| Terms used throughout the site which appear
in bold type are explained here. |
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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
and a recommended contribution rate based on comparing the actuarial
value of assets and the actuarial liability. |
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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.
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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. |
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Bonus Augmentations:
Benefit improvements from valuation surpluses arising from valuations
undertaken after October 1994. Bonus Augmentations are not fully guaranteed
by the Government. |
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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. |
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Commutation:
The giving up of a part or all of the pension payable from retirement
for an immediate lump sum. |
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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 the contributing member
• extra service credits
awarded from valuation surpluses
prior to October 1994. |
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Deferred Pensioner:
A person entitled to preserved benefits. |
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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 PSO purposes, a spouse qualifies automatically
as a dependant and a child of the member or pensioner may always
be regarded as a dependant until attaining the age of 18 or ceasing
to receive full time or vocational training, if later.
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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. |
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Equivalent Pension
Benefit (EPB):
The benefit which must be provided for an employee who was contracted
out of the former graduated pension scheme. |
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Family Benefit contributions:
Contributions paid to secure entitlement to a widow or widower’s
pension and to children’s allowances. |
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Graduated Pension
Scheme:
The state scheme which commenced on 3 April 1961 and terminated on
5 April 1975. |
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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. |
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Guarantor’s
Fund:
This contains the balance of the Guarantor’s share of surplus
and its liabilities consist of the Trustees’ obligation to pay
its share of surplus to the Government in 10 annual instalments. |
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Guaranteed benefits:
Scheme benefits fully covered by the Government guarantee. |
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Guaranteed Minimum
Pension:
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 State Scheme. |
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Guarantor:
The Secretary of State for Trade and Industry. |
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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 Inland Revenue
Limits leaflet on the Publications web page. |
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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. |
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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.
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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. |
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Pensionable age:
E ither 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. |
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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. |
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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. |
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State Earnings Related
Pension Scheme (SERPS):
The additional pension provisions of the state pension scheme. |
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