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Glossary

We have tried to highlight the more common words and phrases used with regard to pensions. If there are any you would like including here, please let us know. You can also use the Search tool above to find items on this page.


Actuary

The RCPS are required to have a named scheme actuary appointed by the Management Board responsible for actuarial valuations; this is provided by the Government Actuary's Department (GAD)

Actuarially Reduced Retirement (ARR)

Pension benefits which are claimed prior to the normal pension age and are reduced to take account of being in payment for a longer period of time.

Added Pension / Added Years

An extra amount of annual pension that you have purchased by paying extra contributions, either as a lump sum, or as a monthly deduction from your salary.

Additional Voluntary Contributions (AVCs)

Extra contributions that you decide to pay to increase your benefits.

Aggregation

An option that may be available for individuals who have more than one period of RCPS membership, but both are based on the same benefit type (eg both Nuvos or both final salary based). It is a means of joining the former 'deferred' RCPS membership with the later membership. Please see the Linking and Aggregation page where the 'aggregation' section covers joining Nuvos to Nuvos. Certain rules apply and for further information, please contact JSS

Annual Allowance

The maximum amount of pension saving that you can build up in any one year before incurring a tax charge. This includes actual employer and employee contributions to defined contribution schemes (such as an AVC scheme or Partnership), as well as benefits built up in defined benefit schemes such as classic, classic plus, premium and nuvos.

Career Average Scheme / Career Average Revalued Earnings (CARE) scheme

A type of defined benefit scheme that builds up benefits each year (or part year) based upon the pensionable salary earned during that year. At the end of each year, each 'slice' is increased by CPI. When you finally leave, your total pension is calculated by adding up the slices you have built up (plus increases). It averages the member's earnings from the whole of their membership period, not just the final years, as happens in a traditional final salary scheme.

Commutation (see also Inverse Commutation)

On retirement, members are allowed to 'commute' or give up some pension in exchange for lump sum. All RCPS schemes use the same commutation rate of 12:1; this means that each £1 of pension given up buys £12 of lump sum. Classic has an automatic lump sum whereas Premium or Nuvos do not.

Contributions - Employees and Employers

The amount needed to be paid into the scheme to pay for the benefits. This is split between employees (members) and employers.

Consumer Price Index (CPI)

The rate that public service pensions are increased annually, normally in April by reference to the CPI measure for the previous September.

Death Benefit Nomination form (DBN)

The form that tells JSS who any benefits are payable to in the event of the death of a member. If there is no DBN held by JSS then any benefits are paid to the estate, which takes longer to be paid and is subject to inheritance tax.

Defined Benefits / Defined Benefit Scheme (DB)

A type of workplace pension where the amount you get at retirement is based on your earnings and years of membership in your pension scheme, and not on stock market investment returns or annuity rates

The RCPS is a Defined Benefit Scheme

Defined Contribution Scheme (DC)

A pension arrangement where the member (and employer) pay contributions into an investment fund The amount in a member's pension 'pot' at retirement will depend upon the investment returns achieved. Retirement income will also depend on the 'annuity rate' available when the pension pot is used to buy a pension from an insurance company. There is greater investment risk with defined contribution schemes unlike defined benefit pensions, you will not know in advance how much pension you will receive at retirement.

Dependant

A spouse, civil partner, nominated qualifying partner or dependant child who qualifies to receive a pension after you die.

Final Pensionable Earnings (Premium and Classic Plus Schemes)

Premium Final Pensionable Earnings are the best of:

  • Pensionable earnings in the final 12 months of scheme membership; or
  • The highest pensionable earnings in the any of the last four scheme years; or
  • The highest average pensionable earnings in any three consecutive scheme years ending up to 13 years before scheme leaving date.

Final Pensionable Earnings (Classic scheme)

Classic Final Pensionable Earnings are the best consecutive twelve months' pensionable earnings during the last three years of scheme reckonable service ('stepping back' in 91 day periods)

Final Salary Scheme

In a final salary scheme, your pension is typically worked out as a fraction of your final salary for each year of service. 'Final salary' is generally your last 12 months' pay or your best 12 months in your last few years of service.

