|Pensions Bill - continued||House of Commons|
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Period of leave from work taken by an adopter when a child is newly placed for adoption or following a child's entry into Great Britain in connection with adoption.
A contract of insurance that provides an income in retirement for most members of money-purchase occupational pension schemes and personal pension schemes.
Legislation preventing the practice in schemes whereby statutory increases in the GMP were offset against other scheme benefits, rather than increasing entitlement.
Application for reconsideration
In relation to determining whether the scheme is required to be wound up, an application must be accompanied by protected liabilities quotation in the prescribed form and an auditors valuation of the scheme as at the reconsideration date.
Appropriate Personal Pension (APP)
Contracted-out personal pension.
Relevant to the Pension Protection Fund. Date of the first insolvency trigger.
The amount of money usually held in shares or bonds or other investments, which a scheme sets aside to pay for its liabilities.
Basic (retirement) pension
The basic element of state retirement pension.
Bereavement benefits are: bereavement payment; widowed parent's allowance; or bereavement allowance.
Category A pension
Category A pensions are contributory and consist of two parts, either or both of which are payable:
Basic pension - dependent on the number of qualifying years a person has in their working life; and
Additional pension - dependent on a person's earnings since April 1978.
Two contribution conditions for the basic pension must be met - a person must have: at least one qualifying year from National Insurance contributions actually paid; and qualifying years for about 90% of the years in their working life for the full rate basic pension. To get any retirement pension at all someone must have 25% of qualifying years.
Category B pension
Category B pensions are contributory and consist of two parts, either or both of which are payable:
Basic pension - dependent on the number of qualifying years; and
Additional pension - dependent on earnings since April 1978.
It is payable by virtue of the spouse's qualifying years or earnings.
Those who can get a Category B pension are: married women; widows; and widowers.
Conversion of pension rights into a lump sum payment.
Contracted-out deduction (CoD)
The amount deducted from a person's entitlement to state retirement pension (and certain other benefits) for the period they were members of the contracted out pension scheme.
Contracted-out Mixed Benefit Schemes (COMBS)
A contracted-out scheme that has separate defined benefit and defined contribution sections.
Contracted-out Money-Purchase Pension Scheme (COMP)
A contracted-out scheme where the benefits provided are dependent on the contributions paid and the investment return. (Also called defined contribution).
Contracted-out Salary-Related Pension Scheme (COSR)
A contracted-out scheme where the rules define the level of benefits on offer. These benefits are not directly related to the investments of the scheme. (Also called defined benefit).
A scheme is contracted out when it provides benefits in place of the earnings related state system. The employer and the employee pay reduced levels of National Insurance contributions.
Contributions payable towards the scheme by or on behalf of the employer or the active members of the scheme. In relation to an eligible scheme, contributions payable in accordance with the schedule of contributions maintained in respect of the scheme.
Credit of earnings
Relevant to state pension. In some circumstances people may be credited with earnings to help them to get retirement pension if they do not have earnings in a tax year which reach the level needed to make it a qualifying year. For example, in a tax year a person may have been: incapable of work through illness or disability; unemployed and available for, and actively seeking work; in receipt of certain benefits; on a course of approved training; doing jury service; serving a prison sentence for a conviction which is subsequently quashed.
Men with no liability to pay Class 1 or Class 2 National Insurance contributions may be credited automatically for the tax year in which they reach 60 and the four following years. From 6 April 2010 this arrangement will be extended to women.
Young people can get credits for the tax year in which they reach age 16 and the two following years.
There are certain conditions attached to the receipt of credits and the availability of a credit does not mean that people do not have to pay National Insurance contributions if their earnings exceed the employee's earnings threshold.
Earnings are not credited to married women who have a reduced liability.
Not claiming or giving up a retirement pension to earn increments.
Defined benefit occupational pension
Common term for a scheme where the rules define the level of benefits on offer. These benefits are not directly related to the investments of the scheme. Also called salary-related.
Defined contribution occupational pension
A common term for a money-purchase occupational pension.
Direct payment arrangements
See "Personal Pension".
