PENSIONS

 Click on any letter to go to that section.- The terms highlighted as links have their own definition. Click on them to move to the definition.

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2% incentive This is a payment the DSS made to certain personal pension schemes or contracted out occupational pension schemes. It was 2% of the member's upper band earnings. These payments were stopped on 5 April 1993.
87-89 member This is another name for a class B member. This is when an occupational pension scheme was set up before 14 March 1989, and the member joined it between 17 March 1987 and 31 May 1989.
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ABI 1994 method This is a test to work out whether the benefits paid by a money purchase scheme are more than the Inland Revenue limits. It does not apply to a small self-administered scheme.
Accrual rate In a defined benefit scheme this is the rate at which pension benefits build up for the member. They will get a certain amount for each year of pensionable service.
Accrued benefits These are the pension benefits that have built up for a pension scheme member
Accumulated contributions These are all the contributions a member has paid, plus anything extra the money has earned. In a money purchase scheme, these can include the employer's contributions.
Accrued rights This term is sometimes used to mean accrued benefits.
Active investment management This is a system of investment that could be used for a pension fund. It involves buying and selling particular investments to try and get better growth.
Active member This is a member of an occupational pension scheme who is building up pension benefits from their present job.
Actuarial assumptions These are the figures and estimates that an actuary uses when they make an actuarial valuation. This can include how long people are expected to live, price rises, how much people are expected to earn, and the income from the pension scheme investments.
Actuarial deficiency This is where the actuarial value of a scheme’s assets is less than the actuarial liability . The actuarial deficiency is the difference between the two.
Actuarial increase This is the extra pension benefit a member gets when retiring after the normal retirement age.
Actuarial liability This is the money a pension scheme will have to pay out for pensions after the date of the actuarial valuation.
Actuarial reduction This is a drop in a member's pension because they have taken their pension early.
Actuarial report This is a report on an actuarial valuation. This name is also used for when an actuary says how changes to a scheme might affect it financially.
Actuarial surplus This is where the actuarial value of a scheme’s assets is more than the actuarial liability . The actuarial surplus is the difference between the two.
Actuarial valuation This is an assessment done by an actuary, usually every three years. The actuary will work out how much money needs to be put into a scheme to make sure pensions can be paid in the future.
Actuarial value This is the value an actuary puts on something.
Actuary An actuary is an expert on pension scheme assets and liabilities, life expectancy and probabilities (the likelihood of things happening) for insurance purposes. An actuary works out whether enough money is being paid into a pension scheme to pay the pensions when they are due.
Added years This is when a member of a defined benefit scheme becomes entitled to extra pension benefits because:
Additional component This is another name for additional pension.
Additional pension This is what the Government sometimes calls the pension paid by SERPS (or its replacement, the State Second Pension)
Additional voluntary contribution (AVC) This is an extra amount (contribution) a member can pay to their own pension scheme to increase the future pension benefits.
Administrator This is the person who is responsible for managing a pension scheme from day to day.
Allocation option This allows a pension scheme member to give up some pension benefits in return for a pension for the member's husband, wife or dependants.
Annual pension estimate This is similar to a benefit statement. This is a statement of the pension benefits a member has earned. An annual pension estimate will be based on certain expectations or predictions, so the benefits the member actually gets will probably be different.
Annual report This is a report that the trustees of an occupational pension scheme send to members and employers each year to keep them informed on the scheme.
Annuitant This is a person who receives, or is entitled to, an annuity.
Annuity This is a fixed amount of money paid each year until a particular event (such as a death). It might be split into more than one payment, for example monthly payments. Many schemes use an annuity to pay pensions. When someone retires, their pension scheme can make a single payment, usually to an insurance company. This company will then pay an annuity to the member. The money paid to the member is what people usually call their pension.
Annuity rate This compares the size of an annuity (how much it pays each year) with how much it cost to buy. It also takes into account the age of the annuitant.
Appropriate scheme This is a pension scheme which meets conditions set by the Contributions Agency. This means that a member of the scheme can contract out of the State Second Pension.
Approval This is when the Pension Schemes Office (PSO) says that a scheme is suitable for tax relief. This means members can count some or all of their contributions against their tax bill. If a scheme meets certain conditions, it will get mandatory (automatic) approval. If the scheme does not meet the conditions, the PSO may give it discretionary approval.
