Pension Glossary - Understand the Terms Used For UK Pensions - 'A' Terms
Understand the terms used for UK pensions in this free jargon busting pension glossary
ABI 1994 Method
This is a test to work out whether the benefits paid by a money purchase scheme are more than the Inland Revenue limits. It does not apply to a small self-administered scheme.
In a defined benefit scheme this is the rate at which pension benefits build up for the member. They will get a certain amount for each year of pensionable service.
These are the pension benefits that have built up for a pension scheme member.
The total value of assets accumulated in a pension fund.
Accumulated Benefit Obligation (ABO)
The actuarial present value of benefits, vested and non-vested, attributed to the pension formula to employee service rendered to a particular date, based on current salaries.
These are all the contributions a member has paid, plus anything extra the money has earned. In a money purchase scheme, these can include the employer's contributions.
This term is sometimes used to mean accrued benefits.
Active Investment Management
This is a system of investment that could be used for a pension fund. It involves buying and selling particular investments to try and get better growth.
This is a member of an occupational pension scheme who is building up pension benefits from their present job.
These are the figures and estimates that an actuary uses when they make an actuarial valuation. This can include how long people are expected to live, price rises, how much people are expected to earn, and the income from the pension scheme investments.
This is where the actuarial value of a scheme's assets is less than the actuarial liability. The actuarial deficiency is the difference between the two.
This is the extra pension benefit a member gets when retiring after the normal retirement age.
This is the money a pension scheme will have to pay out for pensions after the date of the actuarial valuation.
This is a drop in a member's pension because they have taken their pension early.
This is a report on an actuarial valuation. This name is also used for when an actuary says how changes to a scheme might affect it financially.
This is where the actuarial value of a scheme's assets is more than the actuarial liability. The actuarial surplus is the difference between the two.
This is an assessment done by an actuary, usually every three years. The actuary will work out how much money needs to be put into a scheme to make sure pensions can be paid in the future.
This is the value an actuary puts on something.
An actuary is an expert on pension scheme assets and liabilities, life expectancy and probabilities (the likelihood of things happening) for insurance purposes. An actuary works out whether enough money is being paid into a pension scheme to pay the pensions when they are due.
This is when a member of a defined benefit pension scheme becomes entitled to extra pension benefits because:
- a transfer payment has been made by another scheme;
- an additional voluntary contribution has been paid; or
- the member's pension benefits have been improved by the employer or the pension scheme (or both).
This is another name for additional pension.
This is what the Government sometimes calls the pension paid by SERPS (or its replacement, the State Second Pension)
Additional Voluntary Contribution (AVC)
This is an extra amount (contribution) a member can pay to their own pension scheme to increase the future pension benefits.
This is the person who is responsible for managing a pension scheme from day to day.
This allows a pension scheme member to give up some pension benefits in return for a pension for the member's husband, wife or dependants.
Annual Pension Estimate
This is similar to a benefits statement. This is a statement of the pension benefits a member has earned. An annual pension estimate will be based on certain expectations or predictions, so the benefits the member actually gets will probably be different.
This is a report that the trustees of an occupational pension scheme send to members and employer's each year to keep them informed on the scheme.
This is a person who receives, or is entitled to, an annuity.
This is a fixed amount of money paid each year until a particular event (such as a death). It might be split into more than one payment, for example monthly payments. Many schemes use an annuity to pay pensions. When someone retires, their pension scheme can make a single payment, usually to an insurance company. This company will then pay an annuity to the member. The money paid to the member is what people usually call their pension.
This compares the size of an annuity (how much it pays each year) with how much it cost to buy. It also takes into account the age of the annuitant.
This is a pension scheme which meets conditions set by the Contributions Agency. This means that a member of the scheme can contract out of the State Second Pension.
This is when the Pension Schemes Office (PSO) says that a scheme is suitable for tax relief. This means members can count some or all of their contributions against their tax bill. If a scheme meets certain conditions, it will get mandatory (automatic) approval. If the scheme does not meet the conditions, the PSO may give it discretionary approval.
Approved Occupations List
The Pension Schemes Office (PSO) does not normally allow a scheme to pay a pension before a member is 50 (or 60 with a retirement annuity). With some jobs, the PSO may allow a lower pension age. One example might be professional footballers, whose earnings are mostly early in their life. These jobs are called recognised occupations. The PSO has an approved occupations list to show which jobs are recognised occupations.
This is either a personal pension scheme or a free-standing additional voluntary contribution (FSAVC) scheme that has got approval from the Pension Schemes Office (PSO). The term approved scheme is not used for occupational pension schemes, even though they can get approval from the PSO.
These are everything that the trustees hold for the pension scheme. They can include investments, bank balances, and debtors.
This is a qualified person who checks accounts. If an auditor believes the law has been broken in an occupational pension scheme, they must tell the Occupational Pensions Regulatory Authority (OPRA). This is called whistleblowing.
This is when extra pension benefits can be bought for a pension scheme member. They are usually paid for by the employer or the pension scheme.
Average Earnings Scheme
This is another name for a career average scheme. This is a scheme where the pension benefits earned for a year depend on how much the member's pensionable earnings were for that year.
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