| Pensionable Service |
| Length of qualifying time in a defined benefit scheme used to calculate retirement benefits. |
| Pensioneer Trustee (PT) |
| A professional trustee that, prior to 6 April 2006, had to be appointed to carry out defined administrative functions for small self administered schemes . |
| Pensioner Member |
| An occupational pension scheme member who has drawn his scheme pension. |
| Pensions Credit |
| A means-tested benefit that boosts a pensioner's state pension to ensure they have a minimum level of income. |
| Pensions Ombudsman |
| 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 |
| Pensions Simplification |
| The name given to the changes introduced by HMRC on A-Day. One single tax regime was introduced to replace the previous eight. |
| Personal Pension Plan (PPP) |
| 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. |
| PPF Ombudsman (PPFO) |
| An independent, levy funded individual who determines complaints against the PPF and the FAS. |
| Preservation |
| 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). |
| Preserved Member |
| See deferred member. |
| Preserved Pension |
| See deferred pension. |
| Primary Protection |
| 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. |
| Protected Rights (PR) |
| The fund built up in a defined contribution scheme from rebates paid as a result of being contracted out of the state additional pension. |
| Public Sector Scheme |
| An occupational pension scheme set up by the government to benefit those in government funded employment, i.e. teachers, police, civil servants. |
| Record Of Payments Due |
| Produced by an employer, it records how much they and their employees will contribute to the designated stakeholder pension scheme. |
| Retail Price Index (RPI) |
| 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. |
| Retirement Annuity Contract (RAC) |
| 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. |
| Salary-Related Scheme |
| See defined benefit scheme. |
| Schedule Of Contributions |
| Produced by the scheme actuary, it shows the trustees of a defined benefit scheme how much the employer and employees will contribute. |
| Scheme Actuary |
| The individual appointed by the trustees of an occupational pension scheme to carry out valuations and advise on funding matters. |
| Scheme Auditor |
| An individual appointed by the trustees of an occupational pension scheme to audit the annual accounts. |
| Scheme Specific Funding |
| The successor to the minimum funding requirement. A defined benefit scheme is required to have sufficient and appropriate assets to meets its liabilities. |
| Section 32 Plan |
| An insurance policy designed to accept transfers from defined benefit schemes. |
| Selected Pension Age (SPA) |
| The age chosen by a personal pension plan member to draw retirement benefits. |
| Self-Invested Pension Plan (SIPP) |
| A type of personal pension plan that gives an individual more investment control. |
| Short Term Annuity |
| 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. |
| Small Self-Administered Scheme (SSAS) |
| An occupational pension scheme, usually for small businesses, that gives members more investment control. |
| Stakeholder Designation |
| 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 his employees. |
| Stakeholder Pension Scheme |
| A type of personal pension plan, offering a low-cost and flexible alternative and which must comply with requirements laid down in legislation. |
| State Additional Pension |
| The earnings related part of the state pension, paid in addition to the basic state pension. |
| State Earnings Related Pension Scheme (SERPS) |
| Alternate name given to the state additional pension between April 1978 and April 2002. |
| State Graduated Pension Scheme |
| Alternative name given to the state additional pension between April 1961 and April 1975. |
| State Pension |
| Administered and paid by The Pension Service, this benefit is made up of the basic state pension and the state additional pension. |
| State Pension Age (SPA) |
| The earliest age that the state pension can be taken. 65 for men and between 60 and 65 for women (depending on when they were born). |
| State Pension Date (SPD) |
| The earliest date that the state pension can be paid. |
| State Pension Deferral |
| 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. |
| State Pension Forecast |
| An illustration provided by The Pension Service giving an estimate of what state pension an individual may receive at state pension age. |
| State Second Pension (S2P) |
| Alternate name given to the state additional pension since April 2002. |
| Statement Of Funding Principles |
| A statement in which the trustees of a defined benefit scheme set out how the statutory funding objective will be met. |
| Statutory Funding Objective |
| The trustees of a defined benefit scheme must ensure that the scheme's liabilities are covered by appropriate and sufficient assets. |
| Statutory Money Purchase Illustration (SMPI) |
| Annual statements issued to defined contribution scheme members, giving forecasts of benefits now and at retirement (in today's terms). |
| Tax Relief |
| Incentive given to those contributing to pension schemes. The government pays 22% (non-earners and basic rate tax payers) or 40% (higher rate tax payers) of a members gross contribution. |
| Tax-Approved Scheme |
| A pension scheme that has been approved to operate by HMRC. |
| The Pension Service |
| A part of the DWP. Responsible for administering and paying the state pension. |
| The Pensions Advisory Service (TPAS) |
| An independent, government funded body that provides general information about pensions to the public and also helps resolve pension disputes through mediation and conciliation. |
| The Pensions Regulator (TPR) |
| A government body that regulates the running of occupational pension schemes. |
| Transfer of Undertakings (Protection of Employment) (TUPE) |
| Provides pension protection for employees whose employment is transferred from one employer to another. |
| Transitional Protection |
| 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. |
| Triviality |
| Allows an occupational 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. |
| Trust Deed & Rules |
| The legal document that sets up an occupational pension scheme and defines how it should be operated. |
| Trustee in Bankruptcy (TIB) |
| Responsible for the administering the assets and liabilities of a bankrupt. |
| Unfunded Unapproved Retirement Benefits Scheme (UURBS) |
| 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. |
| Unsecured Pension |
| Also known as income drawdown or income withdrawal. Allows a pension scheme member to continue to invest his fund whilst drawing a limited income. Available to under 75s only. |
| Winding Up |
| The process of terminating an occupational pension scheme, usually by transferring member's benefits to individual arrangements. |
| Winding Up Priority Order |
| 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. |
