ACCRUED PENSION - amount of pension credited to a plan member according to service, earnings, etc., up to a given date.
ACTUARY - a professional in the pension and insurance fields responsible for calculating risks and premiums.
ADDITIONAL VOLUNTARY
CONTRIBUTIONS - contributions to a plan made voluntarily by an employee in addition to those contributions required to be made to attain a pension. Extra benefits may be purchased by additional contributions but no additional cost is borne by the employer. Additional voluntary contributions are not locked-in by legislation.
AD HOC ADJUSTMENT - amount added to a pension after retirement or termination to compensate for increases in the cost of living on an irregular basis and not as a result of a prior commitment or contract.
ADMINISTRATOR - the person or persons who administer the pension plan, i.e., who arrange for pension payments, funding of the plan, etc. For most plans, the employer is responsible for administration (although the employer may hire a third party to administer the plan on its behalf). Some plans are administered by a board of trustees or similar body.
AGE ALLOWANCE - Personal allowance against income for a person aged 65 or over. The age allowance increases for a person of 75 or more, but is reduced if income exceeds a certain level
ANCILLARY BENEFITS - benefits in addition to regular pension benefits and survivor benefits, such as bridging benefits and enriched early retirement benefits.
ANNUITY - periodic payments (usually monthly) provided by the terms of a contract for the lifetime of an individual (the annuitant) or the individual and his or her designated beneficiary. An annuity may be a fixed or varying amount, and may continue to be paid for a period after the annuitant's death.
ASSET MIX - refers to the proportions of various types of investments held by a pension fund, usually expressed as a percentage of total investments held in bonds, stocks, real estate, etc.
BASIC STATE PENSION - The flat rate state pension available to everyone upon reaching State Retirement Age, provided sufficient N.I. contributions are made.
BENEFICIARY - a person who on the death of a plan member or former member, may become entitled to a benefit under the plan.
BENEFIT - generally, any form of payment to which a person may become entitled under the terms of a plan, but often refers specifically to the pension normally provided by the plan formula.
BEST FIVE-YEAR AVERAGE - a benefit formula that determines the amount of a member's pension by applying the member's average earnings during the five years when earnings were highest.
CAPITAL GAINS TAX - Capital Gains Tax is a tax on the profit you make when you sell or otherwise dispose of something you own, eg. property or share. There is a tax-free allowance and a few extra reliefs that could reduce your Capital Gains Tax bill.
CAREER AVERAGE PLAN - a defined benefit plan that applies the unit of benefit to earnings of the member in each year of service, and not to the final or final average earnings.
COMMUTED VALUE - the amount of a lump sum payment payable today estimated to be equal in value to a future series of payments.
CONTINUOUS SERVICE OR MEMBERSHIP OR EMPLOYMENT - period during which an employee is continuously employed by the same employer or continuously participates in his or her employer's pension plan, including periods of temporary absence or suspension or periods of layoff. To be distinguished from credited service.
CONTRACTING OUT INCENTIVE - This was an additional payment over and above the Contracting Out rebate, designed to encourage certain individuals to contract out of SERPS. Incentive payments ceased on 5th April 1997.
CONTRACTING OUT REBATE - Amount by which the employer's and employee's National Insurance contributions are reduced by virtue of an employee's membership of a contracted out pension arrangement.
CONTRIBUTION - Alternative word to premium, usually used in connection with personal payments into a pension scheme, or investment based products
CONTRIBUTORY PLAN - a pension plan which requires the employees to make contributions by payroll deduction in order to qualify for benefits under the plan.
CREDITED SERVICE - length of service used in the plan formula to calculate a defined benefit.
DATA PROTECTION ACT 1984. Established rules for storage and disclosure of personal details by computer.
DEFERRED MEMBERS - terminated employees who are eligible for a deferred vested pension. Considered by legislation to be former members.
DEFERRED VESTED PENSION - a specified pension determined at the time of termination of employment or termination of a plan but not payable until some later date.
DEFINED BENEFIT PLAN - a pension plan that defines the pension to be provided (based on service, average earnings, etc.) but not the total contributions. If the plan is contributory, the rate of employee contributions may be specified, with the employer paying the balance of the cost. To be distinguished from a defined contribution plan.
DEFINED CONTRIBUTION PLAN - a plan under which the amount of the employer contribution per plan member and, where applicable, the amount of the employee contribution is specified in advance and the benefits to be received by the pensioner is calculated at the date of retirement based on the accumulated contributions and the return on the investment of the contributions.
ELIGIBILITY REQUIREMENT - a condition such as length of service that must be met before an employee is permitted or required to join a pension plan. Term may refer to the eligibility for certain benefits.
