Glossary of Pension Terms

Under the 50/50 section members pay half their normal pension contribution rate and receive half the normal pension build up.

the rate at which a scheme member's benefits build up for each year and part year of scheme membership. The accrual rate from 1 April 2014 is a 49th (Prior to 1 April 2008 the accrual rate was an 80th and from 1 April 2008 to 31 March 2014 it was a 60th).

(also called Contributor Member, Current Member or just Member) - an employee who is currently making contributions to the LGPS.

(also called percentage reduction) - the amount by which a scheme member's pension and lump sum benefits are reduced if they are withdrawn before the date of normal retirement.

a three yearly valuation of the Fund undertaken by the Actuary to ensure that the Pension Fund is sufficiently well managed and that its assets meet its liabilities. Employer contribution rates are set as part of the valuation process.

a professionally qualified independent person appointed by the administering authority in order to value the Pension Fund and therefore set contribution rates.

from 1 April 2014 additional pension is purchased by way of Additional Pension Contributions (APCs) paid into the Local Government Pension Scheme. APCs have replaced ARC from 1 April 2014

(effective before 1 April 2014) additional pension is purchased by way of Additional Regular Contributions (ARCs) paid into the Local Government Pension Scheme. ARCs have now been replaced by Additional Pension Contributions from 1 April 2014.

payments made within certain HM Revenue & Customs limits to an approved provider (normally an assurance company) in order to provide additional benefits to those payable from the LGPS.

(for the Royal County of Berkshire Pension Fund the administering authority is the Royal Borough of Windsor & Maidenhead) - a body required to maintain a pension fund under the LGPS regulations.

an agreement made between the administering authority, a Scheme employer and a contracted company to allow the contractor to become part of the LGPS.

(may be called admission body) - an employer who is carrying out work that is normally of a similar nature to local government work and who has entered into a contractual arrangement with the administering authority to be part of the LGPS.

the maximum annual increase to Defined Benefit rights before the member is subject to a tax charge.

(also called statutory pension, basic pension, yearly pension) - calculated by reference to final pay and scheme membership (including any transferred in service) payable for life.

a scheme approved under Chapter 2 Part 4 of the Finance Act 2004 thereby granting tax relief on contributions paid.

payments that a pension scheme is allowed to make. These payments will not be subject to a specific tax charge.

a person to whom payments from the LGPS are due.

the name given any time pension benefits are taken from the Scheme. Any such event will result in part or all of the individual's lifetime allowance being used.

the transfer of pension rights between one occupational scheme and another on behalf of a group of staff transferring from one employer to another. This type of transfer will usually provide better benefits for the transferring members than individual Cash Equivalent Transfer Values would provide.

(may be called strain cost, full cost or hidden cost) - the costs imposed on Scheme employers who retire members of the scheme before their normal retirement ages. Costs will increase where a Scheme employer awards additional pension to a Scheme as compensation for the loss of office.

from 1 April 2014 the LGPS became a Career Average Revalued Earnings Scheme. The pension built up from 1 April 2014 is based on a CARE scheme basis and the pension built up prior to 1 April 2014 is linked to Final Salary.

 an employee who works no fixed hours but works as and when required. Scheme regulations do not define the term casual.

pension payable to a member's dependant child or children if aged under 18 or 18 and over and still in full time education or training up to the age of 23 or due to an incapacity that occurred before the age of 18.

a civil partnership is a relationship between two people which is formed when they register as civil partners of each other.

a scheme within the public sector, or one outside of the public sector who has agreed to use the public sector method of calculating transfer values, and award service credits derived from incoming transfer values.

If you have been contributing to the LGPS at some point since 1 April 2008 and you have a cohabiting partner, of either the opposite or same sex, they will receive a partner's pension in the event of your death subject to certain criteria (see our section on Cohabiting partners).

(may be called commuted pension) - the term used when a member's pension is very small and is therefore paid as a one off capital value in order to extinguish the ongoing liability.

a term applied to a pension scheme when it does not comply with the requirements of the State Second Pension (S2P) formerly the State Earnings Related Pension Scheme (SERPS).

a scheme (such as the LGPS) that requires its members to make contributions from their pay.

a term used when a member elects to convert part of a pension into additional lump sum.

an amount paid to a current or former member's estate or nominated beneficiary(ies) in the event of death in service, death after retirement or death of a deferred beneficiary

(may be called preserved benefits) - benefits retained in the pension fund when a member leaves without an entitlement to the immediate payment of those benefits. If a transfer of benefits does not take place before hand, deferred benefits are usually paid from the member's normal retirement date.

a scheme whereby the benefits payable are defined by regulation and are not dependent upon contributions paid or on how well those contributions are invested.

