An A to Z guide to words and terms commonly used in pensions.
An employee who is currently paying into their employer's pension scheme and building up benefits in it.
An adviser on financial matters involving probabilities, often relating to mortality. They usually help during scheme valuations to assess if a scheme has enough funds to cover its responsibilities.
AVCs are designed to help you save more for retirement by paying extra contributions on top of your normal contributions.
The Fund's two AVC arrangements are BRASS and AVC Extra.
The Annual Allowance is currently £40,000 for most people. However, a lower amount may apply for high earners (see ‘Tapered Annual Allowance’), and those who have taken benefits from defined contribution arrangements using the flexibilities that were introduced in April 2015 (see ‘Money Purchase Annual Allowance’).
This amount includes any BRASS matching contributions your employer may make and is the amount that would be measured against the Money Purchase Annual Allowance.
This is the yearly statement sent to members who are paying into the Fund. It provides you with an estimate of how much your BTP benefits may be worth when you reach your Normal Retirement Age, as well as information about any BRASS contributions you have made.
A charge made by investment fund managers for management and administration services. Additional Voluntary Contribution (AVC) funds all have an associated annual management charge.
A policy that you purchase (usually using funds that you’ve built up in a pension arrangement) which provides you with an income for life (or sometimes a set period of time).
If you meet certain criteria, your employer is legally required to enrol you into a pension scheme that meets minimum quality requirements. This process is known as ‘auto-enrolment’.
Your employer must re-enrol you into their pension scheme every three years if you opted out and still meet the enrolment criteria. This process is known as ‘automatic re-enrolment’.
AVC Extra is an Additional Voluntary Contribution (AVC) arrangement for members paying into one of the final salary sections of the Fund. It is available to any members who wish to pay AVC contributions in excess of those which can be paid into BRASS.
An income paid by the government once you reach State Pension age, if you have paid enough National Insurance contributions.
A person (or organisation) who receives a pension, lump sum or other benefits from the Fund when you die.
BRASS is an Additional Voluntary Contribution (AVC) arrangement for members who joined the Fund before 1 April 2007.
Contributions to BRASS start from as little as £2 a week, or £10 per month and, like your contributions to the Fund, they are taken from your pay before tax. The most that you can contribute to BRASS each tax year is 15% of your annual earnings (gross pay) or 20% of your pensionable pay (whichever is more), less the amount you already contribute in normal contributions to the Fund.
This is the estimated value of your BRASS account at your chosen retirement age. It is not a guaranteed amount.
When contributions are paid into your BRASS account by your employer, matching your own BRASS contributions (subject to eligibility).
BRASS 1 is an Additional Voluntary Contribution (AVC) arrangement that closed to new entrants in 1987 before BRASS was launched in 1988. You can not increase your contributions, but you can reduce or stop these by contacting your employer.
Career Average Revalued Earnings (CARE) is a defined benefit pension arrangement (where the amount you’ll receive in your pension is determined by a set formula, not investment market returns). Benefits are based on your 'average' rather than 'final' salary at retirement.
A person who has entered into a civil partnership with his or her same-sex partner.
A pension scheme which no longer allows new members to join, but continues as normal for its existing members and pensioners.
When a defined benefit pension scheme opted out of the State Earnings Related Pension Scheme (SERPS) in exchange for a reduction in National Insurance contributions for employers and employees. Contracting-out ceased from 6 April 2016.
This is the current transfer value of your BRASS 1 funds and is provided by Aviva. This fund value is not used in the Planner projections. The value of your BRASS 1 funds at retirement is shown on your annual statement which is sent to you by Aviva.
The amount that you have already accumulated in BRASS, plus a projection of how much it could be worth in the future.
The pension benefits paid out when you die.
This is the fund that members of defined contribution pension schemes (which includes the Industry-Wide Defined Contribution Section and BRASS and AVC Extra members) will automatically be invested in, unless they choose to invest in other funds.
A person who is no longer paying into their employer's pension scheme, but has benefits in it that they have not yet claimed.
A pension scheme that pays members a pension for life when they retire. The amount of pension they receive is based on a percentage of their salary multiplied by the number of years of service that count towards their pension.