EMPLOYEE - means an individual, employed to do work or to provide a service, who is in receipt of or entitled to remuneration for the work or service.
EMPLOYER - refers to the person or organisation from whom an employee receives remuneration, and includes any or all of the employers that are required to contribute to a specified multi-employer pension plan.
EMPLOYMENT PENSION PLAN - a pension plan offered by an employer or supported by a group of employers for the benefit of employees. The term includes plans covering employees of governments and the private sector.
ETHICAL INVESTMENT -. Making investments only in companies which are considered acceptable according to a set of criteria concerning the type of product, environmental issues and political issues.
FACT FIND - An important stage in the advice cycle, one which enables the adviser to draw out all pertinent information about a potential client, and to update information already held concerning an existing client.
FINAL SALARY SCHEME. A pension scheme providing pension benefit by reference to the scheme member's salary at or near retirement.
FLAT BENEFIT PLAN - a defined benefit plan that specifies an amount of pension to be credited for each year of service.
FORMER MEMBER - means a person whose membership in a plan has terminated and who retains a present or future entitlement to a benefit pursuant to a plan. A pensioner would be considered a former member, as would a person who is entitled to a deferred vested pension.
FULLY FUNDED - a term describing a plan which, at a given time, has sufficient assets to provide for all accrued benefits.
FUNDING - systematic monthly payments into a pension fund which, with investment earnings on these funds, are intended to provide for benefits as they become payable.
GUARANTEED ANNUITY - an annuity which will be paid for the lifetime of a person or for a certain period whichever is longer, but in any event for a minimum period, e.g., if an annuitant with a five year guarantee dies after three years, payment will be continued to a beneficiary or the estate for two years.
GROUP PENSION - Generally operated by an employer for a group of employees and may be a 'conventional' scheme where the employer helps fund the arrangement; or may be a group personal pension scheme where the grouping is merely for administrative convenience. Alternative name for occupational pension scheme.
GUARANTEED MINIMUM PENSION - When a group occupational pension scheme contracts out of SERPS, the scheme must provide a minimum pension in respect of the amount of state pension foregone. This is the GMP, and is approximately equal to SERPS, for the same period. A member of such a scheme is guaranteed to receive a pension at State Pension Age not less than the SERPS equivalent. The GMP principle ceased for benefits accrued after 6th April 1997, when the Reference Share principle was established.
INDEXING - a provision in a pension plan calling for periodic adjustments to benefits (usually after retirement) according to a formula based on a recognized index of price or wage levels such as the Consumer Price Index.
INVESTMENT MANAGERS - plan sponsors frequently are assisted by investment managers who help them decide how the pension funds should be invested. These managers are supervised by the plan sponsor.
INVESTMENT RETURN - earnings of a pension fund including interest, dividends, and capital gains and losses.
JOINT AND SURVIVOR PENSION OR ANNUITY - an annuity payable until the death of the retired employee, and continuing thereafter to the surviving spouse until that person's death. Required to be provided as an option at time of retirement.
LEVEL PREMIUMS -. The incidence of mortality shows that the risk of death generally increases with age. To match this risk increase, premiums should, in theory, increase at the same rate. As this would at some point make the cost prohibitive and unattractive, it has become the norm to calculate a premium that will remain level throughout the term of the contract. This effectively means 'overpaying' at the start of the contract, which will counterbalance the 'underpayment' later.
MANAGED FUND - Usually a fund choice with a unit-linked policy Managed funds are generally made up of units from other funds e.g. equity fund, international fund, so that it represents a wide base for the investor happy to accept a medium risk investment. In most cases the fund receives the same investment management attention as any other fund, so perhaps a better name in those circumstances might be 'mixed fund'.
MANDATE - Instruction, order, permission to allow or permit something to happen. Usually written e.g. bank mandate, as in a standing order to pay sums to another account. Mandatory. Compulsory, something which must be done.
MEMBER - an employee on whose behalf an employer is required to make contributions to a pension plan and who has not terminated his or her membership or commenced his or her pension.
MONEY PURCHASE PLAN - see Defined Contribution Plan.
NATIONAL INSURANCE CONTRIBUTIONS - An additional form of tax paid by most employers, employees, self employed (and some unemployed) people. For the employed it is deducted from income by the employer on a scale related to income levels. The employed pay part flat rate, part income related. The self employed and the unemployed may pay a flat rate voluntary contribution to keep their benefits entitlement up to date.
NET RELEVANT EARNINGS - A definition of 'pensionable income' for the self employed by which Personal Pension Plan contributions are determined. Relevant earnings less business expenses (includes stock relief deductions, losses or capital allowances). NRE for employed PPP holders is effectively gross PAYE pay.