Approved occupations list The Pension Schemes Office (PSO) does not normally allow a scheme to pay a pension before a member is 50 (or 60 with a retirement annuity). With some jobs, the PSO may allow a lower pension age. One example might be professional footballers, whose earnings are mostly early in their life. These jobs are called recognised occupations. The PSO has an approved occupations list to show which jobs are recognised occupations.
Approved scheme This is either a personal pension scheme or a free-standing additional voluntary contribution (FSAVC) scheme that has got approval from the Pension Schemes Office (PSO). The term approved scheme is not used for occupational pension schemes, even though they can get approval from the PSO.
Assets These are everything that the trustees hold for the pension scheme. They can include investments, bank balances, and debtors.
Auditor This is a qualified person who checks accounts. If an auditor believes the law has been broken in an occupational pension scheme, they must tell the Occupational Pensions Regulatory Authority (OPRA). This is called whistle blowing.
Augmentation This is when extra pension benefits can be bought for a pension scheme member. They are usually paid for by the employer or the pension scheme.
Average earnings scheme This is another name for a career average scheme. This is a scheme where the pension benefits earned for a year depend on how much the member's pensionable earnings were for that year.
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Band earnings These are earnings between the lower earnings limit for national insurance contributions and the upper earnings limit. The State Second Pension is worked out on these earnings. These are also called upper band earnings.
Basic component This is a term pension companies use for the basic state pension.
Basic pension This is what the Government sometimes calls the basic state pension.
Basic state pension This is a pension paid by the Government to people who have enough qualifying years. It is not earnings related.
Beneficiary This is a person who is getting pension benefits, or will do so when a particular event happens.
Benefit statement This is a statement of the pension benefits a member has earned. It may also give a prediction of what their final pension might be.
Benefits With pension schemes, this is everything the member gets after retiring because they were part of the scheme. It usually means the money paid to the member as their pension. It could also include death benefits. With insurance, this is the money the insurance firm pays out if something happens. For example, a life assurance policy would pay death benefits if the insured person dies.
Benefits Agency This is an organisation connected to the DSS. It is in charge of paying state benefits such as Income Support and Jobseeker’s Allowance.
Benefits in kind These are things other than money which an employer gives to you for doing your job, for example a company car or a clothes allowance. Only benefits in kind which are taxed are usually counted when working out figures to do with pensions.
Bid price This is the price members of a unit trust will get for each unit if they cash them in.
Bridging pension This is a pension which a member may receive from their pension scheme between the time they retire and the time they reach their state pension age.
Bulk transfer This is when a group of members is moved from one occupational pension scheme to another.
Buy out policy This is an insurance policy which pension scheme trustees can buy for a member instead of paying them pension benefits. The insurance company pays the member (or the member's dependants) a pension.
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Cancellation notice This is a document given to a new member telling them the details of the pension scheme and their right to cancel their membership without any cost. The member must cancel within a certain time. The notice is sometimes called a cooling off notice.
Capitalised value This is the value in today’s money of an amount which will be paid or received in the future. It is worked out taking into account interest over the period (this is called discounting). It also takes into account the probability (chance) that money may not be received or paid.
Career average scheme This is the name for a scheme where the pension benefits earned for a year depend on how much the member's pensionable earnings were for that year.
Carry back A member could sometimes transfer contributions to an earlier tax year for tax relief purposes. This was called carry back. The carry back rules have not applied since 31 January 2002.
Carry forward A member could sometimes transfer excess contributions to a later year to get tax relief. This was called carry forward. The carry back rules no longer applied after 31 January 2002.
Cash equivalent This is the amount of money a pension scheme member can transfer to another pension scheme.
Cash option This is giving up part or all of a pension in return for getting a one-off payment straightaway. It is also called commutation.
Centralised scheme This is a pension scheme which is used by several employers.
Certificate of eligibility This is a document that an employed person fills in to confirm that they are not in an occupational pension scheme, and so they can pay into a personal pension scheme.
Certificate of existence This is a document to confirm that a pension scheme member is still alive.
Class A member A 'class A' member is:
Class B member A 'class B' member is:
Class C member A class C member is a member of an occupational pension scheme who joined before 17 March 1987.
Clawback This is when a member's pensionable earnings or a member's pension are reduced to take into account the amount of state pension the member will get.
Closed scheme This is the name for a pension scheme which does not accept new members anymore.
Clustering This is setting up a number of pension schemes at the same time. It lets the member draw the pension benefits at different times.
Collective investment schemes These are more comonly known as unit trusts. This is a trust which people can invest in by buying units. The trust uses investors’ money to buy investments. The fund manager values the fund’s assets from time to time and puts a new price on the fund’s units.
