| 2% incentive |
This is a payment the DSS made to certain personal pension
schemes or contracted
out occupational
pension schemes. It was 2% of the member’s upper band earnings. These
payments were stopped on 5 April 1993. |
| 87-89 member |
This is another name for a class B
member. This is when an occupational pension
scheme was set up before 14 March 1989, and the member joined it between 17 March 1987 and
31 May 1989. |
| A |
(Back to the
top.) |
| ABI 1994 method |
This is a test to work out whether the benefits paid by a money purchase scheme are
more than the Inland
Revenue limits. It does not apply to a small self- administered
scheme. |
| Accrual rate |
In a defined benefit
scheme this is the rate at which pension benefits build up for the member. They will get a certain amount for
each year of pensionable
service. |
| Accrued benefits |
These are the pension benefits
that have built up for a pension scheme member. |
| Accumulated contributions |
These are all the contributions a member has paid, plus anything extra the
money has earned. In a money purchase scheme,
these can include the employer’s contributions. |
| Accrued rights |
This term is sometimes used to mean accrued benefits. |
| Active investment
management |
This is a system of investment
that could be used for a pension
fund. It involves buying and selling particular investments to try and get better
growth. |
| Active member |
This is a member of an occupational pension
scheme who is building up pension benefits from their present job. |
| Actuarial assumptions |
These are the figures and estimates that an actuary uses when they make an actuarial valuation. This can
include how long people are expected to live, price rises, how much
people are expected to earn, and the income from the pension scheme
investments. |
| Actuarial
deficiency |
This is where the actuarial
value of a scheme’s assets is
less than the actuarial
liability . The actuarial deficiency is the
difference between the two. |
| Actuarial increase |
This is the extra pension benefit a member gets when retiring after the normal retirement
age. |
| Actuarial liability |
This is the money a pension scheme will have to pay out for
pensions after the date of the actuarial valuation. |
| Actuarial reduction |
This is a drop in a member’s
pension because they have taken their pension early. |
| Actuarial report |
This is a report on an actuarial valuation. This
name is also used for when an actuary
says how changes to a scheme might affect it financially. |
| Actuarial surplus |
This is where the actuarial
value of a scheme’s assets is
more than the actuarial
liability . The actuarial surplus is the difference
between the two. |
| Actuarial valuation |
This is an assessment done by an actuary, usually every three years. The
actuary will work out how much money needs to be put into a scheme
to make sure pensions can be paid in the future. |
| Actuarial value |
This is the value an actuary puts
on something. |
| Actuary |
An actuary is an expert on pension scheme assets and liabilities, life expectancy and
probabilities (the likelihood of things happening) for insurance
purposes. An actuary works out whether enough money is being paid
into a pension scheme to pay the pensions when they are due. |
| Added years |
This is when a member of a defined benefit pension
scheme becomes entitled to extra pension benefits because:
|
| Additional component |
This is another name for additional pension. |
| Additional pension |
This is what the Government sometimes calls the pension paid by
SERPS. |
| Additional
voluntary contribution (AVC) |
This is an extra amount (contribution) a member can pay to their own pension
scheme to increase the future pension benefits. |
| Administrator |
This is the person who is responsible for managing the pension
scheme from day to day. |
| Allocation option |
This allows a pension scheme member
to give up some pension benefits in
return for a pension for the member’s
husband, wife or dependants. |
| Annual pension estimate |
This is similar to a benefits statement. This
is a statement of the pension benefits a member has earned. An annual pension
estimate will be based on certain expectations or predictions, so
the benefits the member actually gets will probably be
different. |
| Annual report |
This is a report that the trustees
of an occupational pension
scheme send to members and employers each year to keep them
informed on the scheme. |
| Annuitant |
This is a person who receives, or is entitled to, an annuity. |
| Annuity |
This is a fixed amount of money paid each year until a
particular event (such as a death). It might be split into more than
one payment, for example monthly payments. Many schemes use an
annuity to pay pensions. When someone retires, their pension scheme
can make a single payment, usually to an insurance company. This
company will then pay an annuity to the member. The money paid to the member is what people usually call their
pension. |
| Annuity rate |
This compares the size of an annuity (how much it pays each year) with
how much it cost to buy. |
| Appropriate scheme |
This is a pension scheme which meets conditions set by the Contributions Agency. This
means that a member of the scheme can
contract out of SERPS. |
| Approval |
This is when the Pension Schemes Office
(PSO) says that a scheme is suitable for tax relief. This
means members can count some or all of
their contributions against
their tax bill. If a scheme meets certain conditions, it will get mandatory (automatic)
approval. If the scheme does not meet the conditions, the
PSO may give it
discretionary
approval. |
| Approved occupations
list |
The Pension Schemes
Office (PSO) does not normally allow a scheme to pay a
pension before a member is 50 (or 60
with a retirement annuity).
