The Complete Glossary To Workplace Pensions

Welcome to our glossary. You should be able to find most words that you see used in auto enrolment. Use the search feature below.

If you think we should add a new term, please let us know.

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  • ABI - Association of British Insurers

    The ABI represents the collective interests of the UK's insurance industry, including those of all the major pension providers. In addition it provides an advisory service on corporate governance to those members who are active shareholders.

    The role of the ABI is stated on its website as:

    "The Association speaks out on issues of common interest; helps to inform and participate in debates on public policy issues; and also acts as an advocate for high standards of customer service in the insurance industry."

  • Absolute return

    This is an investment strategy that aims to produce a positive return regardless of the direction of financial markets. The return should have lower volatility than traditional funds and aims to deliver positive returns in all market conditions.

  • Accrued benefits

    Benefits that an employee has earned for service already completed with an employer.

  • Accrued rights

    The rights related to service with a company that have been established and to which a member is entitled under an occupational pension scheme. The value of accrued rights is usually calculated on the basis of current salary but may also include a provision for future salary increases.

  • Accumulation

    Is the acquisition or gradual gathering of something. In this instance, the accumulation of funds in one's pension.

  • Active fund management

    A portfolio management strategy where the manager relies on his skill to make specific investments with the goal of achieving returns over and above the benchmark and sector.

  • Active member

    An active member is a participating member of any of the pension schemes associated with that employment and who is building up pension benefits in that scheme and from that employment.

  • Actuarial valuation

    An actuarial valuation is an investigation by an actuary to determine whether a defined benefit pension scheme has sufficient assets to meet its liabilities. The valuation assesses the funding level and recommends a contribution rate.

  • Actuary

    A business professional who deals with the financial impact of risk and uncertainty. Actuaries provide assessments of financial security systems and advise on policy issues for pension funds and insurance companies.

    It is a requirement for defined benefit schemes to have a named actuary who is appointed by the managers or the trustees of the occupational pension scheme.

  • Administration

    Refers to the management of a pension scheme including the payment of benefits, the collection of contributions and keeping detailed records of all transactions.

    An insolvent company, or a company likely to become insolvent, can enter administration. When a company goes into administration, an administrator, appointed by a court, takes over the control of the company' affairs from its directors to administer the payment of the company's debts with the objective of selling the company as a going concern.

  • Administrative receivership

    Administrative Receivership is a form of insolvency in which position an insolvent company may find itself when debenture holders appoint an Administrative Receiver to recover money that is owed. The company's assets are realised and the proceeds are used to pay any preferential creditors and the debenture holders.

  • Advisers

    Those persons or companies appointed by the board of trustees to give advice. It is a legal requirement for the board of trustees to appoint certain advisers.

  • Alpha

    Employees save into a pension scheme throughout their working life, building up a pension pot. At some point during the early years of retirement they will usually use the money they have saved to buy an annuity from an insurance company; this is a transaction that will occur only once. An annuity can provide a guaranteed income payable for either the rest of the person's life or for a fixed number of years. However, in the 2014 Budget, the chancellor said he planned to scrap the requirement for those with defined contribution pensions to buy an annuity. Instead they will get free advice to decide what is best for them with regards to their pension pot.

  • Annuity

    The accrued pension pot will usually be used to purchase an annuity from an insurance company. An annuity is a guarantee from an insurer that they will pay an annual income for the agreed period or the rest of the life of the annuitant and, in effect, the annuitant is insured against a very long life and running out of income.

    For more information on annuities including the pros and cons, click here.

  • Approved scheme

    HMRC described as approved schemes those schemes which met the requirements which entitled them to the tax privileges associated with pension funding. Approved schemes are now known as registered schemes.

  • Assessment

    Process of assessing all employees age and earnings to check whether any employees who were previously not eligible and therefore not auto enrolled (and didn't wish to opt in) have now become eligible i.e they turned 22 or are now earning above the threshold. Assessment needs to take place each payroll for employees who are not members of an employers pension scheme.

    For more information on assessment using Smart Pension's free to use tools, click here.

