Glossary of terms
50/50 under the 50/50 scheme members pay half their normal pension contribution rate and receive half the normal pension build up.
Accrual Rate the rate at which a scheme member’s benefits build up for each year and part year of scheme membership.
Active Member an employee who is currently making contributions to the LGPS.
Actuarial Reduction the amount by which a scheme member’s pension and lump sum benefits are reduced if they are withdrawn before the date of normal retirement.
Additional Pension Contributions from 1 April 2014 additional pension is purchased by way of Additional Pension Contributions (APCs) paid into the Local Government Pension Scheme. APCs have replaced ARC from 1 April 2014 (see above)
Additional Voluntary Contributions (AVCs) payments made within certain HM Revenue & Customs limits to an approved provider (normally an assurance company) in order to provide additional benefits to those payable from the LGPS.
Administering Authority a body required to maintain a pension fund under the LGPS regulations.
Annual Allowance Charge the maximum annual increase to defined benefit rights before the member is subject to a tax charge.
Annual Pension (also called statutory pension, basic pension, yearly pension) – calculated by reference to final pay and scheme membership (including any transferred in service) payable for life.
Beneficiary a person to whom payments from the LGPS are due.
Career Average Revalued Earnings (CARE) from 1 April 2014 the LGPS became a Career Average Revalued Earnings Scheme. The pension built up from 1 April 2014 is based on a CARE scheme basis and the pension built up prior to 1 April 2014 is linked to Final Salary.
Child(ren)’s Pension pension payable to a member’s dependant child or children if aged under 18 or 18 and over and still in full time education or training up to the age of 23 or due to an incapacity that occurred before the age of 18.
Cohabiting Partner If you have been contributing to the LGPS at some point since 1 April 2008 and you have a cohabiting partner, of either the opposite or same sex, they will receive a partner’s pension in the event of your death subject to certain criteria (see our section on Cohabiting partners).
Deferred Benefits benefits retained in the pension fund when a member leaves without an entitlement to the immediate payment of those benefits. If a transfer of benefits does not take place before hand, deferred benefits are usually paid from the member’s normal retirement date.
Expression of Wish a current or former scheme member can choose whom they would like to receive any death grant payable from the Scheme. This is sometimes called a nomination but it should be noted that such a nomination is not legally binding and is an expression of wish only. The administering authority has ultimate discretion when releasing death grant payments.
Final Pay the pay figure used in the calculation of pension benefits (usually, but not always, pensionable earnings over the last 365 days of pensionable employment).The pension you have built up to 31 March 2014 will be linked to your final pay at your date of leaving. From 1 April 2014 the LGPS became a Career Average Revalued Earnings Scheme (see CARE above).
Ill Health Retirement a retirement which occurs when an employer determines to terminate a scheme member’s employment on the grounds that his ill health or infirmity of mind or body renders him permanently incapable of discharging efficiently the duties of his current employment and that he has a reduced likelihood of obtaining gainful employment before his normal retirement age.
Lump Sum a tax free lump sum paid at retirement.
Nomination Of Beneficiary see Expression of Wish.
Normal Pension Age 65 for pre to 1 April 2014 membership .
Pensionable Pay this is normal pay plus any additional payments defined in an employee’s contract of employment as being pensionable. To be pensionable, pay must also be taxable. Since 1 April 2014 pensionable pay included non-contractual overtime but does not include pay in lieu of holiday or notice, travelling or subsistence allowance or any payment in respect of the value of a motor vehicle.
Pension Credit the term used for a benefit granted to an ex-spouse of a member following a divorce settlement and in accordance with a Court Order (an alternative to earmarking).
Pension Debit the term used when a scheme member’s benefits are reduced in order to provide his or her ex-spouse with a pension credit following a divorce settlement (an alternative to earmarking).
Pension Sharing the splitting of a member’s benefits upon divorce.
Pensions Increase the amount which LGPS benefits are increased annually and based on movement in the Consumer Prices Index (CPI) during the 12 months to September.
Rule of 85 the point at which a member’s age in whole years when added to membership in whole years equals 85 and therefore benefits can be paid without any actuarial reduction being applied. (Certain protections apply to different members).
Spouse’s Pension the pension paid to the legally married husband or wife of a former scheme member who has pre-deceased his or her spouse.
Standard Lifetime Allowance the value of pension benefits an individual can build up before a lifetime allowance charge is applied.
State Earnings Related Pension Scheme (SERPS) a top up to the basic State Pension for individuals who have been members of not-contracted-out pension schemes and therefore paid A rate National Insurance contributions.
Statutory Scheme a scheme, such as the LGPS, established by Acts of Parliament.
Transfer Value the actuarial value of i) a member’s benefits paid to an alternative pension scheme on leaving the LGPS as an alternative to deferred benefits or a refund of contributions; or ii) a member’s benefits paid by a previous employer into the LGPS upon joining the scheme.
Trivial Commutation Lump Sum providing an individual’s total pension benefits do not exceed 1% of the standard lifetime allowance their pension rights can be fully commuted into a single lump sum payment on or after age 60 and before age 75 (all benefits must be commuted within a 12 month period). They will be taxed as having pension income in that tax year equal to the lump sum payable (after any tax-free cash has been taken).