Common investment fund This is the name given when the investments of two or more pension schemes are pooled together.
Commutation This is giving up part or all of a pension in return for getting a one-off payment straightaway. It is also called a cash option.
Commutation factors These are the things which decide how much pension needs to be given up so that the member can get a one-off payment instead.
Company pension scheme This is a scheme organised by an employer to provide pension benefits for their employees.
Compensation levy This is money paid by every occupational pension scheme that is covered by the laws on compensation. This money pays for the Pensions Compensation Board.
Compulsory purchase annuity (CPA) This is an annuity that an insured (occupational pension) scheme must buy for a member when they retire.
Contingent annuity This is an annuity which is paid to someone when someone else dies.
Continuation option This is an option offered by the insurance company which insures a pension scheme’s death benefits. It allows a member who is leaving the pension scheme to take out a life assurance policy without taking a medical or providing other evidence of their good health.
Continuous service A member of an occupational pension scheme may have already spent an earlier time in that scheme (with a break in between) or in a different scheme. Continuous service means that this earlier time is added to the member's existing service. This could happen if a member takes a break from work to have a baby, or moves between two connected schemes.
Contract out If someone contracts out of the State Second Pension, their national insurance contributions are lower. They also pay into an occupational pension scheme or personal pension scheme which has to meet certain conditions.
Contracted out This term is used to describe a scheme where the members contract out of the State Second Pension.
Contracted out Employments Group (COEG) This is a part of the Contributions Agency that deals with contracted out employment.
Contracted out money purchase scheme (COMPS) This is an occupational pension scheme where members contract out, and the employer pays a certain amount into the scheme. When the member retires, this amount is used to make sure they get at least as much pension as they would have got from SERPS or the State Second Pension.
Contracted out salary related scheme (COSRS) This is an occupational pension scheme where the members contract out of the State Second Pension. The member's pension is based on how much they have earned.
Contracting out certificate The Contributions Agency gives this certificate to a pension scheme that meets the conditions to be contracted out.
Contribution holiday This is the period when the usual contributions to a pension scheme are stopped for a time. This is usually done when the scheme has more funds than it needs. This phrase is also used when contributions to a personal pension are stopped because of temporary unemployment.
Contributions This is the money paid into a pension fund for a member. It can be paid by a member or an employer. Contributions are sometimes called pension premiums.
Contributions Agency This is a department of the DSS. It keeps records of people’s national insurance contributions and makes sure that they are paid. It also gives advice on National Insurance.
Contributions equivalent premium This is a special payment to the state scheme. It is usually paid when a member with less than two years of qualifying service leaves a contracted out scheme. The member is then counted as having been in SERPS (or its replacement, the State Second Pension) for the time they were contracted out.
Contributory scheme This is a pension scheme where both the employer and the members have to pay into the scheme.
Control period This term is sometimes used when an actuary works out the scheme’s liabilities by looking at how much pension the members have earned so far. The actuary may then set the standard contribution rate for a certain length of time (the control period). During this time, the standard contribution rate should be enough to make sure the scheme’s assets are enough to cover its liabilities.
Controlled funding This is a plan to make sure that all the pension scheme’s liabilities can be paid. It is often used for final salary schemes.
Cooling off notice This is a document given to a member telling them the details of the pension scheme and their right to cancel the plan without any cost. The cancellation has to be done within a given time. It is sometimes called a cancellation notice.
Corporate trustee This is a company which acts as a trustee.
Creditors These are amounts owed by the pension scheme.
Current funding level This is the amount of money needed to pay the pensions that members have earned so far.
Custodian trustee This trustee looks after the trust's assets.
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De minimis limit If a pension pays less than this limit, the whole of the member's share of the pension fund can be taken as a one-off amount.
Death after retirement benefit If a member has this option, then their dependants will get some benefits from the scheme if the member dies after starting to get pension benefits.
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. It could be death after retirement benefit or death in service benefit.
Death in service benefit If a member has this option, then their dependants will get some benefits from the scheme if the member dies before starting to get pension benefits.
Debtors These are amounts owed to the pension scheme.
Declaration of trust This is the document which creates the pension scheme trust.
Deed of adherence This is a legal document which allows a new employer to take over the running of a pension scheme. The new employer has to agree to follow the scheme’s rules.
Deed of appointment This is a legal document appointing a new pension scheme trustee.
Deferred annuity This is an annuity which will start to pay out at some time in the future.