  • Articles of association

    This is a document that contains the purpose of the company as well as defining and recording the duties and responsibilities of its members. It is an important document which needs to be filed, along with the memorandum of association, with the Registrar of Companies.

    In this case, the term companies also includes trust companies set up for the purpose of running a pension scheme.

  • Assessment date

    The date of the employer's declared insolvency and also the date on which the assessment of the Pension Protection Fund will start.

  • Assessment period

    Entry to the assessment period is triggered by a qualifying insolvency event and before a scheme can enter the Pension Protection Fund (PPF) it has to go through a period of assessment that lasts for a minimum of a year from the assessment date. During assessment a valuation is carried out of the scheme's assets and liabilities by the PPF and the scheme's trustees.

  • Assets

    Assets are items such as stocks, bonds, property and bank deposits that have inherent value.

  • Augmentation

    Additional benefits may be offered to members of a defined benefit scheme; the cost of this provision may be borne by the scheme and/or the employer.

  • Automatic enrolment

    Employers have a legal duty to enrol all eligible employees into a qualifying workplace pension scheme and to make contributions towards their employees' pension. The employee cannot be required to take any action to become an active member of the pension scheme. An employee who has been enrolled automatically is entitled to choose to opt out and to get a refund of the contributions they have paid. If you are thinking about opting out of auto enrolment, here are a few things to think about before you do.

  • Automatic re-enrolment

    See Re-enrolment below.

  • AVC - Additional voluntary contribution

    A contribution paid by a member of an occupational pension scheme, in addition the that member' normal contribution, to secure additional benefits. The possibility of such payments was a legal requirement until 2006 and is still offered by many schemes.

B

  • Back end loading

    Back end loading is an arrangement between an employer and trustees that allows the employer to pay the extra contributions needed to make good a deficit in unequal instalments. The later instalments will be larger than the earlier ones. Back end loading is a term used in relation to a recovery plan.

  • Banded earnings

    Banded earnings relate to contributions made to a banded earnings pension scheme and are earnings between the lower earnings threshold which currently sits at £5,876 (for the tax year 2017/2018), but below the upper limit earnings threshold, which is currently £45,000. Earnings between these two amounts are eligible for the minimum percentage contributions as stipulated by auto enrolment. Banded earnings will also include overtime and bonuses, not just basic pay.

    For more information on this and how it relates to employee classifications and qualifying earnings, visit this page.

  • Barber judgement

    This refers to a judgment in the Barber case made by the European Court of Justice (ECJ) 17 May 1990 which established that men and women should be treated equally in relation to their pension rights. This is now the reference date for all changes to scheme benefit rules made to comply with the ruling.

    To the current date, state benefits remain unequal and will remain so for the foreseeable future; this creates difficulties for schemes with guaranteed minimum pensions (GMPs) in relation to equalisation and the administrative costs and complexities involved could be massively onerous.

  • Barber window

    The time elapsed between the Barber judgement made by the European Court of Justice (ECJ) 17 May 1990 and the date on which the scheme complied (or is due to comply) with the ruling that required that scheme benefits be equalised between men and women.

  • Basic state pension

    The flat rate state pension payable to men and women who fulfil the National Insurance (NI) contribution requirements. The basic state pension is also paid to spouses, subject to certain conditions, and to widows/widowers. The basic state pension is not earnings related.

  • Bear market

    A bear market is a market condition in which the prices of securities are falling over a period of time. It is a transition from high investor optimism to widespread pessimism which causes the negative sentiment to be self-sustaining. In a bear market, sellers are many and buyers few and it is the opposite of a bull market.

  • Benchmark

    A standard that can be used to measure an investment and put its performance in context; with the choice of a series of appropriate indices, it forms an objective test of the effectiveness of an investment strategy. It is usual to set a target which requires the performance of the fund manager to outperform the benchmark by an agreed percentage.

  • Beneficiary

    A member of a pension scheme, or a dependant who is entitled to receive money or other benefit from the scheme following the death of the member.

  • Benefit schedule

    A schedule, usually drawn up when there is a change of administration, for example when a scheme is being transferred to the Payment Protection fund, which is prepared by the administrators. It lists all members of the scheme, including entitled dependants, and the benefits to which they are entitled.