a term used to described the payment of pension and lump sum to a member before the member has attained Normal Pension age (NPA).

a term used for the part of a divorcing member's benefits which is earmarked for his or her former spouse upon completion of the divorce in accordance with a Court Order (see also Pension Credit and Pension Debit).

this term describes the circumstances whereby a member who is aged 55 or over is asked to retire by their employer in the interests of the efficient exercise of the employer's functions. This is also known as 'Business Efficiency Retirement'.

a current or former scheme member can choose whom they would like to receive any death grant payable from the Scheme. This is sometimes called a nomination but it should be noted that such a nomination is not legally binding and is an expression of wish only. The administering authority has ultimate discretion when releasing death grant payments.

the pay figure used in the calculation of pension benefits (usually, but not always, pensionable earnings over the last 365 days of pensionable employment).The pension you have built up to 31 March 2014 will be linked to your final pay at your date of leaving. From 1 April 2014 the LGPS became a Career Average Revalued Earnings Scheme (see CARE above).

a defined benefit scheme which uses the member's final pay (and scheme membership) to determine the benefits payable and not the contributions paid by the member. Any pension membership built up to 31 March 2014 will still be calculated under the Final Salary Scheme arrangement. Pension built up from 1 April 2014 will be calculated under a Career Average Revalued Earnings arrangement.

similar to AVCs but the contributions are paid to a provider of the member's choice and not to the approved in-house AVC scheme providers.

 means paid employment for not less than 30 hours in each week for a period of not less than 12 months

the amount of pension that an LGPS member is guaranteed to receive and is equivalent to the pension that would have been paid under SERPS had the member not been contracted out of that scheme.

a retirement which occurs when an employer determines to terminate a scheme member's employment on the grounds that his ill health or infirmity of mind or body renders him permanently incapable of discharging efficiently the duties of his current employment and that he has a reduced likelihood of obtaining gainful employment before his normal retirement age.

a term used to describe the inflation proofing of LGPS benefits in line with the Consumer Prices Index (CPI).

a transfer of pension rights on behalf of a scheme member who has left one local government employment to take up new employment with a different Local Government Authority in a different region of the country.

a complaints procedure governed by regulation providing any current or former scheme member with the opportunity to settle any dispute or complaint they may have in respect of any decision made regarding their entitlements under scheme rules.

the tax payable on the value of any benefits in excess of the lifetime allowance. If the excess is taken as a lump sum then it will be taxed at 55%. If it is taken as income then it will be taxed at 25%. Tax will also be payable on the pension income at the individual's marginal rate.

individual's opting for protection will be able to apply a factor to the lifetime allowance in order to create their own personal lifetime allowance. All benefits will then be tested against this enhanced figure, hence there will be less chance of a tax charge being applied to those benefits already in excess of the Standard Lifetime Allowance.

(also known as statutory retirement grant or lump sum) - a tax free lump sum paid at retirement.

Members of the LGPS are automatically enrolled into the MAIN section of the LGPS on joining. Under the MAIN section members pay their normal pension contribution and receive the normal pension build up. An alternative to the MAIN section is the 50/50 section.

a reduction made to LGPS pensions from the state retirement age of certain members who in the past had paid modified contributions that were not set at the full 6%.

a scheme that uses the contributions paid by the member (and the employer if any) to calculate the benefits payable rather than the member's final pay and membership.

the proportion of earnings on which contracted out national insurance contributions have been deducted.

see Expression of Wish.

a scheme that does not require its members to make any contribution from their pay.
 

a term used to describe a scheme which can pay and receive transfer values but which does not use the public sector method of calculation and does not award service credits.

in line with State Pension Age (but with a minimum age of 65).

this is normal pay plus any additional payments defined in an employee's contract of employment as being pensionable. To be pensionable, pay must also be taxable. Since 1 April 2014 pensionable pay included non-contractual overtime but does include pay in lieu of holiday or notice, travelling or subsistence allowance or any payment in respect of the value of a motor vehicle.

the term used for a benefit granted to an ex-spouse of a member following a divorce settlement and in accordance with a Court Order (an alternative to earmarking).

the term used when a scheme member's benefits are reduced in order to provide his or her ex-spouse with a pension credit following a divorce settlement (an alternative to earmarking).

the total value of contributions paid during the pension input period.

a period of 12 months during which contributions are paid (1 April to 31 March).

the splitting of a member's benefits upon divorce.

the amount by which LGPS benefits are increased annually and based on movement in the Consumer Prices Index (CPI) during the 12 months to September.

a statement produced and issued by Scheme employers which sets out how they have resolved to follow certain discretions available to them under the LGPS.