(Also known as a money purchase pension)
A pension scheme where members and employers pay contributions that are invested into funds.
The IWDC Section and Additional Voluntary Contribution arrangements such as BRASS and AVC Extra are defined contribution.
The Department for Work and Pensions (DWP) is the government department responsible for administering State Pensions.
A person who has been wholly or partially financially dependent upon a member or pensioner at, or near to, the time of their death or retirement.
This means taking some of your pension pot and leaving the rest invested, or taking a series of lump sums over the years. Drawdown is available to members of defined contribution pension schemes only, so Fund members would need to transfer to an alternative arrangement to use this option.
A member who leaves a pension scheme before reaching their Normal Retirement Age.
Taking the benefits from your pension scheme before your Normal Retirement Age.
The amount you are paid before tax. This is not always the same as pensionable earnings.
A worker who is 'eligible' for automatic-enrolment under the Pensions Act 2008.
The financial strength of an employer with a defined benefit occupational pension scheme. This is assessed via their willingness, ability and legal obligation to support the scheme.
When you take your pension pot as cash. This is available to members of defined contribution pension schemes (including the IWDC Section or Additional Voluntary Contribution arrangements).
A worker who is entitled to join a pension scheme but not entitled to employer contributions.
Another name for shares, stocks or units of ownership in a company.
The amount of taxable pay that you think you may get over the next 12 months.
If you have more than one Restructuring Premium, you will have more than one Final Average Restructuring Premium.
A type of defined benefits pension scheme where benefits are based on a member's service and salary close to retirement.
Financial Conduct Authority (FCA)
The FCA is the organisation responsible for regulating advice on pensions, and registering firms and individuals.
A professional who runs an investment fund and decides which shares, bonds or gilts the fund should invest in.
The amount of extra BRASS funds that you could build up in the future with different contributions, plus a projection of how much it could be worth in the future.
A bond issued through the United Kingdom Treasury and guaranteed by the British government, widely used by pension funds.
The risk that falls on the Trustees of a pension scheme to look after it and run it properly.
The minimum amount of pension ‘promised’ to members of pension schemes that contracted out of the State Earning Related Pension Scheme (SERPS).
Reducing risk by making an investment that offsets existing or expected risks.
UK Government department responsible for collection of taxes, payment of some State benefits and prevention of organised financial crime.
When a pension scheme member retires for medical reasons before the Fund's Normal Retirement Age.
Independent Financial Advisers (IFAs) are professionals who offer independent advice on financial matters. You can find IFAs in your local area at www.unbiased.co.uk.
A scheme set up for all members of a particular industry.
A sustained increase in the price level of an economy which results in an increase to the cost of living.
If you’re near your Normal Retirement Age, you may be able to postpone taking your benefits up to the maximum age of 75. Your benefits will then be ‘preserved’. Late retirement factors will calculate how much extra you will get when you eventually decide to take your benefits.
Liability Driven Investments (LDIs) is an investment approach used to reduce the volatility of funding level within an actuarial valuation. The approach can help to aim to make sure pension promises are paid in full.
An investment fund designed to reduce risk in your investments as you move towards your chosen Target Retirement Age.
The limit on the amount of pension savings that you can make during your lifetime from all your pension arrangements added together (but not the State Pension) before you pay extra tax. The amount is reviewed from time to time by the government. The Lifetime Allowance is currently £1,073,100 unless you have a certificate from HM Revenue & Customs which allows you to have a higher allowance.
The name given to the tax you must pay on the value of any benefits you have above the Lifetime Allowance. If any excess is taken as cash it will be taxed at 55%. If it’s taken as pension income it will be taxed at 25%, and the net pension payments you receive will also be subject to Income Tax.
The amount you can take as a one-off tax-free payment when you retire. You can take up to 25% of your pension savings as a lump sum when you retire.
Many powers and duties of the Trustee are delegated to the Fund’s Management Committee. The Management Committee meets quarterly and is made up of six employer-nominated representatives and six employee-nominated representatives.
A fund, comprising of a mixture of equity, property, fixed-interest investments, along with cash, which are managed. Units are issued to investors.
A person who, having joined a pension scheme, has built up benefits under that scheme.