  • Benefits

    All payments made to a beneficiary including pension payments, tax-free lump sums and death benefits.

  • Benefits consultant

    Benefits consultants may be retained by the employer or the trustees of a scheme, or both. They may be scheme actuaries and advise on pension benefits and remuneration.

  • Benefits statement

    Information from your pension provider setting out the benefits payable in respect of a person's membership of a pension scheme. A statement is usually provided annually during the period of employment, on retirement or in the event of a wind up.

  • Beta

    The returns on a portfolio which track movements in the market and which are not attributable to the particular skills of a fund manager. These returns are usually a result of a portfolio which precisely mirrors a particular index.

  • Bonds

    Bonds are loans made to an issuer – a company or the Government – which accepts to repay the loan at an agreed later date. Government bonds are usually known as gilts and the term bond is more likely to be used to refer to a corporate bond.

  • BR19

    Form BR19 is used to request a Retirement Pension Forecast from the Pensions Service to find out what is the projected state pension benefits at retirement and also what steps can be taken to increase the state pension entitlement. A statement can issued if the individual is at least 30 days away from the State Pension age when the application is looked at.

  • Breach of trust

    All trustees must act in good faith in the best interests of the beneficiaries. Any breach of their duties by any act or omission that is inconsistent with the terms of the trust agreement is known as a breach of trust.

  • Bull market

    A bull market is a period when the prices of securities are generally rising. The start of a bull market is usually marked by a feeling of widespread pessimism which changes to hope and then to optimism. It is the opposite of a bear market and there are more buyers than sellers, forcing up the price of equities.

  • Buy-out

    A type of financial transfer whereby an annuity is purchased for each member of a pension scheme which will guarantee pension benefits which will, as nearly as possible, match those which would otherwise have been paid by the scheme.

  • Buy-out debt

    Also referred to as a debt on the employer or a section 75 debt, this is the amount of money that is required for an annuity to be purchased for each member of a pension scheme which will guarantee pension benefits which will match those which would otherwise have been paid by the scheme.

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  • Earmarked scheme

    A Defined Contribution scheme in which all benefits are secured by an insurance policy. Each member accumulates an earmarked (individual) pension under the policy.

  • Earmarking

    When a member of a pension scheme divorces, a court order will require that the trustees pay some or all of the member's benefits to the ex-spouse, or ex-civil partner, at the time that these benefits would have been liable to be paid to the member.

  • Effective date

    The effective date is the date at which the assets and liabilities of a pension scheme are calculated for the purposes of a valuation.

  • Eligible jobholder

    For an employee to be eligible for auto enrolment they must be:

    • Aged between 22 years and state pension age.
    • Ordinarily working in the UK under their contract of employment.
    • Has qualifying earnings payable by the employer in the relevant pay reference period that are above the earnings trigger for auto enrolment. Current tax year 2015/16 is £10,000 per annum.

    For more details on employee classifications, click here.

  • Employer covenant

    The employer's legal obligation and its ability to fund the scheme now and in the future; trustees should review the covenant regularly.

  • Engagement letters

    "Engagement letters are also known as terms of appointment, letters of appointment, letters of engagement, signed agreements or simply contracts."

    They are used by accountants, solicitors, investment banks and other advisers to set out the exact terms under which they are giving advice and to limit their liability when giving advice. The form of the document will vary depending upon which type of adviser is being appointed. There are statutory requirements prescribing how scheme actuaries and scheme auditors should be appointed and professional bodies that regulate the scheme's advisers will have their own requirements.

    The engagement letters are drawn up by the adviser in question and the document should reflect everything that has been agreed with the adviser including their liability limit, their conflict of interest policy, agreed fees and charges and arrangements for the eventual termination of their appointment.

  • ENT

    An employer-nominated trustee is a trustee who is chosen by the sponsoring employer.