With some jobs, the PSO may allow a
lower pension age. One example might be professional footballers,
whose earnings are mostly early in their life. These jobs are
called recognised
occupations. The PSO has an approved
occupations list to show which jobs are recognised
occupations. |
| Approved scheme |
This is either a personal pension
scheme or a free-standing
additional voluntary contribution (FSAVC) scheme that
has got approval from the Pension Schemes Office
(PSO). The term approved scheme is not used for
occupational pension
schemes, even though they can get approval from the
PSO.
|
| Assets |
These are everything that the trustees hold for the pension scheme.
They can include investments, bank
balances, and debtors. |
| Auditor |
This is a qualified person who checks accounts. If an auditor
believes the law has been broken in an occupational pension
scheme, they must tell the Occupational
Pensions Regulatory Authority (OPRA). This is called whistleblowing. |
| Augmentation |
This is when extra pension benefits can be bought for a pension
scheme member. They are usually paid
for by the employer or the pension
scheme. |
| Average earnings scheme |
This is another name for a career average scheme. This
is a scheme where the pension benefits earned for a year depend on how
much the member’s pensionable earnings were
for that year. |
| B |
(Back to the
top.) |
| Band earnings |
These are earnings between the lower earnings limit
for national insurance
contributions and the upper earnings limit.
SERPS
is worked out on these earnings. These are also called upper band
earnings. |
| Basic component |
This is a term pension companies use for the basic state pension. |
| Basic pension |
This is what the Government sometimes calls the basic state pension. |
| Basic state pension |
This is a pension paid by the Government to people who have
enough qualifying years. It is
not earnings related. |
| Beneficiary |
This is a person who is getting pension benefits, or will do so when a particular event
happens. |
| Benefit statement |
This is a statement of the pension benefits a member has earned. It may also give a
prediction of what their final pension might be. |
| Benefits |
With pension schemes, this is everything the member gets after retiring because they
were part of the scheme. It usually means the money paid to the member as their pension. It could also
include death benefits. With
insurance, this is the money the insurance firm pays out if
something happens. For example, a life assurance policy would
pay death benefits if the
insured person dies. |
| Benefits Agency |
This is an organisation connected to the DSS. It is in
charge of paying state benefits such as Income Support and
Jobseeker’s Allowance. |
| Benefits in kind |
These are things other than money which an employer gives to you for doing your
job, for example a company car or a clothes allowance. Only benefits
in kind which are taxed are usually counted when working out figures
to do with pensions. |
| Bid price |
This is the price members
of a unit trust will get for
each unit if they cash them in. |
| Bridging pension |
This is a pension which a member
may receive from their pension scheme between the time they retire
and the time they reach their state
pension age. |
| Bulk transfer |
This is when a group of members is
moved from one occupational pension
scheme to another. |
| Buy out policy |
This is an insurance policy which pension scheme trustees can buy for a member instead of paying them pension benefits. The insurance company pays the
member (or the member’s dependants) a pension. |
| C |
(Back to the
top.) |
| Cancellation notice |
This is a document given to a new member telling them the details of the
pension scheme and their right to cancel their membership without
any cost. The member must cancel within
a certain time. The notice is sometimes called a cooling off notice. |
| Capitalised value |
This is the value in today’s money of an amount which will be
paid or received in the future. It is worked out taking into account
interest over the period (this is called discounting). It also takes
into account the probability (chance) that money may not be received
or paid. |
| Career average
scheme |
This is the name for a scheme where the pension benefits earned for a year depend on how
much the member’s pensionable earnings were
for that year. |
| Carry back |
A member can sometimes transfer contributions to an earlier tax
year for tax relief purposes. This is called carry back. The
carry back rules will no longer apply after 31 January
2002. |
| Carry forward |
A member can sometimes transfer
excess contributions to a later
year to get tax relief. This is called carry forward. The carry
back rules will no longer apply after 31 January 2002. |
| Cash equivalent |
This is the amount of money a pension scheme member can transfer to another pension
scheme. |
| Cash option |
This is giving up part or all of a pension in return for getting
a one-off payment straightaway. It is also called commutation. |
| Centralised scheme |
This is a pension scheme which is used by several employers. |
| Certificate of eligibility |
This is a document that an employed person fills in to confirm
that they are not in an occupational pension
scheme, and so they can pay into a personal pension
scheme. |
| Certificate of existence |
This is a document to confirm that a pension scheme member is still alive. |
| Class A member |
A 'class A' member is:
|
| Class B member |
A 'class B' member is:
|
| Class C member |
A class C member is a member of an
occupational
pension scheme who joined before 17 March 1987. |
| Clawback |
This is when a member’s pensionable earnings or a member’s pension are reduced to take into
account the amount of state pension the member will get. |
| Closed scheme |
This is the name for a pension scheme which does not accept new
members anymore. |
| Clustering |
This is setting up a number of pension schemes at the same time.
