The Pensions Guide


Pensions Knowledgebase and Glossary

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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.
Accrued rights This term is sometimes used to mean accrued benefits.
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.
Active investment management 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 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 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 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 schemes assets is more than the actuarial liability. The actuarial surplus is the difference between the two.
Actuarial valuation 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 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 When a member of a defined benefit pension scheme becomes entitled to extra pension benefits because:
- a transfer payment has been made by another scheme;
- an additional voluntary contribution has been paid; or
- the member's pension benefits have been improved by the employer or the pension scheme (or both).
Additional State Pension You may be entitled to an additional State Pension, for instance, if you're in full-time employment and make class 1 National Insurance contributions.
When you retire and claim for a basic State Pension any additional State Pension due will be added.
If you've been a member of a company pension scheme you may have paid a lower rate of National Insurance contributions which will have qualified you only for the basic State Pension.
If you do this most, or all of your second pension, will come from you company pension rather than the State Second Pension.
Additional voluntary contribution (AVC) An extra amount (contribution) a member can pay to their own pension scheme to increase the future pension benefit.
Administrator The person who is responsible for managing a pension scheme from day to day.
Age Positive Age Positive is the UK Government's campaign to tackle age discrimination and promote the business benefits of age diversity in the workplace.
Age-related personal allowances A personal allowance is the amount of income you can receive without having to pay tax. Everyone with an income gets a personal allowance.
However, if you are aged 65 or over, as long as your income is below a certain limit, your tax-free allowance will be more generous. Your income could include pensions, salary and interest on savings.
Allocation option 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 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 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 A person who receives, or is entitled to, an annuity.
Annuity 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 Compares the size of an annuity (how much it pays each year) with how much it cost to buy. It also takes into account the age of the annuitant.
Appropriate scheme A pension scheme which meets conditions set by the Contributions Agency. This means that a member of the scheme can contract out of the State Second Pension.
Approval 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.
E.g. 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 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 Everything that the trustees hold for the pension scheme. They can include investments, bank balances, and debtors.
Attendance Allowance If you are aged 65 or over and have needed help looking after yourself for at least six months, you may be entitled to Attendance Allowance.
If you are under 65 and need help looking after yourself, you may be entitled to Disability Living Allowance instead.
Auditor 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).
Augmentation 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 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.

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