  • Entitled Worker

    An entitled worker is someone who does not have qualifying earnings to fit the jobholder description but is entitled to join a workplace pension scheme, usually without employer contribution if they choose, though an employer can choose to make contributions if they wish, it is entirely at their discretion for 'entitled' workers. The following requirements must be met to be considered an entitled worker:

    • Work in the UK.
    • Aged between 16 and 74.
    • Earn less than the qualifying lower earnings threshold (less than £5,876 annually, £490 monthly, or £113 weekly for the 2017-2018 tax year).

    For more details on employee classifications, click here.

  • Equalisation

    As of 17 May 1990, following the Barber judgement, benefits accrued after that date were to be modified so that one sex was treated no less favourably than the other.

  • Equities

    The stock of a company is partitioned into shares, the total of which are stated at the time of the formation of the business. Shares in a company are traded on a stock exchange. Shares represent a fraction of ownership of a company and owning shares in a company usually entitles shareholders to a share of the profits, if any, which are then paid as dividends.

  • Exemption clause

    Exemption clauses in a trust document give trustees a degree of protection in the event of a breach of trust.

  • Exoneration clause

    Exoneration and indemnity clauses in a trust document which give trustees protection in the event of a breach of trust.

  • Expression of wish

    An expression of wishes is a means by which a member of a pension scheme can indicate to the trustees a preference as to the recipient of any lump sum death benefit.

  • External audit

    An external auditor is appointed by the trustees or managers of an occupational pension scheme to examine the financial statements of the scheme. The results of this examination are then incorporated in the auditor's report.

  • External auditor

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  • Gilts

    Gilt-edged securities, known as gilts, are bonds issued by the UK Government which have a fixed interest rate. They may be index-linked which means the value of the gilts increases with inflation resulting in an increase in the amount of interest paid.

  • GMP - Guaranteed Minimum Pension

    The minimum pension which a United Kingdom pension scheme has to provide for those employees who were contracted out of the SERPS for service before 6 April 1997 (unless it was a DC scheme contracted out through the provision of protected rights). The amount is said to be 'broadly equivalent' to the amount the member would have received had they not been contracted out.

  • Group personal pension

    Group personal pensions are personal pensions that are linked to an employer. An employer can establish a group personal pension scheme as a way of providing all employees with access to a pension plan run by a single provider. Although each member has a separate pension policy, contributions are collected by the employer who pays them to the provider.

    There is no board of trustees and, because of the contractual arrangements, a GPP scheme is referred to as a contract-based scheme rather than a trust-based scheme.

  • Growth asset

    Asset which, over the long term, may be expected to grow in value in line with the economy. Property and equities are examples of growth assets.

  • Growth manager

    Growth managers are fund managers who invest in shareholdings which are expected to increase in value but not necessarily to pay dividends. Their preference is usually to favour shares with a high price to earnings ratio. This investment strategy tends to work best in a rising market when such shares tend to perform strongly.

  • Guidance

    The Pensions Regulator issues regulatory guidance that is intended to help trustees, employers and others understand what the law requires with regard to regulating pension provision. The guidance is not a statement of law and, as such, carries less weight than a Code of Practice before courts or tribunals.

H

  • HMRC - HM Revenue and Customs

    HMRC was formed in April 2005 by the merger of the Inland Revenue and Her Majesty's Customs and Excise Departments. It is HMRC that determines the tax environment within which pensions schemes operate and assists in the understanding of the tax rules on pension schemes and their management.

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  • Lawyer

  • Lay trustee

    A lay trustee is an employee who voluntarily sits on the board of his or her company pension fund. They may be nominated the employer (Employer-nominated trustee) or elected by members (Member-nominated trustee) and are not paid except for incidental expenses. A lay trustee is tasked with making decisions based on the scheme' objectives and, at the same time, they must ensure that the scheme members' interests are well protected.

  • Letter of appointment

    A letter that officially appoints an adviser to the trustees of the scheme.

  • Leverage

    Leverage, sometimes referred to as gearing in the UK, involves using borrowed money to increase the size of an investment holding in the belief that the income from the asset will be more than the cost of borrowing. Because of the larger holding, the risk is increased and, while gains are potentially higher, so are losses.

