Glossary
This section should help you understand some of the terms mentioned in this website and in relation to the Financial Assistance Scheme. It is not intended to replace or modify any definitions found elsewhere, such as laws, regulations, forms and instructions, or scheme rules.
A
Accrual Rate – In a defined benefit pension 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.
Active Member – This is a person who is in pensionable service under an occupational pension scheme.
Administrator – This is a person who is responsible for the day-to-day administration of the pension scheme.
Annuity – This is an investment of money, which entitles the investor to a series of equal annual sums.
Assets – These are everything that the trustees hold for the pension scheme. They can include investments, bank balances and any amounts owed to the scheme.
B
Beneficiary – This refers to all qualifying members of qualifying pension schemes including deferred members, active members, pensioner members, ‘inherited members’ and ‘pension credit’ members. ‘Beneficiary’ also refers to eligible survivors of qualifying members of qualifying pension schemes who died after their scheme started to wind-up.
C
Civil Partner – The Civil Partnership Act 2004 is expected to come into force on 5 December 2005. This will change the way we treat same-sex couples. When that happens, people of the same sex who have formed a civil partnership will be treated, as far as possible, in the same way as a married couple. Same sex couples who are living together as civil partners (but who have not formed a civil partnership) will be treated in the same way as unmarried couples.
Compromise Agreements – This is a legally binding agreement where the trustees of an under-funded pension scheme accept an amount that is less than the debt owed by the employer to the scheme.
The Financial Assistance Scheme will cover members of schemes that began winding up between 1st January 1997 and 5th April 2005 where a compromise agreement is in place and enforcing the statutory debt against the employer would have forced the employer into insolvency.
Contracted Out Pension Scheme – This is a pension scheme that undertakes to provide certain benefits to members, their widows or widowers, in place of those provided by the State Earnings Related Pension Scheme (SERPS). Lower National Insurance Contributions are paid by or in respect of members of a contracted out scheme and they do not participate in SERPS for that period of employment.
Core Pension Benefits – These are the benefits that a pension scheme promised to pay a member in full on retirement.
D
Deemed Buyback – Members of a contracted–out pension scheme may in certain circumstances be able to opt to have some or all of their State Scheme Rights restored. This process is called ‘Deemed Buyback’.
Deferred Member – A member who is no longer an active member but
who still has benefits preserved in the scheme which will be payable at
a later date. The member may have left the service of the employer, or
may have opted out of the scheme.
Defined Benefit Pension Scheme (DB) – These are
schemes where members’ benefits are determined by a formula, usually
involving pay and/or service with the employer. The most common type
of defined
benefit scheme is a final salary scheme.
Defined Contribution Pension Scheme (DC) – These are schemes where members’ benefits are calculated by reference to 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 type of scheme is also called a money purchase scheme.
I
Independent Trustee (statutory) – A trustee appointed in accordance with sections 22-26 of the Pensions Act 1195, to a scheme where an insolvency practitioner has been appointed over an employer.
Independent Trustee (non statutory) – A professional trustee unconnected with the employer and not a scheme member. Can be a corporate trustee company or an individual. Their business is to provide trusteeship and trustee services to a number of unrelated and non–associated pension schemes.
Indexation – This is a way in which pensions in payment and/or preserved benefits are increased at regular intervals by reference to indexes of prices or earnings.
Inherited Member – Where a member of a pension scheme dies BEFORE the start of windup, their scheme benefits may have been passed to a nominated beneficiary. For FAS purposes this person effectively becomes the member of the scheme and is called an ‘inherited member’. However, survivors of inherited members will not qualify for FAS payments on the death of the inherited member.
Interested Person - An "interested person" is a potential beneficiary of a pension scheme or their representative, and where a pension scheme has not completed winding up the trustee or manager of that scheme. If you think you meet this definition and you have some information that you think the Financial Assistance scheme manager should consider in connection with an ongoing review please send your written representations to the scheme manager.
