The Pensions Guide


Pensions Knowledgebase and Glossary

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Cancellation notice 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.
Capital Gains Tax (CGT) You must tell your Tax Office if you make a capital gain which is greater than the CGT allowance for the current tax year.
You may need to complete a tax return if you don't do so already. This might apply, for example, if you sell shares or a second property.
Capitalised value 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.
Carer's Allowance If you spend at least 35 hours a week caring for someone who is severely disabled, you may be entitled to this payment.
Carry back A member could sometimes transfer contributions to an earlier tax year for tax relief purposes. This was called carry back. The carry back rules have not applied since 31 January 2002.
Carry forward A member could sometimes transfer excess contributions to a later year to get tax relief. This was called carry forward. The carry back rules no longer applied after 31 January 2002.
Cash equivalent The amount of money a pension scheme member can transfer to another pension scheme.
Cash option Giving up part or all of a pension in return for getting a one−off payment straightaway. It is also called commutation.
Centralised scheme A pension scheme which is used by several employers.
Certificate of eligibility 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 A document to confirm that a pension scheme member is still alive.
Christmas Bonus The Christmas Bonus is a tax free payment made to customers who are present or ordinarily resident in the UK or any other EU Member State and who are entitled to receive one or more qualifying benefits.
This is including State Pension and Pension Credit in the first week of December.
Class A member A member of an occupational pension scheme which was created after 13 March 1989; or a member of an earlier pension scheme who joined after 1 June 1989.
Class B member A member of an occupational pension scheme which was created before 14 March 1989; and the member joined between 17 March 1987 and 31 May 1989.
Class C member A member of an occupational pension scheme who joined before 17 March 1987.
Clawback 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 The name for a pension scheme which does not accept new members anymore.
Clustering Setting up a number of pension schemes at the same time. It lets the member draw the pension benefits at different times.
Cold Weather Payment If you're getting Pension Credit or another income-related benefit, you could be eligible for extra assistance to help with your heating costs when there is a spell of cold weather in your area.
This is different to the Winter Fuel Payment, which you may also be eligible for.
Collective investment schemes A trust which people can invest in by buying units. The trust uses investors' money to buy investments. The fund manager values the fund's assets from time to time and puts a new price on the fund's units.
Unit trusts are sometimes called collective investment schemes.
Combined pension forecast If you are an employer or a pensions provider, you can provide a combined pension forecast for members of your occupational or private pension scheme.
Combined pension forecasts allow members of pension schemes to see forecasts of both their state and current private pension provision together.
Common investment fund The name given when the investments of two or more pension schemes are pooled together.
Community Care Grant If you are getting the Pension Credit and you need help to stay in, or return to your own home, you may be entitled to assistance with the cost of items for your home, clothing and travel costs.
You do not have to pay the grant back.
Commutation 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 Things which decide how much pension needs to be given up so that the member can get a one−off payment instead.
Company (occupational) Pensions Pensions set up by employers for their employees.
In most cases, your employer will make contributions to the scheme on your behalf and require that you make regular payments from your salary.
A company pension may also offer a death benefit, which is paid to your partner if you die before them.
Your employer may also provide you with a pension before the normal retirement age of the scheme if you need to retire early due to ill-health.
However, if you leave your employer you are unlikely to be able to continue making payments into the pension scheme.
Company pension scheme A scheme organised by an employer to provide pension benefits for their employees.
Compensation levy 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) An annuity that an insured occupational scheme must buy for a member when they retire.
Contact lenses and glasses If you are receiving Pension Credit, you may get vouchers towards to the cost of glasses and contact lenses.
Contingent annuity An annuity which is paid to someone when someone else dies.
Continuation option 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 members 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 the State Second Pension, 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 the State Second Pension.
Contracted out Employments Group (COEG) A part of the Contributions Agency that deals with contracted out employment.
Contracted out money purchase scheme (COMPS) 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 or the State Second Pension.
Contracted out salary related scheme (COSRS) An occupational pension scheme where the members contract out of the State Second Pension. The member's pension is based on how much they have earned.
Contracted-out pension You may decide you want to leave (contract out of) the State Second Pension (formerly SERPS) to join a stakeholder, an occupational, or a personal pension scheme.
Contracting out certificate The Contributions Agency gives this certificate to a pension scheme that meets the conditions to be contracted out.
Contribution holiday 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.
This phrase is also used when contributions to a personal pension are stopped because of temporary unemployment.
Contributions The money paid into a pension fund for a member. It can be paid by a member or an employer. Contributions are sometimes called pension premiums.
Contributions Agency 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 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 (or its replacement, the State Second Pension) for the time they were contracted out.
Contributory scheme 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 A plan to make sure that all the pension schemes liabilities can be paid. It is often used for final salary schemes.
Corporate trustee A company which acts as a trustee.
Council Tax Benefit If you are on a low income, you may be able to get help to pay your Council Tax bills. You can apply to your local council for assistance.
Creditors Amounts owed by the pension scheme.
Crisis Loan In the event of emergency or disaster, you may be entitled to an interest free loan to help you and your family. You will have to agree with your Jobcentre Plus office how and when you will pay the loan back.
Current funding level 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.

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