  • Liabilities

    A liability is an obligation that legally binds a pension scheme to settle a debt now or in the future. Current liabilities are debts payable within one year whereas long-term liabilities are debts payable over a longer period and the value of those liabilities cannot be accurately determined.

  • LIBOR - London Interbank Offered Rate

    A benchmark for short-term interest rates that some of the world's leading banks charge each other for short-term loans. The rate is published daily.

  • Lifestyling

    A strategy used mainly in defined contribution schemes whereby the allocation of a member's assets is adjusted depending on their age and time until retirement. Assets are usually gradually moved from equities to bonds and cash as the date of retirement approaches.

  • Liquid asset

    An asset that can be converted into cash quickly and with minimal impact on the price achieved. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market

  • Liquidation

    If a company becomes insolvent, liquidation is the process by which the company is brought to an end and the assets and property of the company are realised and redistributed. If the company is insolvent the directors' primary duty is to act in the interests of the creditors before those of the shareholders.

  • Listing rules

    The Listing Rules are a set of regulations that apply to any company listed on a United Kingdom stock exchange and are subject to the overview of the UK Listing Authority (part of the Financial Services Authority).

    The listing rules lay out mandatory standards for any company wishing to list its shares or securities for sale to the public including matters such as the requirements of information in a prospectus before an initial public offering of shares, new share offers, rights issues, disclosure of price sensitive information, or takeover bids for companies.

  • LPI - Limited Price Indexation

    A method of providing capped annual increases for members of a pension scheme where they relate to service after 5 April 1997.

    LPI is usually the lesser of the annual increase in the Retail Prices Index and either 5% or 2.5%, although the percentage limit can vary if that is the wish of the scheme, depending when the service was accrued and whether the pension is in payment or has been deferred.

  • Lump sum

    A lump sum is a single payment of a sum of money, as opposed to a series of payments made over time, that members can choose to take on retirement; such payments are currently free of tax. If a lump sum is paid then the member's pension is reduced accordingly.

M

  • Mandate

    That part of an investment management agreement which lays out the authority given and which stipulates the target return and other matters such as the distribution of the assets in question between different types of investment eg property, bonds, equities.

  • Market neutral

    An investment strategy that seeks to avoid market risk and to give the same return regardless of market conditions. The return on investment should not follow the rise and fall in UK equities but will usually offer a fixed percentage return that is above inflation, bank rates or some other objective measure.

  • Member

    A person who is a member of a pension scheme and is thus entitled to benefits under than scheme. The term member is sometimes used to refer only to an active member of a scheme.

    For more on active members, see our member's pension scheme booklet.

  • Memorandum of association

    A document which must be submitted to the Registrar of Companies at Companies House, with the articles of association, when the company is formed. Details required include the name of the company, the registered address of the company and an objects clause stating the purpose and range of activities of the company.

  • MFR - Minimum funding requirement

    A statutory requirement under earlier legislation, imposed on most defined benefit schemes, dictating that a scheme's assets must cover its liabilities, assessed on a prescribed set of actuarial assumptions. Since 30 December 2005, the MFR has been superseded by the scheme-specific funding provisions of the Pensions Act 2004.

  • MND

    Member-nominated director. Usually referred to as a member-nominated trustee (MNT)

    "A person, director or corporate trustee, appointed or elected by employees, or members of an occupational pension scheme, in accordance with the Pensions Act 2004."

    For very small schemes, where the sponsor is a private company, the corporate trustee may be the board of directors of the company, providing the legal requirements for member-nominated trustees are met.

  • MNT - Member-nominated trustee

    A trustee of an occupational pension scheme appointed or elected by the members in line with MNT requirements.

  • Money purchase scheme

    Money purchase schemes, also known as defined contribution pension schemes, can be schemes that are set up by your employer as a workplace pension or a private one arranged by an individual. Payments made into money purchase schemes are then put into investments by the pension provider, which is designed to yield benefits upon retirement based on how the investment performs.

  • Morris review

    The Morris review, published on 16 March 2005, focused on three main areas: the extent of choice and competition in the market for actuarial services, the current regulatory framework for members of the actuarial profession and the role and future institutional status of the Government Actuary' Department. The review' central recommendation was that the regulation of the actuarial profession should be subject to independent oversight by the Financial Reporting Council (FRC) .

