The name of the Local Government Pension Scheme in Cheshire
Glossary
Accrued Benefits
The level of benefits of membership in a pension scheme up to a given point in time.
Active Member
A member of a pension scheme who is still in employment and is paying pension contributions.
Actuary
An advisor to the pension scheme required by Pension Regulations. In the Local Government Pension Scheme (LGPS), the Actuary is responsible for reviewing the scheme’s pension liabilities every three years, and for advising the Administering Authority on the rate of contributions to be paid by employers to ensure that current and future pension liabilities are met.
Administering Authority
The Local Government Pension Scheme is run by local administering authorities, for example County and former Metropolitan Councils, in accordance with regulations approved by Parliament.
Admitted Body
A body which can apply to be admitted to the LGPS with the agreement of the administering authority. It must provide public services on a non profit making basis and will normally be in receipt of funding grant from central or local government. In certain circumstances contractors who provide services to a scheme employer can also apply to be an admitted body.
Added Years
Extra periods of scheme membership can be purchased by employees by making additional contributions, subject to membership and Inland Revenue limits. Scheme regulations removed Added Years with effect from 1 April 2008.
Additional Voluntary Contributions (AVC)
Additional contributions are paid into a separately invested AVC fund. These are invested separately from the LGPS into a personal investment account.
Annual Benefit Statement
An estimate of retirement benefits as at the last complete financial year (ending on 31st March).
Annuity
A policy, purchased with the proceeds of an AVC funds to provide an additional income on retirement.
Additional Regular Contributions (ARC)
Members can pay ARCs to buy additional annual pension in proportions of £250 per annum, up to a maximum of £5,000 per annum. The additional contributions attract tax relief and the cost depends on members age and the length of payment period. This period must not go beyond their normal retirement age.
Augmentation
A discretion given to employers in the scheme to increase a member’s membership.
Compensatory Added Years (CAY)
A discretionary award which an employer can use to grant a period of added years.
Contributions Equivalent Premium (CEP)
CEP is the amount payable to the Inland Revenue to reinstate a member in State Earnings Related Pension Scheme (SERPS), now known as State Second Pension (S2P), where they have received a refund of pension contributions.
Concurrent Pensions
Since April 2001 it has been possible for LGPS members to contribute to a Stakeholder or a Personal Pension Scheme whilst also contributing to the Local Government Pension Scheme so that the schemes run concurrently.
Contribution Rate
The rate of members and/or employers’ contributions to a pension scheme.
Deferred Pensioner
A former member of the LGPS who has left the Scheme with more than 3 months service (or less if pension rights have been transferred from another scheme), but still has benefits in the Scheme and will have a pension from the LGPS on retirement.
Defined benefit pension scheme
A pension scheme, such as the LGPS, where the benefits earned by membership of the scheme are defined, and in the case of the LGPS, are also guaranteed.
Defined contribution pension scheme
A pension scheme where the amount of contributions paid in by employees and employers is defined, but where the benefits paid out will depend on investment performance over the period of membership in the scheme. The level of benefits is not defined or guaranteed.
Discretion
The power given under LGPS regulations to employers and to a lesser extent the administering authority to offer discretionary additional benefits in certain specified areas.
Early Retirement
The discretion available to an employer to grant retirement, with immediate payment of pension, before normal retirement date.
Employee contribution rate
The rate of contributions (expressed as a percentage of pensionable pay) payable by employees. In the LGPS the rate is dependant on your full time equivalent annual salary.
Employer contribution rate
The rate of contributions (expressed as a percentage of pensionable pay) payable by employers. The rate is set by the Actuary.
Final Pensionable Pay
This is the pay used to calculate most pension benefits and is normally the actual pensionable pay earned in the last year (i.e. 365 days) leading up to retirement date, or the better of one of the previous two years’ pay if this gives a higher amount.
Financial Services Authority (FSA)
Created in 1997, the FSA is the chief regulatory authority in the U.K. It is responsible for regulating and monitoring the investment industry in line with the Financial Services Act.