A trustee chosen by the members of an occupational pension scheme.
The MPAA reduced from £10,000 to £4,000 from April 2017.
(Also known as a defined contribution pension)
A pension scheme where members and employers pay contributions that are invested into funds and the amount members receive when they retire depends on the market performance of the funds they’re invested in, rather than being a set amount. The IWDC Section and Additional Voluntary Contribution arrangements such as BRASS and AVC Extra are classed as money purchase.
A pension scheme in which more than one employer participates.
Money taken from your pay by the government, used alongside other tax proceeds to fund the State Pension and other State benefits.
You can nominate online when you sign into your myFund account.
A worker who is not eligible to be automatically enrolled but who can 'opt in' to a pension scheme if they choose.
The age from which you can retire without any reductions to your pension.
Employees who are not automatically enrolled into a pension scheme can ask their employer to enrol them in it. This process is known as ‘opting in’.
The form an employee must complete in order to opt out of an automatic-enrolment scheme.
The one-month period after a worker has been auto-enrolled when they are able to leave a scheme and have their contributions returned.
A pension is a long-term savings plan for retirement.
You and your employer put money into your pension each month, and in return you get a regular income when you've retired.
You don't have to pay tax on pension contributions, which is one of the reasons saving into a pension can be more effective than other types of retirement savings.
The Pension Protection Fund (PPF) pays compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover PPF levels of compensation.
Effectively the legal guardians of a pension scheme. The Trustee’s role is covered by the Trust and Rules and controlled by law.
For the 2016/17 tax year, this is earnings between £5,824 and £43,000 and for the 2017/18 tax year, it is earnings between £5,876 and £45,000.
A pension scheme that meets the minimum standards required to allow it to be used for auto-enrolment.
A pension scheme that is registered with HMRC and satisfies its requirements.
The premium(s) apply if your employer has 'restructured' your earnings to make extra elements of your salary pensionable. It is either:
You may have more than one premium with different dates.
The period of time after you stop working in full-time paid employment and take your pension benefits. May it be long and happy!
This is the age you have selected your benefits to be payable from when using the online Planner. The Planner will assume that you will continue to make contributions until this age.
An arrangement where employees ‘give up’ some of their salary and instead it is used as an additional company contribution into their pension.
The person or company that runs a pension scheme and carries out certain legal requirements; for example, paying certain tax charges to HMRC. Railpen is the administrator for the Fund.
The tax-free payment that you could receive when you take your Fund benefits.
You can learn more about the State Pension at the Gov.uk website.
You can contact Railpen if your taxable income is more than £240,000 and you think you may be affected.
Your Target Retirement Age (TRA) is the age when you plan to take your benefits. You will be asked to set a TRA if you’re a member of a defined contribution pension arrangement such as BRASS and are invested in the Lifestyle strategy, which changes your investments to lower-risk funds as you get closer to retirement.
It’s important to let Railpen know if you change your TRA.
The tax year begins on 6 April and ends on the following 5 April. Also known as the Fiscal Year.
The payment you can choose to receive tax tax-free from your pension savings when you retire. The maximum you can take as a tax-free lump sum is 25% of the value of your pension savings.
An institution set up to investigate complaints regarding UK pensions.
The Pensions Regulator (TPR) is the UK regulator of work-based pension schemes. It works with trustees, employers, pension specialists and business advisers, giving guidance on what is expected of them.
You might be able to exchange your pension and lump sum for a one-off cash payment if your benefits across all of your pension arrangements do not exceed a value of £30,000. This is known as ‘trivial commutation’.
The person(s) or authorised body given the job of looking after money entering a Trust on behalf of named or potential beneficiaries.
A Transfer of Undertakings (Protection of Employment) or ‘TUPE’ is the legislation intended to protect employees after a business is sold and employees are transferred to a new employer.
When a pension scheme's assets (incomings) are less than its liabilities (outgoings).
The Trustee is legally required to carry out a formal valuation, also known as an actuarial valuation, every three years and to provide a report to The Pensions Regulator of its funding position.
The requirement (under the Pensions Act 2004) on trustees, administrators, professional advisers and employers to inform the Pensions Regulator of breaches of law relevant to the running and administration of a scheme.