It lets the member draw the pension benefits at different times. |
| Common investment fund |
This is the name given when the investments of two or more pension
schemes are pooled together. |
| Commutation |
This is giving up part or all of a pension in return for getting
a one-off payment straightaway. It is also called a cash option. |
| Commutation factors |
These are the things which decide how much pension needs to be
given up so that the member can get a
one-off payment instead. |
| Company pension
scheme |
This is a scheme organised by an employer to provide pension benefits for their employees. |
| Compensation levy |
This is money paid by every occupational pension
scheme that is covered by the laws on compensation. This
money pays for the Pensions Compensation
Board. |
| Compulsory purchase annuity (CPA) |
This is an annuity that an insured occupational scheme
must buy for a member when they
retire. |
| Contingent annuity |
This is an annuity which is paid
to someone when someone else dies. |
| Continuation option |
This is an option offered by the insurance company which insures
a pension scheme’s death
benefits. It allows a member
who is leaving the pension scheme to take out a life assurance policy
without taking a medical or providing other evidence of their good
health. |
| Continuous service |
A member of an occupational pension
scheme may have already spent an earlier time in that scheme
(with a break in between) or in a different scheme. Continuous
service means that this earlier time is added to the member’s existing service. This could happen if a member takes a break from work to have a
baby, or moves between two connected schemes. |
| Contract out |
If someone contracts out of SERPS,
their national insurance
payments are lower. They also pay into an occupational or personal pension
scheme which has to meet certain conditions. |
| Contracted out |
This term is used to describe a scheme where the members contract out of SERPS. |
| Contracted out Employments Group (COEG) |
This is a part of the Contributions Agency that
deals with contracted out
employment. |
| Contracted
out money purchase scheme (COMPS) |
This is an occupational pension
scheme where members contract out, and the employer pays a certain amount into the
scheme. When the member retires, this
amount is used to make sure they get at least as much pension as
they would have got from SERPS. |
| Contracted
out salary related scheme (COSRS) |
This is an occupational pension
scheme where the members
contract out of SERPS.
The member’s pension is based
on how much they have earned. |
| Contracting out certificate |
The Contributions
Agency gives this certificate to a pension scheme that meets
the conditions to be contracted
out. |
| Contribution holiday |
This is the period when the usual contributions to a pension scheme
are stopped for a time. This is usually done when the scheme has
more funds than it needs. |
| Contributions |
This is the money paid into a pension fund for a member. It can be paid by a member or an employer. |
| Contributions
Agency |
This is a department of the DSS. It keeps
records of people’s national
insurance contributions
and makes sure that the contributions are paid. It also
gives advice on national
insurance. |
| Contributions equivalent premium |
This is a special payment to the state scheme. It is usually
paid when a member with less than two
years of qualifying service
leaves a contracted out scheme.
The member is then counted as having
been in SERPS
for the time they were contracted
out. |
| Contributory scheme |
This is a pension scheme where both the employer and the members have to pay into the scheme. |
| Control period |
This term is sometimes used when an actuary works out the scheme’s liabilities by looking at how much
pension the members have earned so far.
The actuary may then set the standard contribution
rate for a certain length of time (the control period).
During this time, the standard contribution
rate should be enough to make sure the scheme’s assets are enough to cover its liabilities. |
| Controlled funding |
This is a plan to make sure that all the pension scheme’s liabilities can be paid. It is often
used for final salary
schemes. |
| Cooling off notice |
This is a document given to a member telling them the details of the
pension scheme and their right to cancel the plan without any cost.