Deferred annuity purchase This name is also used when a member retires, but chooses not to spend their share of the pension fund on an annuity straightaway.
Deferred member This is a member who has left a scheme, but will get benefits when they retire. These are called preserved benefits.
Deferred pension This is a pension which is taken later than the member's normal retirement date.
Deferred pensioner When someone stops being an active member of a pension scheme, the pension benefits they have earned become preserved benefits, and the member is now called a deferred pensioner. They will get these benefits at a later date.
Deferred retirement This is when a person decides to retire and draw their pension late. It is sometimes called late retirement or postponed retirement.
Deficit This word may be used to mean an actuarial deficiency. This is where the actuarial value of a scheme’s assets is less than the actuarial liability . The actuarial deficiency is the difference between the two.
Defined benefit scheme This is where the rules of the scheme decide how much pension the member will get. There are different ways of working out the size of the pension, but the member will know which system the scheme uses. The most common type of defined benefit scheme is a final salary scheme.
Defined contribution scheme This is where the size of the member's pension is not decided by the rules of the scheme. The size of the member's pension will be affected by how much money is put into the pension fund for the member, how much the pension fund has grown, and what annuity rate is available when the member retires. This system is also called a money purchase scheme.
Definitive trust deed This document shows the rules of the pension scheme and what it provides in detail.
Department for Work and Pensions (DWP) This is the Government department responsible for the state pension schemes. It was previously known as the Department for Social Security. The DWP's phone number is 020 7712 2171.
Dependant This is someone who is financially dependent on a member of the pension scheme (or on a pensioner of the scheme). The scheme rules will usually say what is meant by a 'dependant’.
Dependant's pension option This allows a member to give up part of their pension so that it can be paid to their husband or wife or a dependant.
Derivative This is a general word used to describe special financial instruments such as options and futures contracts. Financial instruments are agreements to buy or sell something, under terms laid out in a contract.
Direct investment This is when the trustees of a self-administered scheme directly hold the scheme’s investments.
Disclosure regulations These are the rules which pension scheme trustees have to follow when giving information about the scheme to members and official organisations.
Discontinuance This is when contributions to a scheme stop and the scheme is closed down or becomes inactive.
Discontinuance valuation This is an actuarial valuation which is done to work out what would happen if the pension scheme was stopped or closed down.
Discretionary approval This is when the Pension Schemes Office (PSO) agrees that an occupational pension scheme can be approved, even though it does not meet the usual rules.
Discretionary increase This is when the trustees give increases in pension benefits above those set out in the pension scheme rules.
Discretionary scheme This is a scheme where the employer chooses which employees are allowed to join. The contributions and benefits may also vary from one member to another.
Disqualification order This is an order made by the Occupational Pensions Regulatory Authority (OPRA). It means that a certain person is banned from being a trustee of any occupational pension scheme.
Drawdown facility This is when a member retires, but chooses not to buy an annuity straightaway. Until the member buys an annuity, they take an income from the scheme. This is also known as income drawdown or income withdrawal..
Dynamisation This is:
Dynamism This is another word for dynamisation.
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Earlier service component This is the part of a member's pension benefit that was earned under a final salary scheme before limited price indexation (LPI) was brought in.
Early leaver This is a person who stops being an active member of a pension scheme but who does not start to get a pension straightaway.
Early retirement This is when a member retires before their normal retirement date and gets their pension immediately.
Earmarked benefits These are the pension benefits set aside by a court for a member's husband or wife after a divorce.
Earmarked money purchase scheme This is a type of occupational pension scheme. It means all the benefits are paid by insurance policies or annuities. Each of these policies or annuities is set up for one particular member, their dependants or both.
Earmarked policy This is a policy held by a pension scheme to provide life assurance cover, or an annuity for a particular member.
Earnings cap This is a limit on how much of a member's earnings may be used to work out the limits on contributions and benefits in an approved scheme. This limits the amount that a high earner can put into a pension scheme and still get tax relief. The limit is set every year in the Government's Budget.
Earnings factor This is a theoretical earnings figure that is used for working out state pensions or guaranteed minimum pensions.
Eligibility These are certain conditions that somebody must meet to be a member of a pension scheme and to receive pension scheme benefits.
Emoluments These are a member's earnings and they include benefits in kind (such as company cars).
Employer This is the organisation the member works for.
Employer's pension scheme This is a pension scheme organised by the employer to provide pension benefits for employees. It is most often called an occupational pension scheme.
