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Nilgosc


Glossary

General Glossary

 Term  

Definition

Accrual rate

This is the rate at which pension benefits build up for the member e.g. 1/49th times pensionable pay for each year of membership.

Active Member

Current member of the pension scheme who is building up retirement benefits from their present job.

Active Management

A style of investment management whereby the manager seeks to add value to the fund by actively buying and selling shares.

Actuary

Expert on pension scheme assets, liabilities, life expectancy and probabilities.  An actuary works out whether enough money is being paid into a pension scheme to pay the pensions when they are due.


Actuarial Valuation


An assessment performed by an actuary, usually every three years, to determine how much money needs to be put into a pension scheme to ensure that there are sufficient funds available to meet future pension payments.

Additional Pension Contributions (APCs)

You can pay additional pension contributions to:

  • boost your pension on retirement
  • cover pension ‘lost’ due to authorised unpaid leave
  • cover pension ‘lost’ due to industrial action

Additional Voluntary Contributions (AVC’s)

Contributions made by an individual over and above the normal contribution level to increase the level of benefits available on retirement.  These contributions are paid to an insurance company.

Asset Allocation

The decision as to which mix of assets to buy – shares, bonds, property or cash

Assumed Pensionable Pay

Assumed pensionable pay is the estimated pay that is used if you are no longer receiving full pay due to sickness, relevant child-related leave or reserve forces service leave. It is calculated using the average pensionable pay that you received during the three months or twelve weeks before your pay was reduced or you started a period of relevant child related leave or reserve forces leave. This ensures that you continue to build up pension based on your unreduced pay. It will also be used to calculate the benefits payable if you die in service or retire due to ill-health.

Automatic Enrolment

The process whereby employers must automatically enrol workers that meet specified eligibility conditions into a qualifying pension scheme.  Workers have the option to opt out.

Balanced Management

A traditional approach to investment whereby a manager buys a combination of shares and bonds to provide both income and capital appreciation while avoiding excessive risk.

Benchmark

A standard against which investment performance is measured. A common benchmark is the FTSE All-Share Index which includes a large percentage of all quoted shares.

Benefit Statement

A statement showing an individual the pension benefits they have earned in the Scheme so far.

Career Average Revalued
Earnings (CARE)

A defined benefit scheme in which pension benefits are based on a career average pay and length of membership in the Scheme and re-valued to retirement.

Civil Partnership

A civil partnership is a relationship between two people of the same sex (“civil partners”) which is formed when they register as civil partners of each other.

Cohabiting Partner

(Regulations are currently under review following the recent judgement that indicates that members will no longer need to nominate an eligible cohabiting partner in order for the surviving cohabiting partner to receive a survivor’s benefit.  This section will be amended once these regulations are made.) 

Couples who live together but do not marry or enter a civil partnership.  If the member wishes for their partner to receive any benefits in the event of their death they must both complete a Nomination of Cohabiting Partner Form (LGS 21).

However, to be able to make a nomination, all of the following conditions must have applied to both you and your nominated cohabiting partner for a continious period of at least 2 years on the date you both sign the nomination form:

  • Both you and your nominated cohabiting partner are, and have been, free to marry each other or enter into a civil partnership with each other, AND 
  • Both you and your nominated cohabiting partner have been living together as if you were husband and wife, or civil partners, AND
  • Neither you nor your nominated cohabiting partner have been living with someone else as if you/they were husband and wife or civil partners, AND
  • Either your nominated cohabiting partner is financially dependent on you or you are financially interdependent on each other.

Consumer Price Index

An index published by the Government each month reporting the change in the price of a ‘basket of goods, commodities and services’ and a measure of inflation within the UK.  This can be used for revaluing pensions in deferment and increases to retirement income.

Contributions

The money paid by an individual or his/her employer into a pension fund.

Corporate Bonds

Loan stock issued by companies which offer a fixed rate of interest paid over the duration of the loan, together with repayment on maturity at a predetermined rate.

Coupon

The nominal interest a bond will pay at each payment date.

Death Benefit

This may be paid to a member’s dependants if the member dies. It may be a pension or a one−off payment.

Deferred Benefits

Benefits which are calculated at the time an individual leaves the scheme and are payable at a later date.