The cancellation has to be done within a given time. It is sometimes
called a cancellation
notice. |
| Corporate trustee |
This is a company which acts as a trustee. |
| Creditors |
These are amounts owed by the pension scheme. |
| Current funding level |
This is the amount of money needed to pay the pensions that members have earned so far. |
| Custodian trustee |
This trustee looks after the
trust’s assets. |
| D |
(Back to the
top.) |
| De minimis limit |
If a pension pays less than this limit, the whole of the member’s share of the pension fund can be taken as a
one-off amount. |
| Death after
retirement benefit |
If a member has this option, then
their dependants will get some benefits from the scheme if the member dies after starting to get pension
benefits. |
| Death benefit |
This may be paid to a member’s dependants if the member dies. It may be a pension or a
one-off payment. It could be death after retirement
benefit or death in
service benefit. |
| Death in service
benefit |
If a member has this option, then
their dependants will get some benefits from the scheme if the member dies before starting to get pension
benefits. |
| Debtors |
These are amounts owed to the pension scheme. |
| Declaration of trust |
This is the document which creates the pension scheme trust. |
| Deed of adherence |
This is a legal document which allows a new employer to take over the running of a
pension scheme. The new employer has
to agree to follow the scheme’s rules. |
| Deed of appointment |
This is a legal document appointing a new pension scheme trustee. |
| Deferred annuity |
This is an annuity which will
start to pay out at some time in the future. |
| Deferred annuity purchase |
This name is also used when a memberretires, but chooses not to spend their
share of the pension fund on an
annuity straightaway. |
| Deferred member |
This is a member who has left a
scheme, but will get benefits when
they retire. These are called preserved
benefits. |
| Deferred pension |
This is a pension which is taken later than the member’s normal retirement
date. |
| Deferred pensioner |
When someone stops being an active
member of a pension scheme, the pension benefits they have earned become preserved benefits, and
the member is now called a deferred
pensioner. They will get these benefits at a later date. |
| Deferred retirement |
This is when a person decides to retire and draw their pension
late. It is sometimes called late
retirement or postponed
retirement. |
| Deficit |
This word may be used to mean an actuarial deficiency. This
is where the actuarial value
of a scheme’s assets is less than the
actuarial liability
. The actuarial
deficiency is the difference between the two. |
| Defined benefit
scheme |
This is where the rules of the
scheme decide how much pension the member will get. There are different ways
of working out the size of the pension, but the member will know which system the scheme
uses. The most common type of defined benefit scheme is a final
salary scheme. |
| Defined
contribution scheme |
This is where the size of the member’s pension is not decided by the rules of the scheme. The size of the member’s pension will be affected by how
much money is put into the pension
fund for the member, how
much the pension fund has grown,
and what annuity rate is
available when the member retires. This
system is also called a money
purchase scheme. |
| Definitive trust
deed |
This document shows the rules of the
pension scheme and what it provides in detail. |
| Department
of Social Security (DSS) |
This is the Government department responsible for the state
pension schemes. |
| Dependant |
This is someone who is financially dependent on a member of the pension scheme (or on a
pensioner of the scheme). The scheme rules will usually say
what is meant by a ‘dependant’. |
| Dependant's pension option |
This allows a member to give up
part of their pension so that it can be paid to their husband or
wife or a dependant. |
| Derivative |
This is a general word used to describe special financial
instruments such as options and futures contracts.
Financial instruments are agreements to buy or sell something, under
terms laid out in a contract. |
| Direct investment |
This is when the trustees of a self-administered scheme
directly hold the scheme’s investments. |
| Disclosure regulations |
These are the rules which pension
scheme trustees have to follow when
giving information about the scheme to members and official organisations. |
| Discontinuance |
This is when contributions
to a scheme stop and the scheme is closed down or becomes
inactive. |
| Discontinuance valuation |
This is an actuarial
valuation which is done to work out what would happen if the
pension scheme was stopped or closed down. |
| Discretionary
approval |
This is when the Pension Schemes Office
(PSO) agrees that an occupational pension
scheme can be approved, even though it does not
meet the usual rules. |
| Discretionary
increase |
This is when the trustees give
increases in pension benefits above
those set out in the pension scheme rules. |
| Discretionary scheme |
This is a scheme where the employer chooses which employees are
allowed to join. The contributions and benefits may also vary from one member to another. |
| Disqualification order |
This is an order made by the Occupational
Pensions Regulatory Authority (OPRA). It means that a
certain person is banned from being a trustee of any occupational pension
scheme. |
| Drawdown facility |
This is when a member retires, but
chooses not to buy an annuity
straightaway. Until the member buys an
annuity, they take an income from the
scheme. |
| Dynamisation |
This is:
|
| Dynamism |
This is another word for dynamisation. |
| E |
(Back to the
top.) |
| Earlier service component |
This is the part of a member’s
pension benefit that was
earned under a final salary
scheme before limited price
indexation was brought in. |
| Early leaver |
This is a person who stops being an active member of a pension scheme
but who does not start to get a pension straightaway. |
| Early retirement |
This is when a member retires
before their normal retirement
date and gets their pension immediately. |
| Earmarked benefits |
These are the pension benefits
set aside by a court for a member’s
husband or wife after a divorce. |
| Earmarked money purchase scheme |
This is a type of occupational pension
scheme. It means all the benefits are paid by insurance policies
or annuities. Each of these policies
or annuities is set up for one
particular member, their dependants or both. |
| Earmarked policy |
This is a policy held by a pension scheme to provide life assurance cover, or an
annuity for a particular member. |
| Earnings cap |
This is a limit on how much of a member’s earnings may be used to work out
the limits on contributions and
benefits in an approved scheme. This limits the
amount that a high earner can put into a pension scheme and still
get tax relief. |
| Earnings factor |
This is a theoretical earnings figure that is used for working
out state pensions or guaranteed minimum
pensions. |
| Eligibility |
These are certain conditions that somebody must meet to be a member of a pension scheme and to receive
pension scheme benefits. |
| Emoluments |
These are a member’s earnings and
they include benefits in kind
(such as company cars). |
| Employer |
This is the organisation the member
works for. |
| Employer's pension scheme |
This is a pension scheme organised by the employer to provide pension benefits for employees. It is most often
called an occupational
pension scheme. |
| Endowment policy |
This is an insurance policy which will pay out a single amount
on a fixed date in the future or when the policyholder dies
(whichever happens first). |
| Enhanced commutation factor |
A commutation factor
is something which decides how much pension needs to be given up so
that the member can get a one-off
amount instead. An enhanced commutation factor takes account of the
member’s pension increasing in the
future. |
| Entry date |
This is either the date an employee can join a pension scheme,
or the date they actually do join. |
| Equal access |
-This is the term used to describe the requirement that members of both sexes have
identical entry conditions to pension schemes. |
| Equal treatment |
After a European ruling, Britain’s pension laws were changed to
say that each sex must be treated the same. |
| Equivalent pension benefit (EPB) |
This is the benefit which an employer must give an employee who was
contracted out of the old graduated pension
scheme. |
| Escalation |
This is an automatic increase in the amount of pension a member gets (or will get in the future).