  • Mortality rates

    Mortality rates are a statistical measure of the number of deaths, and age at death, in a population, scaled to the size of that population, per unit of time.

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  • NAPF - National Association of Pension Funds

    The NAPF is the main UK body that represents the interests of the occupational pensions movement and provides representation and other services for those involved in designing, operating, advising and investing in all aspects of pension schemes and other types of retirement provision.

  • NIC

    National Insurance Contributions.

  • NICO - National Insurance Contributions Office

    NICO is part of HMRC and is responsible for safeguarding and maintaining accurate national insurance records and, in particular, NICO oversees the system relating to the collection of National Insurance contributions.

  • NISPI - National Insurance Services to Pensions Industry

    NISPI is a directorate of the National Insurance Contributions Office and is responsible for supervising pension schemes that are contracted-out of the state second pension (S2P). It ensures that contracted-out schemes maintain correct records of individuals' contracted-out rights. NISPI is divided into three main business areas, relating to early leavers, pension payments, and schemes that cease to be contracted-out.

  • Non-contributory scheme

    A pension scheme which does not require contributions from its active members. You can find out more information here.

  • Non-eligible jobholder

    A non-eligible jobholder is someone who is not eligible for automatic enrolment but has the choice to opt-in to a workplace pension scheme with employer contribution. The following requirements must be met to be considered a non-eligible jobholder:

    • Work in the UK.
    • Aged between 16 and 74.
    • Earn less than the amount required to be eligible for automatic enrolment but more than the lower earnings threshold (more than £5,876 annually, £490 monthly, or £113 weekly but less than £10,000 annually for 2017-2018 tax year).

    OR

    • Work in the UK.
    • Aged between 16 and 21 OR aged between State Pension Age and 74.
    • Earn the minimum amount eligible for automatic enrolment (more than £10,000 annually, £833 monthly, or £192 weekly for 2017-2018 tax year).

    For more details on employee classifications, click here.

  • Non-professional clients

    Someone who has limited investment expertise and knowledge-bank. Pension scheme trustees often fall into this category but they may have considerations other than investment returns to take into account, such as the employer covenant, company's attitude to risk etc.

    Fund managers and advisers are required to allow trustees the opportunity to declare themselves as non-professional and thus in need of extra protection. This is likely to involve higher costs for advice and management.

  • Notice (of wind up)

    A formal written notification between the employer and the trustee that a scheme wind up has been started and that the scheme will cease to exist. This notice must be formally acknowledged in writing. The scheme lawyer will advise on the exact format which will vary from scheme to scheme.

  • NPA - Normal Pension Age

    This is defined by section 180 of the Pension Schemes Act 1993 as the age at which a member of a pension scheme normally becomes entitled to receive his or her pension under the scheme rules, most often 60 or 65. This is not necessarily the same as normal retirement age or normal pension date.

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P

  • Par value

    The value of a loan at the time it is made by the original investor. It is also known as maturity value, nominal value or face value. It is the amount which the issuer will pay to the current owner of a bond at the agreed maturity date. For index-linked gilts, the par value is the value of the original loan increased to take into account inflation over the period.

  • Partial projected unit method

    A method used for calculating technical provisions that takes some account, but not full account, of future salary increases.

  • Participating employer

    An employer who contributes, or has contributed, to a multi-employer or industry-wide occupational pension scheme and has been admitted to participate under the scheme's rules. Unless a scheme is winding up, participating employers must pay contributions to the scheme, as required by the scheme' governing trust deed.

  • Passive fund management

    A financial strategy in which a fund manager invests in accordance with a pre-determined strategy that requires no forecasting. The most popular method is to mimic the performance of an externally specified index, e.g the FTSE100, with the result that the assets move exactly in line with the chosen index.

  • PPF - Pension Protection Fund

    A statutory fund, established with effect from 6 April 2005 by the Pensions Act 2004. The PPF pays compensation at a prescribed level to members of defined-benefit (DB) schemes that are eligible for entry. A scheme may be eligible if its sponsoring employer has experienced an insolvency event and the scheme is underfunded to a specified level. The PPF is funded by a levy on all eligible defined-benefit schemes.