Guaranteed Minimum Pension (GMP)

The Civil Service Pension Scheme was contracted out of the State Earnings Related Pension Scheme (SERPS) prior to 6 April 2016. If you were a member of the Civil Service Pension Scheme between 6 April 1978 and 5 April 1997, GMP is the minimum amount that the scheme must provide for you at State Pension age (SPA).

HMRC

Her Majesty's Revenue & Customs (formally the Inland Revenue).

Ill Health Retirement

Being awarded a pension due to being too ill to continue to work.

Injury Benefits Scheme

A scheme that pays you money if you are injured or become ill as a result of your work.

Inverse Commutation

For Classic members there is an option to convert some or all the lump sum to extra pension, this is called Inverse Commutation.

Lifetime Allowance

The maximum amount of pension saving you can build up over your life that benefits from tax relief. If you exceed the Lifetime Allowance you will have to pay a tax charge.

Linking

An option that is available to anyone who is newly appointed by an RCPS employer, enrolled in Nuvos and already has a preserved RCPS pension based on final salary benefits. It is a means of joining the RCPS memberships together. Please see the Linking and Aggregation page for more information.

Maximum Accrual

The maximum number of years of pensionable service that you can build up. classic and premium allow members to build up 45 years' service. Nuvos members can build up a pension of 75% of pay.

Maximum Lump Sum

The maximum cash you can take from your pension benefits when you retire. HMRC determine this as being the lower of: 25% of the available lifetime allowance or 25% of the capital value of your benefits to be paid.

Member

A person who is currently employed by an RCPS employer/organisation and is contributing towards an RCPS pension.

Normal Pension Age (NPA)

The age at which pension benefits can be claimed without an actuarial reduction for early payment, and without an actuarial enhancement for late payment.

Pension

An annual amount of income paid once you have retired from the Scheme.

Pension Benefit

The pension (and lump sum) you receive after your retirement, or your dependents receive after your death.

Pension Fund

A pension fund is usually made up of shares and other financial products. The RCPS is not backed by a fund; it operates on an unfunded, pay-as-you-go basis with pensions paid from a combination of member and employer contributions and taxpayer funds.

Pension Sharing Order

An order made in accordance with the provisions of Chapter I of Part IV of the Welfare Reform and Pensions Act 1999 which makes provision for the pension rights of a scheme member to be split on divorce.

Pensionable Pay

The amount of your salary that is used to calculate the amount of contributions you pay.

Pensionable Earnings

The member earnings used by schemes to determine the benefits payable at pension age.

Personal Pension

A separate pension that you can take out to save towards your retirement.

Preserved Benefits / Preserved Award

A pension (and retirement lump sum) that is due to be paid at a later date, normally your Normal Pension Age.

Preserved Members

People who have left the Scheme but have not yet taken their pension. These members are also sometimes referred to as having deferred benefits.

Qualifying Service

The service that counts towards qualification for benefits. i.e. Date of Joining the scheme to last day of service. Minimum service needed to qualify is 2 years and can include any transferred in service from previous schemes.

Reckonable Service

The service on which the calculation of a members benefits is based. Part time service will count on the basis of the actual hours worked. A service credit resulting from a transfer of pension rights from a previous scheme adds to your reckonable service.

State Pension

A pension paid when you reach State Pension Age based on your National Insurance payments or credits.

State Pension Age

The earliest age you can get your State Pension. It is based on your date of birth. Currently 65 for men and in 2018 it increases to 65 for women (phased in from April 2010). From 2020 both men and women's state pension age will be 66, increasing to 67 between 2026 and 2028.

State Second Pension

A separate part of the State pension based on the amount of your earnings since 6 April 1978 on which you have paid National Insurance contributions. Before April 2002, the Second State Pension was known as the State Earnings Related Pension Scheme (SERPS). Individuals retiring after 6 April 2016 will receive the new single state pension. The RCPS was contracted out of the state second pension scheme but this ended on 6 April 2016.

Tax Relief

Pension contributions to registered pension schemes attract tax relief. For members of defined benefit schemes, contributions are typically deducted from pay and tax relief is provided by calculating PAYE tax on pay after deduction of pension contributions.

Transfer

Moving your pension benefits into or out of a registered pension scheme.

Transfer Value

The cash value of benefits held under a registered pension scheme that could be transferred out.

Widow(er)

The person to whom a member is legally married when the member dies.