The amount goes up at regular times, and usually at a fixed
rate. |
| Ex gratia benefit |
This is something that an employer gives to an employee, even
though they do not have to. |
| Executive pension plan (EPP) |
This is another name for an executive scheme. |
| Executive scheme |
This is a pension scheme for specially chosen employees. It is
also known as a top hat
scheme. |
| Exempt approved scheme |
This is an approved scheme
that is not a personal
pension scheme, and is set up under a trust that cannot be changed. |
| Experience deficiency |
This is the deficit (loss) when
the pension scheme’s actual performance is compared with what the actuary originally predicted. |
| Experience surplus |
This is the surplus (profit) when
the pension scheme’s actual performance is compared with what the actuary originally predicted. |
| Expression of wish |
If a scheme pays death
benefits, this is where the member tells the trustees who should get this benefit if the member dies. The trustees do not have to follow the member’s wishes. This is also called nomination or form of request. |
| F |
(Back to the
top.) |
| Final average
earnings |
These are the member’s earnings
used to work out their pension in a final salary scheme. The
amount used could be the member’s
earnings in the last few years before they retire. |
| Final earnings scheme |
This is another name for a final salary scheme. |
| Final pensionable earnings |
This is another name for final average
earnings. |
| Final remuneration |
This is a limit that affects how much of a member’s earnings are
taken into account when the Pension Schemes Office
(PSO) works out the highest amount of benefit they can get from an approved scheme. |
| Final salary scheme |
This is the most common type of defined benefit scheme. It
means that the pension paid to the member is based on how much they are
earning when they retire.- This amount could be an average over
their last few years of work. |
| Financial
Services Authority (FSA) |
This is a new organisation that deals with financial business,
such as pensions. It makes sure the rules on financial business are followed.
It has replaced the Personal
Investment Authority, among other bodies.- The FSA’s phone number is
0207 676 1000. |
| Flat rate scheme |
In this type of scheme a member’s
pension depends on how long they have been in the scheme. The member’s earnings do not affect the amount
of the pension. This is a type of defined benefit
scheme. |
| Forgoing |
This is a written agreement between the member and their employer where the member agrees to have their wages cut by a
certain amount. The employer then
puts this amount into the pension scheme for the employee. |
| Form of request |
This is another name for expression of wish. If a
scheme pays death benefits, this
is where the member tells the trustees who should get this benefit if the member dies. The trustees do not have to follow the member’s wishes. This is also called nomination. |
| Franking |
This is the name given to taking any increase in the guaranteed minimum
pension off the other pension benefits. |
| Free cover |
An insurance company may agree to cover a group of people for death benefits without asking for
proof that they are in good health. For example, this group could be
members of a pension scheme. Free
cover is the highest amount of benefits that the insurance company will
pay out for any one person under this system. |
| Free-standing additional voluntary contributions |
These are payments into a free-standing
additional voluntary contribution (FSAVC) scheme. |
| Free-standing
additional voluntary contribution (FSAVC) scheme |
An active member of an occupational pension
scheme can pay extra amounts into a separate scheme,
called a free-standing additional voluntary contribution (FSAVC)
scheme. These are run by pension firms. The benefits they get from the scheme will
be based only on these extra amounts. It is possible to contract out by joining a
free-standing additional voluntary contribution (FSAVC)
scheme. |
| Frozen benefits |
These are the benefits a member has already earned from a scheme
when they stop being an active
member (or the scheme closes). The member will get these benefits when they retire. These are
also called preserved
benefits. |
| Frozen scheme |
This is a scheme which has been closed. No more contributions will be paid and the
members will get their frozen benefits when they
retire. |
| Fully insured scheme |
With this type of scheme, the trustees take out an insurance
policy for each member. The policies
guarantee that each member will get all
the benefits that the scheme rules say they should
get. |
| Fund account |
This is part of the accounts that a scheme must produce each
year. It shows how the scheme has dealt with members, income from investments, and what the scheme has
bought and sold during the year. |
| Funded unapproved retirement benefits scheme (FURBS) |
This is an occupational pension
scheme that is not designed to be approved. This type of scheme
saves up assets to pay members’ benefits, unlike an unfunded scheme.