An occupational pension scheme which is accepted as eligible to be taken over by the Pension Protection Fund. This excludes money purchase schemes and schemes that are currently exempted from the application of the Minimum Funding Requirement in Section 56 of the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 (Regulation 28).
Employees earnings threshold (primary threshold)
The point from which employees start to pay National Insurance contributions.
Equalisation (of pensionable age)
Pensionable age with respect to state pensions will be equalised at 65 for both men and women from 6 April 2020. The change from current pensionable ages will be phased in over a ten-year period from 2010 to 2020. This phased change will affect women born on or after 6th April 1955. Women born on or after 6th April 1955 will have a pensionable age of 65.
Equivalent Pension Benefits (EPB)
The benefit paid by the employer where a scheme was contracted out of Graduated Retirement Benefit. A precursor of the Guaranteed Minimum Pension.
Final salary scheme
Common term for a defined benefit scheme where the benefit is calculated by reference to the final pensionable earnings of the member, usually also based on pensionable service.
Financial Services Authority
The independent regulator for financial services business, including some private pensions. Empowered under the Financial Services and Markets Act 2000.
Flat rate contributions
National Insurance contributions paid before 6 April 1975.
An individual or company appointed by the trustees of an occupational pension scheme to manage the scheme's investments.
Graduated Retirement Benefit (GRB).
Based on the amount of graduated National Insurance contributions paid when the GRB scheme existed between 3rd April 1961 and 5th April 1975. Paid as an additional amount to the retirement pension. Also known as Graduated Pension, or Grad.
Relevant to the Pension Protection Fund. A company which at the time of the action or failure is in the same group as the employer.
Group Personal Pension (GPP)
An arrangement made by an employer for employees to participate in a personal pension arrangement. Each employee has an individual contract with the pension provider.
Graduated Minimum Pension (GMP)
The minimum pension which a defined benefit occupational pension scheme had to provide as one of the conditions of contracting out for the period April 1978 to March 1997.
An increase in retirement pension or Graduated Retirement Benefit which can be earned by entirely giving up entitlement to or not claiming retirement pension, shared additional pension or Graduated Retirement Benefit for at least seven weeks.
Annual increase to pensions in payment to take account of increase in the Retail Prices Index.
Initial period (relating to PPF levies)
The first period following introduction of the PPF when the Secretary of State determines the amount of the levy.
Means a voluntary arrangement as per Part 1 or 8 of the Insolvency Act 1986.
An arrangement which has effect under section 425 of the Companies Act 1985;
A deed of arrangement registered in accordance with the Deeds of Arrangement Act 1914.
In relation to an insolvency event, is the date on which the event occurs.
This occurs in relation to an individual where:
This occurs in relation to a company where:
A person who is acting as the insolvency practitioner in relation to the employer in relation to an occupational pension scheme.
Level of earnings
The general level of earnings obtaining in Great Britain.
The maximum amount by which the PPF Board may increase the PPF levies.
Those factors relating to the calculation of the Pension Protection Levies (see scheme factors and risk factors below).
The total amount of a pension scheme's current and future obligations, including pension liabilities in respect of its members. Liabilities in respect of members cannot be known accurately in advance and so a scheme will employ an actuary to calculate estimates of liabilities.
Limited Price Indexation (LPI)
The requirement to increase occupational pensions based on rights accrued from 5th April 1997 by RPI capped at 5%.
Lower Earnings Limit (LEL)
The level of earnings at which people begin to accrue entitlement to contributory state benefits.
The security of scheme assets and members' benefits. A breach that could immediately or potentially pose a significant risk to the security of scheme assets or have a significant detrimental impact on members' benefits poses a significant risk to members' interests.
Minimum Funding Requirement
A requirement introduced by the Pensions Act 1995 by which most defined benefit occupational pension schemes are required to hold a minimum level of assets to meet their pension liabilities, as assessed on a prescribed basis.
Money-purchase occupational pension
A scheme where the benefits provided are dependent on the contributions paid and the investment return. Also called defined contribution.
