A to Z of Pensions

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A to Z of Pensions

A - C

Accrual Rate – The rate you build up your benefits each year you are a contributing member. For example, in the 2017 and Basic Benefits Scale, you build up 1/80th of your Earnings as pension credit each year.

Active Member – A member paying contributions into the Scheme. Someone may still be an active member if reduced or no contributions are being paid, for example, during periods of sick leave or family leave.

Additional Voluntary Contributions (AVCs) – You may wish to pay AVCs to supplement your retirement savings. Further information can be found here.

Annual Allowance – The maximum amount you can save towards your retirement each year without incurring a tax charge. You can carry forward unused Annual Allowance from the previous three tax years. Further information can be found here.

Benefit Scale – The basis on which you accrue or have accrued benefits under the Scheme.

CARE – Stands for Career Average Revalued Earnings and is a type of defined benefit pension scheme. Your pension in the Scheme is based on the average of your earnings during the time you contribute to the Scheme.

Closure Date – The Scheme closed from 30 June 2019. Members will no longer pay contributions or accrue benefits after this date.

Commutation – When you retire, you may choose to commute (exchange) some of your pension for a cash lump sum.

Consumer Price Inflation (CPI) – a measurement of inflation.

Contracting-Out – The Scheme was contracted-out of the Second State Pension until 6th April 2016. If you were a contributing member before 6th April 2016 you will have paid lower National Insurance Contributions and you would not have built up any entitlement to the Second State Pension. Contracting-Out ended in April 2016 when the State Pension Scheme changed.

Contributions – From the Closure Date, no further member contributions (voluntary or otherwise) are payable towards the Scheme.

D - J

Dependant – Anyone who is financially dependent on you or was so dependent at the time of your death. The decision of the Trustee as to whether a person is your dependant is final.

Earnings – Your total cash emoluments from your Scheme employer. It does not include your holiday pay and sickness and accident benefit under the Industry Holiday and Welfare Benefit Schemes and any payment under the Government Statutory Sick Pay Scheme. If you participate in a profit related pay scheme or a salary sacrifice arrangement (where you accept a reduction in pay in return for another benefit), your earnings are the total cash emoluments which your employer certifies to the Trustee in writing.

Guaranteed Minimum Pension (GMP) – If you were a contributing member of the Scheme between 6th April 1978 and 5th April 1997 you may receive a GMP. This is a part of your Scheme pension which is broadly the same as the pension you would have built up in the State system for the period you were contracted-out.

HMRC – HMRC means HM Revenue and Customs.

HMRC Tax Limits – From the Closure Date, you will no longer build up any future benefits within the Scheme. However, if you think you might be affected by HMRC Tax Limits (the Annual Allowance and Lifetime Allowance) you should contact an independent financial advisor.

Incapacity – Physical or mental illness which stops you from continuing to work in any capacity or any trade for which you receive profit or pay. The Trustee’s decision as to whether you are suffering from incapacity is final.

K - R

Lifetime Allowance – The limit on pension entitlement you can build up in your lifetime without incurring a tax charge on your retirement or death. The limit is measured against the value of your pension benefits from all your pension arrangements, not just the Scheme.

Normal Retirement Date – Your 65th birthday or any other date that the Association, the Federation and the Union agree is your Normal Retirement Date.

Pension Protection Fund (PPF) – A government scheme set up to manage occupational defined benefit pension arrangements where the sponsor fails and there are insufficient funds to pay a certain level of benefits to members.

Pensionable Service – Service while you are contributing to the Scheme and includes any period during which you are not required to contribute to the Scheme because your benefits exceed HMRC limits.

Pensionwise – A free and impartial government guidance service for members with money purchase retirement savings for example AVCs. Further information can be found here.

Retail Price Inflation (RPI) – A measure of price inflation, which has historically been higher than Consumer Price Inflation (CPI).

S - Z

Service – Service means employment with an employer participating in the Scheme.

Scheme Year – A period of 12 months ending on 5 April.

State Basic Pension – If you reached State Pension Age before 6 April 2016 and you paid enough National Insurance Contributions, you will receive the State Basic Pension from State Pension Age.

State Pension – If you reach State Pension Age on or after 6 April 2016, you will receive the new flat rate State Pension which replaces both the State Basic Pension and the State Second Pension.

State Pension Age – This is currently age 65 for men and increasing from age 60 to age 65 for women born before 6 December 1953. Between December 2018 and November 2020 the State Pension Age for men and women will increase gradually to age 66. Under current legislation, State Pension Age will continue to rise further in the future. Irrespective of when you reach State Pension Age, your pension from the Scheme is payable from your Normal Retirement Date.

State Second Pension (S2P) – This provides a pension to individuals retiring before 6 April 2016 and is based on an employee’s earnings between the Lower Earnings Limit and Upper Accrual Point throughout his/her working life. You will not have built up any rights to the State Second Pension while you contributed to the Scheme, because the Scheme was “contracted-out” of the State Second Pension.

Trivial Commutation – If the total value of your benefits in the Scheme is below a certain level set by the Government, you may be able to take all your benefits as a single cash lump sum.

Trustee – The Trustee Directors manage the Scheme, acting in the best interests of the members and beneficiaries. The Scheme’s Trustee is a Corporate Trustee called Plumbing Pensions (UK) Limited. See here for further information.