Most FURBS are top-up pension
schemes. |
| Funding |
This is setting assets aside
(saving up) so that money is available to pay future liabilities. |
| Funding level |
This is a comparison of a scheme’s assets and liabilities. |
| Funding plan |
This is a plan to make sure that money is available at the right
time to pay out pension benefits. It
usually involves setting the contributions at a certain level,
such as the standard
contribution rate. |
| Funding rate |
This name is sometimes used to describe the recommended contribution
rate. This is how much the actuary says the standard contribution
rate should be to make sure the scheme has enough money to
pay the necessary benefits. |
| Funding ratio |
This is the funding level,
written as a percentage |
| Futures contract |
This is a contract to buy goods at a fixed price and on a
particular date in the future. Both the buyer and the seller must
follow the contract by law. |
| G |
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top.) |
| General levy |
This is paid by all occupational and personal pension
schemes covered by the Pension Schemes
Registry. It pays for the Pension Schemes
Registry, the Pensions
Ombudsman and the Occupational
Pensions Regulatory Authority (OPRA). |
| Graduated pension
scheme |
This was an additional State pension which was building up
before 5 April 1975. |
| Graduated retirement |
This was the pension paid by the graduated pension
scheme. The benefits depended on how much
had been paid in contributions. |
| Group personal pension (GPP) |
This is a system where several employees at one company join a
personal pension
scheme with the same pension firm. Each member has a separate policy with the
pension firm, but contributions
are collected together. The member may
get better terms with a GPP than with a normal personal pension
scheme. The employer may
be more likely to pay contributions, because there will
be less paperwork than with each employee dealing with a separate
pension firm. |
| Group policy |
This is an insurance policy which covers more than one
person. |
| Guaranteed annuity- |
This is an annuity that is paid
until the person getting it dies. If they die before a certain date,
the annuity is then paid to their dependants until that date. |
| Guaranteed annuity
option |
This gives a person the right to use the money they get from
their insurance policy to buy an annuity, with the annuity rate guaranteed in the
insurance policy. It can apply to a pension scheme as well as an
insurance policy. |
| Guaranteed
minimum pension (GMP) |
A member of a contracted out occupational pension
scheme will get at least this much pension unless:
- Some of the member’s service is
after 5 April 1997. They would have some of their benefits affected by GMP and some by
LPI.
|
| Guaranteed pension |
This is the name for the minimum
pension a particular insurance policy will pay. |
| H |
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top.) |
| Headroom check |
There are Inland Revenue
limits on how much money can be paid into a free-standing
additional voluntary contribution scheme. A headroom check
may be carried out to make sure that these limits are kept. |
| Historical cost |
This is one way of measuring the value of assets. It uses what the assets originally cost, but an amount is
often taken off for wear and tear and age. |
| Hybrid scheme |
This is an occupational pension
scheme where the pension benefits can be worked out in two ways.
The way that gives the higher benefits will be used. This name is also
used for an occupational
pension scheme that pays both final salary and money purchase benefits. |
| I |
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| Ill-health early
retirement |
This happens when a member retires
early because of ill-health. They may get higher pension benefits than a member normally gets when they retire
early. |
| Immediate annuity |
This is an annuity which starts to
pay out straightaway. |
| In-house AVC scheme |
This is an additional voluntary
contribution (AVC) scheme offered by an occupational pension
scheme to its members. |
| Incapacity pension |
If a member’s illness means they
cannot work as normal, they may get an extra pension. This depends
entirely on the rules of their
scheme |
| Incentive payment |
This is a payment the DSS used to
make to certain personal
pension schemes or contracted
out occupational
pension schemes. This was sometimes called the 2% incentive. |
| Income withdrawal |
This is when a member retires, but
chooses not to buy an annuity
straightaway. Until the member buys an
annuity, they take an income from the
scheme. |
| Independent financial advisor (IFA) |
This is a qualified person or firm that can give people
independent advice on how they could save with life assurance and
pensions. An independent financial advisor is not tied to a
particular company. |
| Independent trustee |
This is a trustee who has no
connection with the pension scheme, the employer or the members. For example, an independent
trustee might be appointed if an employer goes out of business. |
| Indexation |
This is a way of measuring changes in prices or earnings, and
adjusting pensions in line with these changes. For example, if a
pension was linked to a price index, and prices rose by five per
cent, then the pension would also rise by five per cent. |
| Index linking |
This is another name for indexation. |
| Individual
arrangement |
This is an occupational pension
scheme with only one member. |
| Inflation proofing |
This is when a pension scheme uses price rises for indexation. It means that the pension
a member gets will not be worth less if
prices have gone up. |
| Inland Revenue |
This is the Government department that deals with taxes. |
| Inland Revenue
limits |
These figures set the largest amount of benefits and contributions allowed in an approved occupational pension
scheme. There are different limits for class A, class B or class C members. As a rough
rule, a member’s benefits are often limited to two thirds
of the wages they got in the year before they retired. |
| Insured scheme |
This is a pension scheme where the only way the assets are invested is in an insurance
policy. It does not include schemes that use a managed fund policy. |
| Integration |
This is reducing a member’s benefits by part or all of the amount
that they will get from the basic
state pension. State
pension offset is one type of integration. |
| Interim trust deed |
This is a trust deed
which allows a pension scheme to be set up with very general terms.
