MMPS Jargon buster

Contained in this section are some terms and names associated with pensions in general. However, you may come across some of these terms at any time and the purpose of this glossary is to provide you with a brief understanding of their meaning. You will also find some ACRONYMS at the end of the glossary which you may find useful.

Accrual Rate - the rate at which a scheme member's benefits build up for each year and part year of scheme membership (1/70th of the standard stipend for membership before 1st September 2010 - 1/80th of the standard stipend for membership from 1st September 2010).

Active Member - (also called Contributor Member, Current Member or just Member) - an employee who is currently making contributions to MMPS.

Actuarial Reduction - the amount by which a scheme member's pension and lump sum benefits are reduced if they are withdrawn before the date of normal retirement.

Actuarial Valuation - a three yearly valuation of the Fund undertaken by the Actuary to ensure that the Pension Fund is sufficiently well managed and that its assets meet its liabilities. Employer contribution rates are set as part of the valuation process.

Actuary - a professionally qualified independent person appointed by the Trustee to assess the contributions required for the scheme to meet its liabilities.

Additional Voluntary Contributions (AVCs) - contributions over and above your normal contributions to provide additional  benefits upon retirement.  

Annual Allowance Charge - the maximum value of pension benefits, including AVCs that HMRC allows you to build up in any year without receiving a tax charge.  

Annual Pension - (also called basic pension, yearly pension) - calculated by reference to final standard stipend and scheme membership (including any transferred in service) payable for life.

Approved Scheme - a scheme approved under Chapter 2 Part 4 of the Finance Act 2004 thereby granting tax relief on contributions paid.

Beneficiary - a person to whom payments from MMPS are due.

Child(ren)'s Pension - pension payable to a member's dependant child or children if aged under 18 or up to age 23 if still in full time education or training.

Civil Partnership - a civil partnership is a relationship between two people of the same sex ("civil partners") which is formed when they register as civil partners of each other.

Cohabiting Partner - a member who has been contributing to the Scheme at some point since 1 April 2008, can nominate a cohabiting partner, of either the opposite or same sex, to receive a partner's pension. Both partners have to sign a joint declaration and satisfy certain conditions.

Commutation - (also called Conversion of Benefits) - exchanging part of your pension for  cash sum at retirement (under current legislation the cash sum is tax-free).

Death Grant - an amount paid to a current or former member's estate or nominated beneficiary(ies) in the event of death in service (equal to three times annual pensionable stipend), death after retirement (equal to the balance of 5 years worth of pension where the death occurs before the age of 75) or death of a deferred beneficiary (a multiple of the deferred pension plus pension increases).

Deferred Benefits - (may also be called preserved 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.

Defined Benefit Scheme - (also called Final Salary scheme) a scheme whereby the benefits are defined in the rules and are not dependent upon contributions paid or on how well those contributions are invested.

Early Retirement - a term used to described the payment of pension and lump sum to a member before the member has attained normal retiring age. 

Early Retirement Factor - the amount by which a scheme members' pension and lump sum benefits are reduced if they are withdrawn before normal retiring age.

Earmarking - a term used for the part of a divorcing member's benefits which is earmarked for his or her former spouse upon completion of the divorce in accordance with a Court Order (see also Pension Credit and Pension Debit).

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 Trustee has ultimate discretion when releasing death grant payments.

Free Standing Additional Voluntary Contributions - similar to AVCs but the contributions are paid to a provider of the member's choice and not to the in-house AVC scheme.

Index Linking - a term used to describe the inflation proofing benefits.

Internal Disputes Resolution Procedure (IDRP) - a complaints procedure governed by regulation providing any current or former scheme member with the opportunity to settle any dispute or complaint they may have in respect of any decision made regarding their entitlements under scheme rules.

Lifetime Allowance Charge - the tax payable on the value of any benefits in excess of the lifetime allowance.

Money Purchase Scheme - (also called Defined Contribution or DC) a scheme that uses the contributions paid by the member (and the employer if any) to calculate the benefits payable rather than the member's final stipend and membership. 

Nomination of Beneficiary - see Expression of Wish.

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 Input Amount - the total value of the increase in benefit for DB schemes during the pension input period.

Pension Input Period - a period of 12 months during which contributions are paid (1 September to 31 August).

Pension Sharing - the splitting of a member's benefits upon divorce.

Pensions Increase - the amount by which benefits are increased annually and based on movement in the Retail Prices Index during the 12 months to September.

Preserved Benefits- see Deferred Benefits.

Spouse's Pension - the pension paid at the date of death of a scheme member to their legal spouse or civil partner.

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 for members of not-contracted-out pension schemes and therefore paid 'A' rate National Insurance contributions.

State Second Pension (S2P) - The earnings related part of the state pension payable in addition to the basic state pension as long as you have not contracted out.

Surrender of Pension - the term used when a member elects to give up part of his or her pension in favour of a chosen beneficiary.

Transfer Value - the actuarial value of a member's benefits paid to another arrangement upon leaving as an alternative to a deferred pension or a refund of contributions.

 

        ACRONYMS


AA Annual Allowance
AVC Additional Voluntary Contribution
CETV Cash Equivalent Transfer Value
CPI Consumer Prices Index
DWP Department of Work & Pensions
FSAVC Free Standing Additional Voluntary Contribution
HMRC Her Majesty's Revenue & Customs
IDRP Internal Disputes Resolution Procedure
LA Lifetime Allowance
NRA Normal Retirement Age
NRD Normal Retirement Date
PI Pensions Increase
PIA Pension Input Amount
PIP Pension Input Period 
S2P State Second Pension
SERPS State Earnings Related Pension Scheme
SPA State Pension Age
TPAS The Pensions Advisory Service (formerly OPAS)
TV Transfer Value

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