Deferred Member

An individual who has left the scheme but will get pension benefits when they reach their normal pension age.

Defined Benefit Scheme

A pension scheme which states in advance the level of benefits that will be paid on retirement, usually based on the service and earnings.

Dependant

This is someone who is dependent on a member of the pension Scheme (or on a pensioner of the Scheme).

Eligible Child

Eligible children are your children. They must, at the date of your death:

  • Be your natural child (who must be born within 12 months of your death), or 
  • Be your adopted child, or
  • Be your step-child or a child accepted by you as a member of your family (this doesn’t include a child you sponsor for charity) and be dependent on you.

Eligible children must meet the following conditions: 

  • Be under age 18, or
  • Be aged between 18 and 22
    (inclusive) and in full-time education or vocational training, or
  • Be unable to engage in gainful employment because of physical or mental impairment and either has not reached the age of 23 or the impairment is, in the opinion of NILGOSC’s Independent Registered Medical Practitioner, likely to be permanent and the child was dependent on you at the date of your death because of mental or physical impairment.

Expression of wish

An expression of wish enables a member to tell NILGOSC who they would like to receive a death grant if they die.  NILGOSC does not have to follow the member’s wishes but will take them into account.

Final Pensionable Pay

The pensionable earnings on which the benefits before 1 April 2015 are calculated.  This may be based on how much an individual is earning when they retire or the best pensionable earnings in the last three years.  

Final Salary Scheme

A type of defined benefit scheme where the pension benefits paid on retirement are based on how much an individual is earning when they retire.

Fund Manager

A professional manager of investments often employed by a pension scheme to manage assets on their behalf.

Gilts

Bonds issued by the Government.

Ill−health early retirement

When a member retires early because of ill−health.  They may get enhanced pension benefits if they meet the qualifying criteria for ill-heath retirement.

Index

In the stock market, an index is a device that measures changes in the prices of a basket of shares, and represents the changes using a single figure. The purpose is to give investors an easy way to see the general direction of Shares in the index.

Index Linked Gilts

A type of bond where the interest payment is guaranteed to rise in line with the Retail Prices Index.

Index Tracking Fund

Investments are made to match closely the performance of a market index such as the FTSE All-Share Index. It does not aim to outperform the market like active management does.

Inflation

The general rate of increase in prices and wages over a period of time. 

Normal Pension Age

Normal Pension Age is linked to your State Pension Age for benefits built up from April 2015 (but with a minimum of age 65) and is the age at which you can take the pension you have built up in full. If you choose to take your pension before your Normal Pension Age, it will normally be reduced, as it is being paid earlier. If you take it later than your Normal Pension Age, it is increased because it is being paid later.

You can use the Government’s State Pension Age calculator to find out your State Pension Age. Please note that this calculator does not include proposed changes to State Pension Age. Remember that your State Pension Age may change in the future and this would also change your Normal Pension Age in the Scheme for benefits built up from April 2015. Once you start drawing your pension, any subsequent change to your State Pension Age will not affect your Normal Pension Age in the Scheme.

If you were paying into the Scheme before 1 April 2015 your final salary benefits keep their protected Normal Pension Age - which for most people is age 65. However, all pension benefits drawn on normal retirement must be taken at the same date i.e. you cannot separately draw your final salary benefits (built up before April 2015) at age 65 and your benefits in your pension account
(built up from April 2015) at your Normal Pension Age.

Occupational Pension Scheme

A pension scheme established by an employer to provide pension benefits to its employees on their retirement.

Opting Out

This is when an employee chooses to leave membership of a pension scheme.

Passive Management

A style of investment management where no active management is required, instead investments are made in line with an index.

Pension

A regular income paid to an individual on their retirement.

Pensions Increase

In April each year NILGOSC increases pensions to reflect rises in the cost of living.

Pensionable pay

These are the earnings used to work out a member’s benefits and contributions. They might not include overtime.

Pensionable Service

The period of employment which is taken into account when calculating pension benefits.