The detailed rules are usually set up
later in a definitive trust
deed. |
| Internal dispute resolution (IDR) |
This is the system an occupational pension
scheme must have to deal with member’s concerns or complaints. If a member is not happy with what happens
through this system, they can take their case to OPAS
or the Pensions
Ombudsman. |
| Investment |
This is when the money paid into a pension scheme is used to buy
things like stocks and shares, bonds and properties. These are
called investments. |
| Investment income |
This is the income earned by the pension fund’s investments. |
| Investment Management Regulatory Organisation (IMRO) |
This was an organisation that deals with investment management
companies. It made sure that the rules and laws on investment are followed. This is now
the responsibility of the Financial Services Authority. |
| Investment manager |
This is someone the trustees
appoint to manage the investment of
the scheme’s assets. |
| Investment report |
This gives details of investments held by the pension fund, and the buying and
selling of them. It explains why the investments were chosen and the
reasons for any changes. |
| Investment trust |
An investment trust is a company which invests money in
different securities. It is listed on the stock exchange. |
| K |
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top.) |
| Key features document |
This is a document that people offering a life insurance policy
or pension scheme must give to anyone thinking of buying a policy or
joining a scheme. |
| L |
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top.) |
| Late retirement |
This is when a member retires and
takes their pension after the normal retirement
date. |
| Later earnings addition |
When a member is still in pensionable employment
and:
the minimum benefit may be
increased. |
| Letter of exchange |
This is a letter from an employer
to an employee, which is all or part of the individual arrangement
document. The employee signs a copy of the letter to show that the
terms are agreed. |
| Level of funding |
This is the how much the actuarial valuation says a
scheme’s assets are worth compared to
its liabilities. It is usually a
percentage figure, meaning that a scheme with a 100 per cent level
of funding would have assets and liabilities worth the same
amount. |
| Levy |
This is an amount that a pension scheme has to pay each year.
The amount depends on how many members
are in the scheme. There are two types, the general levy and the compensation levy. |
| Liabilities |
These are amounts which the pension scheme will have to pay now
or at some time in the future. The most common liability is paying
members’ pensions. |
| Life assurance
scheme |
This is an insurance policy which will pay out if a member dies. When used in pensions, the
policy may only pay out if the member
dies before they retire or leave their employer. |
| Lifelong
Individual Savings Account (LISA) |
This was a name some people suggested for a new Government idea
for a pension investment system.
But the Government chose the name Pooled Pension Investment
(PPI). |
| Limited price
indexation (LPI) |
This is a part of the law that says pensions paid by an occupational pension
scheme, and protected
rights paid by an appropriate personal pension
scheme must increase by at least a certain rate each year.
This rate is five per cent, or the increase in the Retail Price
Index, whichever is less. LPI does not affect additional voluntary
contribution (AVC) or free-standing
additional voluntary contribution (FSAVC) schemes.
It only applies to pension benefits
earned after 5 April 1997. Any benefits earned before this come under
the guaranteed
minimum pension (GMP). A member who worked both before and after
this date would have some of their benefits affected by GMP and some by
LPI. |
| Linked qualifying service |
Linked qualifying This is when a member used to belong to another scheme
and the pension benefit earned in it
has been transferred into the member’s
new scheme. The qualifying
service in the two schemes is linked together. |
| Long service benefit |
This is the term used for a member’s benefits which will be paid at their normal pension age. This
figure is used when working out short service
benefit. |
| Lower earnings limit
(LEL) |
This is the least amount someone must earn before they have to
pay national
insurance. |
| Lump sum certificate |
This is a certificate which a pension scheme must supply in some
cases when a member transfers to
another scheme. The certificate shows the largest one-off amount
available from the transfer
payment given to a new pension scheme. |
| M |
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| Managed fund |
This is a fund, run by an insurance company, that people can
invest in. With pensions, this can be where somebody from outside
the scheme is employed to invest the scheme’s assets, usually in a range of investments. |
| Mandatory approval |
This is when an occupational pension
scheme meets all the normal rules for contracting out, so the Pension Schemes Office
(PSO) has to automatically make it an approved scheme. |
| Market value |
This is the price an asset should
fetch if it is sold on the open market. |
| Master policy |
This is an insurance policy which covers more than one person.
