MyCompanyPension.co.uk - Helping members of occupational pension schemes to better understand their benefits.

19th October 2017
:: Scheme Member | Glossary | Glossary D-F

Glossary D - F
 
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  D

Defined benefit scheme
A pension arrangement that provides specific benefits on the retirement of its members from an occupational pension scheme that are based upon salary and service – 'Final Salary’, 'Salary Related’ pension schemes and 'career average schemes (CARE)' are all types of defined benefit schemes.
 
 
Defined benefit scheme with a money purchase underpin
 
It provides two alternative pension options from the same pension scheme. It provides the better of: a ‘defined benefit’ element of the pension scheme and a ‘money purchase’ element of the pension scheme.
 
 
Defined contribution scheme
A pension arrangement where the pension benefits at retirement are determined by agreed levels of contributions paid into the fund by the member and employer. They provide benefits based upon the money held in individual ‘pots’ specifically on behalf of each member. The amount in your ‘pot’ at retirement will depend upon the investment returns achieved on the member and employer contributions. They are often called Money Purchase Schemes.
 
 
Dependant
A person who was married to or in a civil partnership with the member at the date of the member’s death; A child of the member is a dependant of the member if the child (a) has not reached the age of 23, or (b) has reached the age of 23, and in the opinion of the scheme administrator, was at the date of the member’s death dependent on the member because of physical or mental impairment; A person can also be a dependant of the member if, in the opinion of the scheme administrator the person was financially dependant on the member, the person’s financial relationship with the member was one of mutual dependence, or the person was dependant on the member because of physical or mental impairment.
 
  E 
Early payment
When the pension benefit is provided before normal pension age or Normal Retirement Date.
 
 
Early retirement
Where a member decides to draw his pension benefit before normal pension age or Normal Retirement Date (if the rules of his scheme allow it).
 
 
Employer sponsored pension scheme
A pension scheme provided by employers for employees, often called company or works pension schemes.
 
 
Enhanced protection
A method of protecting an individual’s pension fund against a future lifetime allowance charge. The value of the fund at 6th April 2006 must be registered with HMRC. It is available to anyone who leaves pensionable service and stops contributing to a registered pension scheme. It doesn’t matter whether the lifetime allowance has been reached or not. The fund may then grow without being subject to the lifetime allowance check providing no further contributions are made.
 
 
Equalised/equalisation
The levelling of benefits so that males and females are treated equally in respect of any aspect of their retirement provision.
 
 
Escalate / escalation
Increases granted to pensions once in payment, often by reference to a specific index.
 
 
Executive Pension Plans (EPP)
A defined contribution scheme set up to provide benefits for specific employees only or a small number of employees.
 
  F

Final pensionable salary/earnings/pay
Those member earnings used by a defined benefit scheme to calculate the benefits payable at pension age. The earnings may be based on the member’s final year or final few consecutive years’ salary.
 
 
Final salary scheme
A defined benefit scheme that provides specific benefits on the retirement of a member based upon final pensionable salary, and pensionable service. Also called a salary related scheme.
 
 
Financial Assistance Scheme (FAS)
A government scheme which provides modest protection to some members of schemes which began winding up between 1st January 1997 and 5th April 2005. 
 
 
Frozen benefits
Very rare now, but actually refers to a member’s benefits where the member left service before 1st January 1986. Frozen benefits are not revalued (increased) in the same way as benefits earned by leavers after that date. The term is frequently used in error to describe preserved benefits.
 
 
Free Standing Additional Voluntary Contributions (FSAVC)
Are extra member contributions paid into a separate pension arrangement established in the member’s own name.
 
 
 
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