National Insurance Contributions (NICs)
Contributions paid by individuals to the state in order to build up entitlement to the basic retirement pension and other contributory state benefits.
Three classes of NICs count towards qualifying years for a retirement pension.
Class 1 - Paid for by employed earners and their employers. Employees pay these if they work for an employer and earn more than the employee's earnings threshold. The employer also pays NICs for the employee if they earn more than the employee's earnings threshold. Some married women and widows can still pay their NICs at a reduced liability.
Class 2 - Paid by self-employed people. Paid at a flat-rate.
Class 3 - Voluntary NICs that may be paid to protect a National Insurance record in some circumstances. Paid at a flat-rate.
Class 3 NICs can be paid for previous years to enable someone either to qualify for a basic retirement pension at the minimum rate or to increase the rate of the basic retirement pension for which they have qualified.
Any arrears of NICs paid after pensionable age cannot normally count for payment of retirement pension from a date earlier than the day on which the NICs were paid.
Married women and widows cannot pay Class 3 NICs for any tax year in which they have a reduced liability for the whole year.
National Insurance Fund
The fund into which National Insurance contributions are paid.
Any trustee or professional adviser or person involved in the administration of the scheme. A person involved in the administration of the scheme includes anyone who carries out administrative activities related to the scheme. It is not restricted to those who carry out the principal record keeping and calculation activities for the scheme.
Normal Benefit Age
Relevant to pension-sharing on divorce, the earliest age at which a pension credit member can receive a pension derived from their pension credit rights in occupational pension schemes. Normal Benefit Age must be between 60 and 65.
Normal Pension Age
In relation to the scheme and any pension or lump sum under it, means the age specified in the admissible rules as the earliest age at which the pension or lump sum becomes payable without actuarial adjustment (disregarding any admissible rule making special provision as to early payment on the grounds of ill health).
Occupational pension scheme
A scheme established by an employer to provide retirement benefits for employees.
Occupational Pensions Regulatory Authority (Opra)
A statutory body, created by the Pensions Act 1995, responsible for ensuring that occupational pension schemes comply with the requirements of the relevant legislation. It has powers of investigation and can impose penalties ranging from prohibition from acting as a trustee, imposition of fines to criminal prosecution.
Period of leave from work for the purpose of caring for the child and/or supporting the mother or adopter. Taken by birth fathers, or the spouse/ partner of the mother or the partner or spouse of the adopter following the birth or placement for adoption of a child or a child's entry into Great Britain in connection with adoption.
The age people must be before they can receive a state retirement pension. Currently, it is 65 for men and 60 for women (but see equalisation (of pensionable age) above).
The earnings by reference to which the benefits are calculated under the admissible rules.
a) Service in any description of category of employment to which the scheme applies which qualifies the member (on the assumption that it continues for the appropriate period) for benefits under the scheme; any service attributable to transfer credits; and service which under the admissible rules of the scheme is attributable to voluntary contributions paid by the member.
Relevant to pension-sharing on divorce. A credit under section 29(1)(b) of the Welfare Reform and Pensions Act 1999 (c.30) or under corresponding Northern Ireland legislation. Not to be confused with the State Pension Credit introduced in October 2003.
Pension credit member
Relevant to pension-sharing on divorce. In relation to the scheme, this means a person who has rights under the scheme which are attributable (directly or indirectly) to a pension credit.
A person who is entitled to the current payment of pension or other benefits as a result of pensionable service completed under an occupational pension scheme and who is not an active member of the scheme.
Refers to trustees or managers of an eligible scheme which are:
Pension protection levies
The levies on pension schemes to help fund the cost of the compensation payable to members of eligible schemes.
Pensions Compensation Board
The Board administers the pensions compensation scheme for occupational pension schemes. It is able to provide compensation when an employer becomes insolvent and scheme assets have been dishonestly removed. It decides whether compensation can be paid and how much. Its functions will be taken on by the Pension Protection Fund.
An arrangement between an individual who is self-employed, in non-pensionable employment or who is not a member of an employer's scheme and a pension provider (such as an insurance company) which enables the individual to make provision for a pension on a money-purchase basis. The employer may or may not make a contribution on behalf of the employee. The employer may also pay the employee's contributions direct from his salary through direct payment arrangements.