Initial Payment – Where a member reaches age 65, but their scheme is still winding up, they may be entitled to early payments of FAS. These are known as ‘initial payments’ and will top up whatever interim payments are being made by the scheme. There is no right of review against the amount paid (even if the FAS decision is not to pay anything).
Insolvency Events – These are the insolvency events set out in the Financial Assistance Scheme Regulations. [see the FAS regulations or leaflet FAS P2 for more details]
L
Liabilities – These are amounts, which a pension scheme will have to pay now or at some time in the future. The most common liability is paying members’ pensions.
M
Member Appointed Representative – This is a representative appointed by the beneficiary to act on their behalf (eg appointee etc).
N
Non-Departmental Public Body – This is a body, which has a role in the processes of national government, but is not a government department, or part of one, and which operates at arm's length from Ministers.
Normal retirement age – This is the age specified in the scheme rules as the age at which a member will normally retire. Inland Revenue Guidance states that it is a condition of tax approval that the rules of a scheme should specify a single age for each member at which that member will normally retire.
O
Occupational Pension Scheme – This is a scheme organised by an employer to provide pension benefits for their employees.
P
Pension Credit – This is the amount of benefit right that the ex-spouse of a scheme member becomes entitled to following a pension sharing order.
Pensioner Member – This is someone who has retired from the scheme and is currently receiving, or entitled to receive, a pension from the scheme.
Pension Schemes Office Number (PSO) – The PSO was the Inland Revenue department that approved pension schemes under the relevant tax legislation. Each scheme that is submitted is given a number, known as the PSO number.
Professional Advisor – Any auditor, actuary, fund manager or legal advisor appointed by scheme manager or trustees.
Q
Qualifying Insolvency Event – This is an insolvency event, which meets the requirements set out in the Financial Assistance Scheme Regulations [see the FAS regulations or leaflet FAS P2 for more details].
Qualifying Member – For the purposes of FAS this is a member as defined in the Financial Assistance Scheme Regulations (Regulation 12).
Qualifying Pension Scheme – For the purposes of FAS
this is a pension scheme as defined in the Financial Assistance Scheme Regulations
(Regulation
9).
R
Retail Prices Index – The general index of retail prices (for all items) published by the Office for National Statistics.
Revaluation – When used by schemes revaluation refers to increases to pension rights in deferment, i.e. between the time the member leaves the scheme and the start of their pension payment. The FAS will also revalue deferred pension rights and will revalue the amount that qualifying members stand to receive from the date it is calculated to the date that it is paid.
S
Scheme Appointed Representative – This is a representative appointed by the beneficiary to notify the scheme manager of the details prescribed.
Scheme Manager – This is the Secretary of State for the Department for Work and Pensions acting in his capacity as manager of the Financial Assistance Scheme.
Scheme Professional – This may be the trustee, administrator, insurer or professional advisor depending upon the circumstances of the scheme and the information required. In the case of schemes that are in the process of winding up the trustee is usually the point of contact. For schemes that have completed the winding up process it may be necessary to approach all parties who were involved in the wind up in order to secure the information required.
Survivor – A FAS survivor is either a spouse or a civil partner (from December 2005 when the new law comes into force) of a qualifying member of a qualifying scheme. Survivors will receive a total income from the qualifying pension scheme and the FAS, equivalent to at least 50% of the total income the member would have received had they lived.
T
TPR (OPRA) number – This is The Pension Regulator (TPR) number and it is a number (usually 8 digit) issued to schemes once they have registered with The Pension Regulator. The TPR number used to be known as the OPRA number.
Trustee – A trustee is a person or Company acting separately from an employer, who holds assets for the beneficiaries of the scheme. Trustees are responsible for ensuring that the pension scheme is run properly and that members’ benefits are secure. They must follow the laws that apply to trusts.
W
Wind-Up – A wind-up occurs when a scheme is terminated and the assets are used to secure members benefits elsewhere, often by the purchase of immediate and deferred annuities from an insurance company. When wind-up has been completed the scheme ceases to exist.
Wound-Up – This is where the scheme ceases to exist and liabilities have been discharged.