  • PAYE

    PAYE stands for Pay As You Earn and is a HM Revenue and Customs' (HMRC) system that collects both Income Tax and National Insurance from employment. Employers who operate a PAYE system will receive a letter notifying them of auto enrolment and how it will affect them. This letter will include their PAYE reference number (as seen here) along with their staging date.

  • Pension transfer

    Pension transfers are the movement of pension assets from one pension scheme to another. A member may want to transfer the benefits they have accrued from their pension, upon leaving their current employer, to the scheme of a new employer. To find out more about pension transfers and what Smart Pension can offer, visit our pension transfers page.

  • Pensioner

    Any person who is currently receiving a pension from a pension scheme.

  • Pensions administration

    Refers to the day-to-day running of the pension scheme including: the collection and allocation of contributions, the calculation of the benefits owed to members on retirement, on death or ill-health or in deferment. Accurate and up-to-date member records are to be kept and operational risks are to be managed.

    Administration of pension schemes may be performed internally by employees of the sponsoring employer, contracted out to a third party administration or may be carried out by the pension provider, in the case of fully insured pension schemes.

  • Pensions administrator

  • Pensions in payment

    Pensions that are currently being paid.

  • Pensions manager

    The pensions manager may be the chief executive of the pension scheme, may act as the secretary to the trustees or may be the manager of a pensions administration area.

  • Pensions Ombudsman

    The Pensions Ombudsman investigates and decides complaints and disputes about the way that pension schemes are run. Funded by registration levies on all occupational pension schemes, the Ombudsman will rule on any grievances or injustice as a result of maladministration. The Ombudsman's decision is final and binding on all the parties to the complaint or dispute. It can be enforced in the courts. His decision can only be changed by appealing to the appropriate court on a point of law.

    The Pensions Ombudsman deals with:

    • disputes from individual members of occupational pension schemes about entitlement and complaints of maladministration
    • disputes between employers and trustees of occupational pension schemes
    • disputes between trustees of different occupational pension schemes
  • Pensions Regulator

    The Pensions Regulator has responsibility for all work-based pension schemes in the UK. The Regulator may investigate schemes, issue improvement notices and take action to recover unpaid employer contributions. It aims to give better protection to members of work-based schemes.

  • Pensions Regulator Tribunal

    An independent body that was set up to hear appeals (references) on rulings (determinations) that were made by the Determinations Panel. The tribunal issues guidance on the content and form of an appeal and may consider any evidence available in relation to the subject to the appeal, including evidence that was not available at the time of the original determination.

  • Pooled fund

    Also known as pooled arrangement.

    A fund in which many investors hold units as part of a pooled investment. The assets of this pooled fund are managed by a fund manager and are not directly owned by the investors.

  • Postponement

    If an employee wishes to opt in and join the pension scheme during postponement, the employer must enrol them immediately irrespective of postponement.

    For more information on postponement, click here. For a step by step guide on how to postpone your staging date on the Smart Pension platform, watch this video.

  • PPF

  • PPF buy-out quote

    A quote obtained by the trustees when their scheme is in the PPF assessment period. The quote gives the cost of providing the benefits on the basis of the PPF levels of compensation.

  • PPF credit rating

    A credit rating used by the Pension Protection Fund to estimate the risk of insolvency of a sponsoring employer as part of the calculation of the risk-based element of the levy. A single credit-rating agency provides the credit ratings for all sponsoring employers of DB schemes, thus ensuring consistency.

  • PPF levy

    The PPF is funded by levies on all eligible defined benefit schemes; the levy is calculated on a combination of scheme-based and risk-based elements.

    The number of members in a scheme determines the scheme-based element.

    The risk-based element takes into account the funding level of a scheme and the risk of insolvency for the sponsoring employer. The value of certain contingent assets, guarantees and other commitments to the scheme from the sponsoring employer may also be taken into account.

  • Preferential creditor

    In insolvency, those creditors whose claims rank in priority to other unsecured creditors.