In relation to the scheme means:
Specified advisers in section 47 of the Pensions Act 1995 (the scheme auditor, scheme actuary, legal adviser, fund manager or any person they appoint to exercise specific functions in relation to the scheme) appointed by the trustees of an occupational pension scheme.
A quotation for one or more annuities form one or more insurers, being companies willing to accept payment in respect of the members from the trustees or managers of the scheme, which would provide benefits to or in respect of the members of the scheme corresponding to the compensation which would be payable in accordance with the pension compensation provisions if the Pension Protection Fund Board assumed responsibility for the scheme.
In relation to an eligible scheme, at a particular time are:
Protected notional pension
Pension Protection Fund calculation used to work out entitlement where scheme pension rate does not apply.
Protected pension rate
Annual rate of the pension, under the admissible rules, immediately before the assessment date for Pension Protection Fund purposes.
Benefits from a scheme contracted out on a money purchase basis (whether occupational or personal) that derive mainly from the National Insurance contribution rebate and its investment return.
Relevant to state pensions.
Earnings from Class 1 employment - earnings on which full rate Class 1 National Insurance contributions have been paid or are treated as having been paid count as qualifying earnings. Earnings of married women and widows with reduced liability do not count as qualifying earnings.
Class 2 and Class 3 contributions - for both the National Insurance contribution conditions, each Class 2 or Class 3 National Insurance contribution counts as one week's earnings at the Lower Earnings Limit.
Relevant to state pensions. A qualifying year for the basic retirement pension is a tax year in which a person has received (or are treated as having received) qualifying earnings of at least 52 times the Lower Earnings Limit for that year.
Between 6 April 1975 and 5 April 1978, the qualifying earnings needed in a tax year for it to be a qualifying year were 50 times the Lower Earnings Limit for that year.
The amount of National Insurance Contributions paid back to employers and employees when they contract out. Currently £11 billion a year.
Recent discretionary increase
Relevant to the Pension Protection Fund. An increase in the rate of any pension in payment or postponed under the scheme which were made or took effect in the period of three years ending with the assessment date.
Recent rule changes
Relevant to the Pension Protection Fund. Changes which were made or took effect in the period of three years ending with the assessment date.
Relevant to state pensions. Before the present National Insurance contribution arrangements started, married women and widows who worked could choose to have reduced liability. Women having reduced liability, pay reduced Class 1 National Insurance contributions when they work for an employer but no Class 2 National Insurance contributions when they are self-employed. Reduced-rate contributions do not count for any contributory benefit.
Reference Scheme Test (RST)
The replacement for the GMP, it came into operation from April 1997. A test of scheme quality, rather than ensuring a specific level of benefit.
Relevant to the Pension Protection Fund. The time immediately before the qualifying insolvency event occurs.
Retail Prices Index (RPI)
The legal definition of the pension paid by the Government. Can include either or both basic pension and additional pension.
Annual increases to deferred pensions to take account of increases in the Retail Price Index over the period between the member leaving pensionable service and reaching pension age.
Review period (in relation to PPF levies)
In relation to the current year means the period of 12 months ending with the prescribed date in the previous financial year.
Those factors used to assess the PPF levy relating to the risk of a sponsoring employer becoming insolvent.
Also referred to as defined benefit scheme. An occupational pension scheme where the benefits are calculated by reference to the employee's salary at or near the time of retirement or on leaving service, and length of pensionable service.
The named actuary appointed by the trustees or managers of a defined-benefit or hybrid scheme under section 47(1)(b) of the Pensions Act to carry out specific duties set out in the Pensions Act.
Those factors used to assess the PPF levy relating to scheme size.
Scheme lump sum
Describes a lump sum to which a person is entitled under the admissible rules of the scheme.
Occurs when an insolvency practitioner in relation to the employer is able to confirm the pension scheme has or has not been rescued and therefore will or will not enter the PPF.
|© Parliamentary copyright 2004||Prepared: 12 February 2004|