Glossary
Terms used throughout the site which appear in bold type are explained here
- Actuarial Valuation:
An investigation by an actuary into the ability of a pension scheme to meet its liabilities. This is usually to assess the funding level by comparing the actuarial value of assets and the actuarial liability. - Actuary:
An adviser on financial questions involving probabilities relating to mortality and other contingencies.
For statutory purposes in the UK, the term automatically includes Fellows of the Institute of Actuaries and of the Faculty of Actuaries. Persons with other actuarial qualifications may be approved by the Secretary of State for a specific purpose. - Additional Voluntary Contributions (AVCs):
Contributions over and above a member’s normal contributions if any, which the member elects to pay to the scheme in order to secure additional benefits. - Bonus Augmentations:
Benefit improvements from valuation surpluses arising from valuations undertaken after October 1994. Bonus Augmentations are not fully guaranteed by the Government.
- Bonus Augmentation Fund:
This contains the members’ share of surplus: Bonus Augmentations awarded since 31 October 1994 are paid from the assets of this Fund. - Commutation:
The giving up of a part or all of the pension payable from retirement for an immediate lump sum. - Contributing service:
The total of:
• Service during which contributions were paid to the Scheme
• Any back service credit granted in exchange for a transfer value payment from a previous scheme
• Any added years purchased by a contributing member
• Extra service credits awarded from valuation surpluses prior to October 1994 - Deferred Pensioner:
A person entitled to preserved benefits.
- Dependant:
A person who is financially dependant on a member or pensioner or was so at the time of death or retirement of the member or pensioner.
For HMRC purposes, a spouse qualifies automatically as a dependant and a child of the member or pensioner may be regarded as a dependant until attaining the age of 18 or ceasing to receive full time or vocational training, if later. - Earmarking:
An order of the Court when a member of an occupational pension scheme or personal pension scheme divorces, directing the trustees or managers to pay some or all of the member’s benefits to the ex-spouse at the time they become payable to the member. - Equivalent Pension Benefit (EPB):
The benefit which must be provided for an employee who was contracted out of the former graduated pension scheme. - Expression of wish:
A means by which a member can indicate a preference as to who should receive any lump sum death benefit. Known in BCSSS as a Rule 28A election and declaration. - Family Benefit contributions:
Contributions paid to secure entitlement to a widow or widower’s pension and to children’s allowances. - Graduated Pension Scheme:
The state scheme which commenced on 3 April 1961 and terminated on 5 April 1975.
- Guaranteed Fund:
This is the fund which contains the assets necessary to pay all of the Guaranteed liabilities, which are the benefits earned by members during their employment with British Coal and the annual RPI increase on these benefits, ie all benefits except Bonus Augmentations. - Guarantor’s Fund:
This contains the balance of the Guarantor’s share of surplus and its liabilities consist of the Trustee’s obligation to pay the Guarantor's share of each valuation surplus to the Government in 10 annual instalments. - Guaranteed benefits:
Scheme benefits fully covered by the Government guarantee. - Guaranteed Minimum Pension (GMP):
The Guaranteed Minimum Pension (GMP) is broadly equivalent to the entitlement to pension from the State Earnings Related Pension Scheme (SERPS) that members would have earned during their years of contributing service had they not been contracted out of the SERPS. - Guarantor:
The Secretary of State for Business, Enterprise and Regulatory Reform (formerly the Department for Trade and Industry (DTI)).
- Inland Revenue limits:
The maximum pension and lump sum benefits that can be paid relative to earnings and service. Further details are given in the Pension Taxation Factsheet leaflet on the Publications web page. - Investment Reserve:
This is the balance of British Coal’s share of surplus from valuations before 1994. This money will be available as first call to meet a deficiency in the Guaranteed Fund but, if not used for this purpose, will be payable to the Government over a period of not less than 25 years from 31 October 1994. - Level bonuses:
These are the replacement bonuses award since 2005 and the 2007 bonus awarded from the 2006 actuarial valuation. - Liabilities:
Amounts which a pension scheme has an obligation to pay now or in the future.
The amounts may not be immediately ascertainable and some liabilities may be dependant on the occurrence of future events. - Lifetime allowance (LTA):
The Lifetime Allowance is an overall ceiling on the amount of tax-privileged savings that any one individual can draw. The allowance applies to the total benefit value of all registered schemes, not just the BCSSS, at the time benefits are put into payment. In the current tax year (2008/9) the Lifetime Allowance is £1.65 million. Increases to the Allowance have been set down for the next 5 years. - Pension Sharing:
The splitting of a member’s benefits under a pension scheme between the member and the divorced spouse, either within the scheme or by means of a transfer payment. - Pensionable age:
Either the Scheme’s normal retirement age of 60 or, for members qualifying for early payment of pension as a result of redundancy, the date of redundancy, or age 50 if later. - Pensionable salary:
The amount of contributor’s earnings used to calculate his or her pension entitlement at the date of leaving service, in accordance with the provisions of the Rules of the Scheme at that date. - Reducing bonuses:
These are the bonuses awarded in 1996, 1998 and 2001. Following the 2003 valuation these bonuses reduce each year when the Guaranteed benefits increase by RPI. The reduction each year is equivalent to the increase in the Guaranteed benefits. - SIB Review:
A review, instigated by SIB, of personal pension arrangements, (including transfers to personal pensions and section 32 policies) sold between 29 April 1988 and 30 June 1994, to determine whether or not the purchasers had been given best advice in accordance with FSA86. - State Earnings Related Pension Scheme (SERPS):
The additional pension provisions of the state pension scheme.