It is also called a group
policy. |
| Maximum approvable
benefit |
In an approved scheme this
is the largest pension benefit
a member can receive.
This does not apply to personal pension
and simplified
defined contribution schemes. The size of the
maximum approvable benefit depends on whether the member
is a Class A, Class B or Class C member. |
| Member |
This usually means someone who has joined a pension
scheme. |
| Member-nominated director (MND) |
This is a director of a corporate trustee that is
chosen by the members of an occupational pension
scheme. |
| Member-nominated
trustee (MNT) |
This is a trustee chosen by the members of an occupational pension
scheme. Usually, at least a third of the trustees of an occupational pension
scheme will be member-nominated trustees. |
| Member participation |
This is the term used to describe members having a say in
how their pension scheme runs. |
| Member’s normal contribution |
This is the member’s regular
payment to the pension scheme as set out in the scheme’s rules. |
| Minimum benefit |
A scheme may set a minimum benefit. This means that the member will get at least this much, even
if their pension works out to be less. This is also called a minimum pension. |
| Minimum
contributions |
These are contributions the
DSS pays
to an appropriate scheme
when a member decides to contract out. |
| Minimum
funding requirement (MFR) |
This is part of the Pensions Act 1995. It affects how much money
a final salary pension scheme must have in its fund so that it can
pay future pensions. (In the 2001 Budget, the Chancellor suggested
this rule will soon be removed. There is no firm date for when this
will happen.) |
| Minimum payments |
This is the smallest amount an employer is allowed to pay into a contracted out money purchase
scheme.- This amount will give the protected rights. |
| Minimum pension |
A scheme may set a minimum pension. This means that the member will get at least this much, even
if their pension works out to be less. This is also called a minimum benefit. |
| Mis-selling |
This is a word used to describe the problems of firms selling
pensions to people who would have been better off staying with the
scheme they were already in. One example is somebody leaving an occupational pension
scheme to join a personal pension
scheme, but losing out because their employer no longer paid money into their
pension fund. |
| Modified premium
value |
This is a way the actuary of an occupational pension
scheme works out how much an insurance policy is worth to
the scheme. It bases the value on how much the scheme pays to the
insurer for each member, but does not
include anything the insurance firm charges for setting up the
policy, such as commission or expenses. |
| Modification order |
This is an order made by the Occupational
Pensions Regulatory Authority (OPRA). It means that
an occupational pension
scheme must make a particular change, even though this is
normally against the scheme
rules. |
| Money purchase |
This is when a member’s benefits are based on the contributions paid by them and for
them, and any increase in this amount from investments. In most cases, this
involves using the member’s share of
the pension fund to buy an
annuity. |
| Money purchase
scheme |
This is where the size of the member’s pension is worked out by the money purchase method. The
size of the member’s pension will be
affected by how much money is put into the pension fund for the member, how much the pension fund has grown, and what annuity rate is available when the
member retires. This is also called a
defined contribution
scheme. |
| N |
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top.) |
| National Insurance |
This is money that the Government takes from both workers and employers. The amount depends on how
much the worker earns. Some Government benefits, such as the basic state pension and SERPS,
depend on how much national
insurance you have paid. |
| Net assets statement |
This is a statement showing the difference between an occupational pension
scheme’s assets and liabilities. |
| Net book value (NBV) |
This is what an asset originally
cost to buy (called historical
cost) less a sum for wear and tear and ageing. |
| Net relevant
earnings |
These are earnings of self-employed people or earnings of
employees who are not in an employer’s pension scheme. Net
relevant earnings are used to work out the highest amount which can
be paid into a pension scheme where contributions get tax relief. |
| Nomination |
If a scheme pays death
benefits, this is where the member tells the trustees who should get this benefit if the member dies. The trustees do not have to follow the member’s wishes. This is also called expression of wish or form of request. |
| Non-approved scheme |
This is a scheme which is not designed to be approved by the Pension Schemes Office
(PSO). It can be used to provide extra pension benefits over the earnings cap (limit) on approved schemes. Tax relief is
not usually available for these schemes. |
| Non-contributory |
This is a type of pension scheme where the members do not have to pay into the scheme
themselves. |
| Non-pensionable earnings |
These are earnings that are not used when working out contributions or benefits. They could include overtim |