Qualifying Period

The qualifying period in the Scheme is two years.  You will meet the two year qualifying period if:

  • you have been a member of the Scheme for two years, or
  • you have brought a transfer of pension rights into the Scheme from a different occupational pension scheme or from a European pensions institution and the length of service you had in that scheme or institution was two or more years or, when added to the period of time you have been a member of the Scheme is two or more years, or
  • you have brought a transfer of pension rights into the Scheme from a pension scheme or arrangement in which you were not allowed to receive a refund of contributions, or you have previously transferred pension rights out of the Scheme to a pension scheme abroad (i.e. to a qualifying recognised overseas pension scheme), or
  • you already hold a deferred benefit or are receiving a pension from the Scheme (other than a survivor's pension or pension credit member's pension), or
  • you have paid National Insurance contributions whilst a member of the Scheme and cease to contribute to the Scheme in the tax year of reaching pension age, or you cease to contribute to the Scheme at age 75, or
  • you die in service.

Retail Prices Index

An index published by the Government each month reporting the change in the price of a ‘basket of goods, commodities and services’ and is the accepted measure of inflation within the UK.  This is a slightly different ‘basket of goods, commodities and services’ from those used to calculate CPI. This can be used for revaluing pensions in deferment and increases to retirement income.

Securities

A general name for shares, stocks and bonds issued to investors.

Shares

Sold by companies looking to raise money. Shares give the holders an interest in the company and a right to share in the profits.

State pensionable age

This is the age people normally start getting the basic state pension.  From April 2010, the age at which women become entitled to State Pension will gradually increase, to 65 by December 2018, bringing it into line with State Pension age for men.  State pension age is then to increase to age 67 by 2036 and to age 68 by 2048.  

State pension age is under review by the Government.

Stock Selection

The process of selecting which individual shares and bonds to buy and sell.

Superannuation

A term used to describe contributions made to a pension scheme, particularly in the public sector.

Transfer Value

The value of an individual's pension rights, which can be transferred to another pension scheme to provide alternative benefits if they have left the Local Government Pension Scheme (NI).

Rule of 85

The Rule of 85 refers to a provision of the Scheme which allowed members who retired early to take their pension entitlements without penalty if the sum of their age and length of membership equalled 85 years or more.  This rule was abolished on 1st October 2006 however members who joined before this have some protections:

  • All existing members at 30 September 2006 are protected until 31 March 2008 i.e. the benefits you accrue up to 31 March 2008 will be protected under the 85 year rule.
  • Those existing members at 30 September 2006 who will be 60 or over and meet the 85 year rule by 31 March 2016 are fully protected i.e. the benefits you accrue up to 31 March 2016 will be protected under the 85 year rule.
  • Those existing members at 30 September 2006 who will be 60 or over and meet the 85 year rule between 1 April 2016 and 31 March 2020 will have full 85 year rule protection to 31 March 2008 and have some 85 year rule protection, on a sliding scale, to 31 March 2020.

Underpin

These are protections that apply to members who are close to retirement to ensure that they receive a pension at least equal to that which they would have received had the Scheme not changed on 1 April 2015.

Those members who are protected by the underpin have to meet the criteria below:

  • Were active members on 31 March 2012, and
  • Were within 10 years of their Normal Pension Age on 1 April 2012,
  • Were active members immediately before the underpin date and receive payment of benefits on or after the underpin date,
  • Have not had a disqualifying break in service of more than 5 years, and
  • Have not drawn any benefits before the underpin date.

The underpin date is the date you reached age 65, or the date you died in service or the date you left the Scheme with an immediate entitlement to pension (including flexible and voluntary early retirement).

50/50 Section

The 50/50 section allows members to pay half the contributions and build up half the pension. 

 

Automatic Enrolment Glossary

 Term

 Definition

Automatic Enrolment

The process whereby employers must automatically enrol eligible workers into a qualifying pension scheme.  Workers have the option to opt out.

Opting Out

This is when an employee leaves the pension scheme.    Under automatic enrolment you must be signed up to the Scheme before you can opt out.  If you opt out within two years of joining you are entitled to a refund of contributions; an opt-out after two years of joining entitles you to deferred pension benefits payable from your normal pension age. 

Qualifying Pension Scheme

A pension scheme that meets the statutory minimum criteria.

Staging Date

This is the first date from which an employer must comply with its automatic enrolment duties.  Depending on the size of the employer the dates will range from October 2012 through to 2017. 

Entitled Worker

Non-Eligible Jobholder

Eligible Jobholder