Endowment policy This is an insurance policy which will pay out a single amount on a fixed date in the future or when the policyholder dies (whichever happens first).
Enhanced commutation factor A commutation factor is something which decides how much pension needs to be given up so that the member can get a one-off amount instead. An enhanced commutation factor takes account of the member's pension increasing in the future.
Entry date This is either the date an employee can join a pension scheme, or the date they actually do join.
Equal access -This is the term used to describe the requirement that members of both sexes have identical entry conditions to pension schemes.
Equal treatment After a European ruling, Britain’s pension laws were changed to say that each sex must be treated the same.
Equivalent pension benefit (EPB) This is the benefit which an employer must give an employee who was contracted out of the old graduated pension scheme.
Escalation This is an automatic increase in the amount of pension a member gets (or will get in the future). The amount goes up at regular times, and usually at a fixed rate.
Ex gratia benefit This is something that an employer gives to an employee, even though they do not have to.
Executive pension plan (EPP) This is another name for an executive scheme.
Executive scheme This is a pension scheme for specially chosen employees. It is also known as a top hat scheme.
Exempt approved scheme This is an approved scheme that is not a personal pension scheme, and is set up under a trust that cannot be changed.
Experience deficiency This is the deficit (loss) when the pension scheme’s actual performance is compared with what the actuary originally predicted.
Experience surplus This is the surplus (profit) when the pension scheme’s actual performance is compared with what the actuary originally predicted.
Expression of wish If a scheme pays death benefits, this is where the member tells the trustees who should get this benefit if the member dies. The trustees do not have to follow the member’s wishes. This is also called nomination or form of request.
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Final average earnings These are the member's earnings used to work out their pension in a final salary scheme. The amount used could be the average of the member's earnings over the last few years before they retire.
Final earnings scheme This is another name for a final salary scheme.
Final pensionable earnings This is another name for final average earnings.
Final remuneration This is a limit that affects how much of a member's earnings are taken into account when the Pension Schemes Office (PSO) works out the highest amount of benefit they can get from an approved scheme.
Final salary scheme This is the most common type of defined benefit scheme. It means that the pension paid to the member is based on how much they are earning when they retire.- This amount could be an average over their last few years of work.
Financial Services Authority (FSA) This is the organisation that regulates financial business, such as pensions. It has replaced the Personal Investment Authority among other bodies. The FSA's telephone number is 0845 606 1234.
Flat rate scheme In this type of scheme a member's pension depends on how long they have been in the scheme. The member's earnings do not affect the amount of the pension. This is a type of defined benefit scheme.
Forgoing This is a written agreement between the member and their employer where the member agrees to have their wages cut by a certain amount. The employer then puts this amount into the pension scheme for the employee. This is also called salary sacrifice.
Form of request This is another name for expression of wish. If a scheme pays death benefits, this is where the member tells the trustees who should get this benefit if the member dies. The trustees do not have to follow the member's wishes. This is also called nomination.
Franking This is the name given to taking any increase in the guaranteed minimum pension (GMP) off the other pension benefits.
Free cover An insurance company may agree to cover a group of people for death benefits without asking for proof that they are in good health. For example, this group could be members of a pension scheme. Free cover is the highest amount of benefits that the insurance company will pay out for any one person under this system.
Free-standing additional voluntary contributions These are payments into a free-standing additional voluntary contribution (FSAVC) scheme.
Free-standing additional voluntary contribution (FSAVC) scheme An active member of an occupational pension scheme can pay extra amounts into a separate scheme, called a free-standing additional voluntary contribution (FSAVC) scheme. These are run by pension firms. The benefits they get from the scheme will be based only on these extra amounts. It is possible to contract out by joining a free-standing additional voluntary contribution (FSAVC) scheme.
Frozen benefits These are the benefits a member has already earned from a scheme when they stop being an active member (or the scheme closes). The member will get these benefits when they retire. These are also called preserved benefits.
Frozen scheme This is a scheme which has been closed. No more contributions will be paid and the members will get their frozen benefits when they retire.
Fully insured scheme With this type of scheme, the trustees take out an insurance policy for each member. The policies guarantee that each member will get all the benefits that the scheme rules say they should get.
Fund account This is part of the accounts that a scheme must produce each year. It shows how the scheme has dealt with members, income from investments, and what the scheme has bought and sold during the year.
Funded unapproved retirement benefits scheme (FURBS) This is an occupational pension scheme that is not designed to be approved. This type of scheme saves up assets to pay members' benefits, unlike an unfunded scheme. Most FURBS are top-up pension schemes.