    These preferential creditors include:

    • HMRC (income tax deducted at source, VAT) and National Insurance contributions
    • occupational pension schemes (members' contributions for the four months prior to the insolvency event, and employers' contracted out contributions for the 12 months prior to that date)
    • wages for employees in the four months prior to the insolvency event
  • Present value

    Present value is a future amount of money, made by future pension payments and future receipts from investment returns and contributions, that has been discounted to reflect its current value. Present value is also known as present discounted value.

  • Preserved benefits

    A benefit for an individual who ceases to be an active member of an occupational pension scheme which is payable at a later date ( for example, a member who leaves that employment before retirement date). It remains the case that a full preserved benefit need not be offered unless a member had two years' service in the scheme but, in practice, schemes may well offer more than the statutory minimum.

  • Price earnings ratio

    One of the most commonly used methods of measuring how highly investors value the earnings of a company and therefore how expensive a share is. It demonstrates how a company's shares are priced compared to its historical earnings. The P/E ratio is calculated by dividing the company's share market price by its earnings per share.

    Traditionally, a high price/earnings ratio suggests a growth company; a low price/earnings ratio suggests a company with a modest profits outlook or a company in a high-risk area.

  • Priority order

    Provisions that are contained in the documentation of a scheme, or in overriding legislation, laying out the order of precedence of liabilities that must be followed if the scheme is in wind up.

  • Professional clients

    Having a good knowledge of financial theory and a clear understanding of their own requirements, such clients are not in need of the extra protection given to non-professional clients. Many boards of trustees will consider themselves to be professional clients.

  • Projected unit method

    An actuarial funding method for calculating technical provisions which takes account of any future salary increases.

  • Protected liabilities

    When a scheme is in wind up, or in an assessment period for the PPF, protected liabilities represent the cost of securing members' benefits in an amount equal to the compensation level from the PPF, plus any other liabilities and the estimated costs of winding up the pension scheme.

  • Protected rights basis

    This applies when a scheme is contracted out of S2P (or SEPRS) on a money purchase basis, funded by National Insurance rebates and any incentive payable in the early years of contracting out.

  • Prudential Regulation Authority (PRA)

    The Financial Services Authority was split, on 1 April 2013, into two regulatory bodies – the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The PRA is a subsidiary of the Bank of England.

    The PRA is the UK regulator, in conjunction with the FCA, responsible for the prudential regulation of systemically important financial institutions, including banks, building societies, credit unions, certain designated investment firms and insurers.

  • Put option

    A contract which is paid for upfront and gives the investor the right, but not the obligation, to sell certain specified assets at an agreed price on or before a specified date. The market value of the assets may have moved in such a way that the contract is disadvantageous for the bank at the time the option is exercised.

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  • Unbanded earnings

    Unbanded earnings refers to the total pay components (Total Gross Qualifying Earnings) , regardless of the upper earnings limit of £45,000, and the lower earnings threshold of £5,876, as defined under Qualifying Earnings of the Pensions Act 2008.

    For more information banded and unbanded earnings, click here.

  • Unsecured pension arrangement

    An arrangement whereby a DC scheme member of retirement age is allowed to defer the purchase of an annuity and instead to invest the fund in assets of his own choosing. The member may or may not draw down an income subject to scheme rules.

    This arrangement is normally only possible up to the age of 75.

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  • Value asset

    An asset that should achieve high income returns in relation to price. A value asset is expected to do relatively well in falling markets as it should hold its value better than other types of asset.

  • Value manager

    A fund manager whose aim is to achieve results by investing in companies offering high income returns compared to the value of the shares.

    Value managers normally do well in falling markets because low price/earnings ratio, ie 'cheap', shares tend to hold their value better than other shares.

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  • Yield

    The term yield describes the annual income that is earned on an investment.

    In the case of stocks and shares, this is normally the annual value of the dividends expressed as a percentage of the market price of the shares.

    For bonds, the yield is the annual interest rate divided by the price paid for the bond; this may be more or less than the nominal value.

    In the case of inflation-linked gilts, the value of the gilt will increase in line with inflation which leads to an increased yield.

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