where an individual has pension benefits, including pensions in payment, that are valued in excess of the standard lifetime allowance, they can apply for primary protection. Their benefits will be allowed to grow in line with the increase in the standard lifetime allowance before any lifetime allowance charge is applied.
 

the term used for a group of public sector employers which have agreed a common basis of calculating transfer values.

 chosen by the Scheme employer and approved by the administering authority to deal with ill health retirement cases and who is qualified in occupational health medicine i.e. holds a diploma in occupational medicine (D Occ Med) or is either a Member (MFOM), a Fellow (FFOM) or an Associate (AFOM) of the Faculty of Occupational Medicine (or the equivalent of any EEA State).

the term used for a group of public sector employers which have agreed a common basis of calculating transfer values.

a certificate issued by the Actuary following a valuation of the Fund which sets out the employer contribution rates payable by each of the associated scheme bodies.

the term used for a member who is made redundant by their employer and who is entitled to the immediate payment of his retirement benefits as the member is aged 55 or over.

 

for the purpose of the LGPS regulations re-employment means re-employment with another Local Authority or body in which eligibility for LGPS membership exists.

a scheme approved by HM Revenue & Customs under the Finance Act 2004. The LGPS is a Registered Public Scheme under Chapter 2, Part 4 of that Act.

the point at which a member's age in whole years when added to membership in whole years equals 85 and therefore benefits can be paid without any actuarial reduction being applied (certain protections apply to different members).

an AVC scheme set up by a Scheme employer into which that employer can make contributions as well as the employee.

the pension paid to the legally married husband or wife of a former scheme member who has pre-deceased his or her spouse.

the value of pension benefits an individual can build up before a lifetime allowance charge is applied.

a top up to the basic State Pension for individuals who have been members of not-contracted-out pension schemes and therefore paid 'A' rate National Insurance contributions.

this scheme replaced SERPS - see State Earnings Related Pension Scheme. S2P is a top-up to the basic State Pension and members of the LGPS automatically contract-out of S2P for the duration of their LGPS membership.

a scheme, such as the LGPS, established by Acts of Parliament.

the actuarial value of i) a member's benefits paid to an alternative pension scheme on leaving the LGPS as an alternative to deferred benefits or a refund of contributions; or ii) a member's benefits paid by a previous employer into the LGPS upon joining the scheme.

a payment that will automatically attract a tax charge of 40% and may also give rise to an unauthorised payment surcharge.

the amount of pay at which employees cease to pay the full, contracted-out rate of any National Insurance contributions. The current Upper Earnings Limit can be found at www.hmrc.gov.uk/rates/nic.htm It is usually increased annually by Parliament.

the term used in respect of a permanent employee who is not contracted to work a set number of hours per week.

AAC Annual Allowance Charge
ACT Advance Corporation Tax
AVC Additional Voluntary Contribution
ARCs Additional Regular Contributions (prior to 1 April 2014)
APCs Additional Pension Contributions (from 1 April 2014)
BCE Benefit Crystallisation Event
CA Certified Amount
CARE Career Average Revalued Earnings
CAY Compensatory Added Years
CEP Contributions Equivalent Premium
CETV Cash Equivalent Transfer Value
CLG Communities and Local Government
COD Contracted Out Deduction
COEG Contracted-Out Employments Group
COMBS Contracted-Out Mixed Benefit Scheme
COMPS Contracted-Out Money Purchase Scheme
COSRS Contracted-Out Salary Related Scheme
CPI Consumer Prices Index
DWP Department of Work & Pensions
ECON Employers Contracting-Out Number (This is E3900002R for the Berkshire Pension Fund)
FSAVC Free Standing Additional Voluntary Contribution
FURBS Funded Unapproved Retirement Benefits Scheme
GAD Government Actuary's Department
GMP Guaranteed Minimum Pension
HMRC Her Majesty's Revenue & Customs
IDRP Internal Disputes Resolution Procedure
IFA Inter-fund Adjustment
ILA Individual Lifetime Allowance
LAC Lifetime Allowance Charge
LAEF lifetime Allowance Enhancement Factor
LGE Local Government Employers
LGPC Local Government Pensions Committee
LGPS Local Government Pension Scheme
NAPF National Association of Pension Funds
NRA Normal Retirement Age
NRD Normal Retirement Date
PI Pensions Increase
PIA Pension Input Amount
PIP Pension Input Period
S2P State Second Pension
SCAVC Shared Cost Additional Voluntary Contribution Scheme
SCON Scheme Contracting-Out Number (This is S2700137M for the Berkshire Pension Fund)
SERPS State Earnings Related Pension Scheme
SIP Statement of Investment Principles
SLA Standard Lifetime Allowance
SPA State Pension Age
TPAS The Pensions Advisory Service (formerly OPAS)
TV Transfer Value