Funding This is setting assets aside (saving up) so that money is available to pay future liabilities.
Funding level This is a comparison of a scheme’s assets and liabilities.
Fund manager This is a person or firm who is responsible for managing the day to day running of a fund to the best advantage of the fund's investors.
Funding plan This is a plan to make sure that money is available at the right time to pay out pension benefits. It usually involves setting the contributions at a certain level, such as the standard contribution rate.
Funding rate This name is sometimes used to describe the recommended contribution rate. This is how much the actuary says the standard contribution rate should be to make sure the scheme has enough money to pay the necessary benefits.
Funding ratio This is the funding level, written as a percentage
Futures contract This is a contract to buy goods at a fixed price and on a particular date in the future. Both the buyer and the seller must follow the contract by law.
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General levy This is paid by all occupational pension schemes and personal pension schemes covered by the Pension Schemes Registry. It pays for the Pension Schemes Registry, the Pensions Ombudsman and the Occupational Pensions Regulatory Authority (OPRA).
Graduated pension scheme This was an additional State pension which was building up before 5 April 1975.
Graduated retirement This was the pension paid by the graduated pension scheme. The benefits depended on how much had been paid in national insurance contributions.
Group personal pension (GPP) This is a system where several employees at one company join a personal pension scheme with the same pension firm. Each member has a separate policy with the pension firm, but contributions are collected together. The member may get better terms with a GPP than with a normal personal pension scheme. The employer may be more likely to pay contributions, because there will be less paperwork than with each employee dealing with a separate pension firm.
Group policy This is an insurance policy which covers more than one person.
Guaranteed annuity- This is an annuity that is paid until the person getting it dies. If they die before a certain date, the annuity is then paid to their dependants until that date.
Guaranteed annuity option This gives a person the right to use the money they get from their insurance policy to buy an annuity, with the annuity rate guaranteed in the insurance policy. It can apply to a pension scheme as well as an insurance policy.
Guaranteed minimum pension (GMP) A member of a contracted out occupational pension scheme will get at least this much pension unless:
Guaranteed pension This is the name for the minimum pension a particular insurance policy will pay.
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Headroom check There are Inland Revenue limits on how much money can be paid into a free-standing additional voluntary contribution scheme. A headroom check may be carried out to make sure that these limits are kept.
Historical cost This is one way of measuring the value of assets. It uses what the assets originally cost, but an amount is often taken off for wear and tear and age.
Hybrid scheme This is an occupational pension scheme where the pension benefits can be worked out in two ways. The way that gives the higher benefits will be used. This name is also used for an occupational pension scheme that pays both final salary and money purchase benefits.
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Ill-health early retirement This happens when a member retires early because of ill-health. They may get higher pension benefits than a member normally gets when they retire early.
Immediate annuity This is an annuity which starts to pay out straightaway.
In-house AVC scheme This is an additional voluntary contribution (AVC) scheme offered by an occupational pension scheme to its members.
Incapacity pension If a member's illness means they cannot work as normal, they may get an extra pension. This depends entirely on the rules of their scheme
Incentive payment This is a payment the DSS used to make to certain personal pension schemes or contracted out occupational pension schemes. This was sometimes called the 2% incentive.
Income drawdown This is when a member retires, but chooses not to buy an annuity straightaway. Until the member buys an annuity, they take an income from the scheme. This is also known as income withdrawal or a drawdown facility.
Income withdrawal This is when a member retires, but chooses not to buy an annuity straightaway. Until the member buys an annuity, they take an income from the scheme. This is also known as income drawdown or a drawdown facility.
Increment This means an increase in contributions to an existing pension.
Independent financial advisor (IFA) This is a qualified person or firm that can give people independent advice on how they could save with life assurance and pensions. An independent financial advisor is not tied to a particular company. They are regulated by the Financial Services Authority.
Independent trustee This is a trustee who has no connection with the pension scheme, the employer or the members. For example, an independent trustee might be appointed if an employer goes out of business.
Indexation This is a way of measuring changes in prices or earnings, and adjusting pensions in line with these changes. For example, if a pension was linked to a price index, and prices rose by five per cent, then the pension would also rise by five per cent.
Index linking This is another name for indexation.
Individual arrangement This is an occupational pension scheme with only one member.
Inflation proofing This is when a pension scheme uses price rises for indexation. It means that the pension a member gets will not be worth less if price