A
Day
6 April 2006 – the day the government pension
simplification rules came into effect.
AVCs – Additional Voluntary Contributions
A pension top-up for an occupational
pension. You pay contributions into a scheme
run by your employer to boost your main pension.
FSAVCs – Free-Standing Additional Voluntary
Contributions
A pension top-up policy for an occupational
pension, but separate from your employer’s
pension scheme and normally run by an insurance firm.
Group Personal Pension
A type of personal pension offered by some employers
but not classified as occupational (see money
purchase pension).
Lifetime annuity
A lifetime
annuity converts money from your pension
fund into pension income, which is taxed. There are
different types to suit your circumstances.
Money purchase pension
Some occupational
pensions and all personal, group personal,
stakeholder, FSAVCs and some AVCs are money purchase
pensions. Your contributions are invested in, for example,
the stockmarket. The size of your fund depends on your
contributions and how well your investments do. At retirement,
you have a choice of options to provide you with a retirement
income.
Occupational
pension
Only available through employers and run by pension
scheme trustees. There are two types – salary-related
(defined benefit) and money
purchase (defined contribution).
Personal
pension
A pension policy you take out yourself from an insurance
company or another financial institution and into which
you pay contributions. It may also be offered by employers.
See money purchase pension.
Protected rights pension
The part of your pension fund which was used to contract
out of the State Second Pension (SERPS or S2P) that
must be used to buy a protected rights annuity.
Salary-related pension scheme (final salary
or defined benefit)
A type of occupational
pension. The amount of pension you get
is worked out on your salary at or near retirement,
or when you left employment, and your pensionable service.
Stakeholder pension
A type of personal pension that has to meet certain
standards set by the government. You can take one out
yourself or it may be available through your employer,
but is not classified as occupational. See money
purchase pension.
State Pension
The Pension Service (part of the Department for Work
and Pensions) will pay your basic State Pension based
on your National Insurance contribution record. You
may also qualify for the additional State Second Pension
based on your earnings and National Insurance contributions
– see below.
State Second Pension
The State Second Pension is an additional State pension
paid on top of your basic State Pension. This was called
SERPS. Self-employed people cannot build up a State
Second Pension.
Tax-free lump
sum
An amount of cash set by tax law which you can take
at retirement free of tax. Salary-related occupational
pension schemes may have different rules
on the amount of tax free cash you can take.
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