Free Standing Additional Voluntary Contributions (FSAVC)
FSAVC is similar to an AVC but is an arrangement with a pension provider of your choosing rather than using the scheme’s nominated AVC providers.
FTSE All Share Index
The performance index for the quoted U.K. Equity market.
Future Liabilities
Amounts due to be paid by a pension scheme in the future, to meet the pension benefits of pensioners, deferred and active members.
Guaranteed Minimum Pension (GMP)
The amount of pension which would have been paid if the member had been contracted-in to the State Second Pension (S2P), rather than being in the LGPS.
Ill Health Early Retirement
Retirement, after independent occupational health advice, on medical grounds before normal retirement age.
In House AVC
Additional Voluntary Contributions (AVC) scheme offered by an occupational pension scheme to its current members. Cheshire Pension Fund in house providers are Standard Life and Clerical Medical.
Late Retirement
The retirement of a scheme member who has carried on working (with their employer’s consent) after age 65.
Lifetime Allowance (LTA)
The lifetime allowance is the maximum value an individual can build up in pensions benefits before suffering a tax charge. The current Lifetime Allowance limit for 2008/09 is £1.65 million.
Local Government Pension Scheme (LGPS)
The statutory defined benefit final salary pension scheme available to all teaching employees in local government (except teachers, police officers and fire-fighters, who have their own pension schemes) The LGPS is contracted out of the State Second Pension (S2P), which means lower national insurance contributions are paid and tax relief is received.
Lower Earnings Limit
The amount of pay received before any National Insurance Contributions are payable. The Lower Earnings Limit for 2008/09 is £90 per week or £4680 per year. It is usually increased annually by Parliament.
Normal Retirement Date
The age at which a member can retire with an unreduced pension is normally 65. However some scheme members, depending on when they joined, also have the option to retire between age 60 and 65. If the scheme member has been in the scheme for less than 25 years, their pension benefits will be reduced if they leave before age 65.
Pensions Increase (PI)
The amount by which pensions are increased annually. The rate is fixed by Government and is based on movement in the Retail Price Index (RPI). The amount by which pensions are increased annually is based on movement in the RPI during the 12 months to September.
Pensionable Pay
Salary plus shift allowances, bonuses, contractual overtime, statutory sick pay and statutory maternity pay and any other taxable benefit stated in a contract as being pensionable.
Pensionable Service
The period of pension scheme membership used to calculate pension benefit.
Preserved Benefits
See deferred pensioner.
Retail Price Index (RPI)
The Government’s main domestic measure of inflation in the UK. It measures the average change from month to month in the prices of goods and services purchased by the average household in the UK.
Rule of 85
If a scheme member’s age and number of years of scheme membership (both in whole years) add to or greater than 85 and the member is aged 50 or over, then, subject to employer consent, the employee may be able to retire early with pension benefits. Please note that this option has been removed from the scheme with effect from 1 October 2006 and protections are in place for certain members who are age 60 before 31 March 2020.
Russell Mellon
A performance measurement company engaged by the scheme to measure investment performance.
State Earnings Related Pension Scheme (SERPS)
The earnings related element of the state scheme (also now known as the State Second pension S2P). Benefits are paid by the Department of Work and Pensions and are based on the National Insurance contributions paid over your working lifetime.
State Retirement Age
The age from which the basic state pension is paid. Currently age 65 for men and 60 for women, but from 2010 will be phased for women, so that by 2020 State Retirement Age will have been equalised at age 65.
Statement of Investment Principles (SIP)
A Requirement arising from the Pensions Act 1995 – that all occupational pension schemes must prepare, publish and maintain a written SIP outlining their policy on investment matters.
Scheme Employer
A body which under LGPS regulations, is required to allow its employees to join the LGPS or, in the case of parish councils, has the statutory right to choose to do so.
Spouse
Husband or wife to whom you are legally married.
Transferred Service
Pension benefits that have been transferred into the LGPS from a previous pension arrangement and now counts towards LGPS membership.
Upper Earnings Limit
The amount of pay above which National Insurance Contributions are paid. The Upper Earnings limit for 2008/09 is £770 per week or £40,040 per year. It is usually increased annually by Parliament.
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