Active Members: These are current employees who are contributing (or have contributions made on their behalf) to an organisation’s occupational pension scheme. They are distinct from deferred members and pensioners.
A-Day: The 6th April 2006 was when pensions were reformed following the Pensions and Finance Act 2004. The changes were intended to make pensions simpler to understand and easier to invest in, to encourage everyone to take control of their own pension provisions. For SPPA Schemes A-Day was 1st April 2006.
Additional Pension: An extra amount of annual pension that you (or your employer) have purchased by paying extra contributions.
Additional Voluntary Contributions (AVC): Extra contributions that you decide to pay to increase your benefits.
Annual Allowance Charge: A tax charge that is made on an individual when contributions in excess of the Annual Allowance Limits are made by, or for, that individual in a tax year. The tax charge is initially 40% of the excess contributions.
Annual Allowance Limit: The amount up to which a member’s contributions can benefit from tax relief each tax year without incurring an annual allowance charge.
Benefit Crystallisation Event (BCE): An event (typically retirement) which triggers entitlement to immediate payment of:
- A lump sum benefit and scheme pension
- A relevant lump sum death benefit in respect of an individual; or
- A transfer value to an overseas pension scheme in respect of an individual.
If an member reaches age 75 with a prospective entitlement to a defined benefits pension/lump sum this is also a BCE.
Following each event a check must be made against members Personal Lifetime Allowance (PLA) to see if a Lifetime Allowance (LTA) charge is to be deducted.
Career Average Revalued Earnings (CARE): For practitioners only. A method of calculating your pension by reference to your earnings over your entire practitioner service.
CETV (Cash Equivalent Transfer Value): The value of accrued pension rights when any worker ceases to be an active member of a scheme before pension is payable. Everyone can request a CETV except in the year before retirement but schemes can refuse to accept them.
Chargeable Amount: This is the amount which a members crystallized amount exceeds the Lifetime Allowance plus any tax due paid by the scheme, without the individuals benefits being correspondingly reduced, the amount of that tax.
Commutation: Giving up some or all of a pension in exchange for a cash lump sum.
Consumer Prices Index (CPI): It is an internationally comparable measure of inflation based on structures in international legislation and guidelines and launched in 1996. Like the Retail Prices Index (RPI) it tracks the changing cost of a fixed basket of goods and services over time. However unlike the RPI it disregards some items, such as housing costs. It also has a different population base for the indices from the RPI and a different way in which the index is calculated.
Contributions: The amount needed to be paid into the Scheme to pay for the benefits. This is split between members and employers.
Crystallised Amount: The capitalised value of benefits crystallised. If a benefit is payable the crystallised amount is the market value of assets and cash value of other sums held. If a scheme pension is payable, the crystallised amount is calculated by applying a ‘relevant factor’ of 20 (unless a higher factor is agreed between the scheme and HMRC) to the scheme pension. The crystallised amount of a lump sum benefit is the cash amount payable.
Deferred Members: Deferred members are scheme members who have left employment, or ceased to be an active member of a scheme whilst remaining in employment, but retain an entitlement to a pension from the scheme.
Dependant: A spouse, civil partner, dependent child or nominated partner who qualifies to receive a pension after you die.
Dynamising Factor: See Revaluation Factor.