NON-CONTRIBUTORY PLAN - a pension plan in which all required contributions are made by the employer.
NORMAL RETIREMENT DATE - the date at which the member becomes entitled to retirement benefits without reduction or increase.
OCCUPATIONAL PENSION SCHEME - A pension scheme established by an employer, usually on a group basis.
OMBUDSMAN - An official who investigates complaints from the public against official bodies, large organisations or industry sector participants.
PENSION - generally any periodic payment payable for the lifetime of a person who has become entitled to such a benefit pursuant to the terms of a pension plan.
PENSION FUND - General term used to describe an investment fund built up during working life and used at retirement to purchase an annuity to provide a continuing income.
PENSION INCREASES - Once in payment, pensions may remain at the same level, increase occasionally at the discretion of the company or have contractual annual increases, up to increases in RPI.
PENSION PLAN - a plan, scheme or arrangement organized and administered to provide pensions for members and former members pursuant to which an employer is required to make contributions.
PORTABILITY - options available to certain members on termination of employment.
QUALIFYING SERVICE - The length of time needed to entitle a pension scheme member to short service benefit; currently two years. May include previous scheme service, if a transfer payment has been made into the current scheme. Quantify. Illustrate the effect of something in terms of figures.
REMUNERATION - In pension planning terms generally taken to mean the full and total earnings package i.e. salary and benefits in kind.
RETIREMENT - withdrawal from the active work force because of age; may also be used in the sense of permanent withdrawal from the labour force for any reason, including disability.
RETIREMENT INCOME - income from pension and other sources to which a retired person is entitled. Term may include both private and public pension payments, income from personal savings, government income supplements and certain other sources of income.
SCHEME ADMINISTRATOR - The person responsible for the management and administration of an occupational pension scheme. All exempt approved schemes must appoint an administrator in UK.
SPOUSE - refers to:
(i) a person who is married to a member or former member; or
(ii) if a member or former member is not married, a person with whom the member or former member is cohabiting as spouses at the relevant time and who has been cohabiting continuously with the member or former member as his or her spouse for at least one year prior to the relevant time.
The relevant time means "at the date of death" with respect to the pre-retirement survivor benefit and "at the date of retirement" with respect to the post-retirement survivor benefit.
SOLVENCY DEFICIENCY - refers to a shortfall in a plan's assets relative to its liabilities at a particular point in time assuming that the plan was terminated at that point.
SOLVENCY RATIO - the ratio of the market value of the plan's assets to its liabilities as measured on a plan termination basis.
STATE EARNINGS RELATED PENSION SCHEME - Earnings related pension based on earnings between LEL and UEL. State Pension Age. Fixed retirement ages for men and women, currently 65 and 60 respectively. To be equalised to 65 for men and women, from April 2020 (with 10 years phasing in from 2010).
SURPLUS - if a pension plan's assets exceed the plan's liabilities, the difference is called a surplus.
SURVIVOR PENSION OR SURVIVOR BENEFIT - a monthly benefit payable under a pension plan to the surviving spouse of a deceased member or former member.
TAX EFFICIENT - There are a number of different types of tax efficient investments and investment strategies. Reid Scott and Ross can give you advice on which are the most appropriate ones for you.
TAX FREE CASH - Both occupational and personal pensions permit a certain account of cash to be taken in lieu of pension from the pension fund at retirement. This does not apply to FSAVCs, and Rebate Only pension arrangements Tax Haven. A country which legally enables individuals and companies from other countries to avoid or pay lower rates of tax by allowing them to live or base their operations there.
TAX RELIEF - The system of exemptions and deductions on income and expenditure whereby the Tax Inspector can identify taxable income.
TERMS of BUSINESS LETTER - Document which must be given to client by financial advisers prior to the transaction of business. Normally signed by client and adviser. Contents vary depending on nature of services being offered. Must include details of advisers status, polarisation, method of remuneration, adviser's obligations and complaints procedure.
TERMINATION OF MEMBERSHIP OR EMPLOYMENT - severance of the employment relationship for any reason other than death and retirement.
TERMINATION OF PLAN - this occurs when a pension plan ceases to operate. All members are vested and entitled to receive a pension.
TRANSFER VALUE - Generally taken to mean the cash value of accrued pension benefit in an occupational pension scheme.
UNFUNDED LIABILITY - any amount by which the assets of a pension plan are less than its liabilities on a going concern basis.
VESTED BENEFITS (VESTING) - benefits to which an employee has unconditional entitlement under the plan as a result of satisfying age or service requirements.
WINDNG UP - The termination of a pension scheme, where assets are used to purchase the accrued liabilities of the pension scheme, either by purchasing immediate and deferred annuities, or transfer to another pension scheme.
