Alternative secured pension - an alternative to buying an annuity at age 75. It allows your clients to draw an income from their pension fund while leaving the fund invested
Annual allowance - there is no limit to the amount of contributions which can be paid to a pension plan. However, a 40% tax charge is payable where total contributions, made to all registered pension schemes (or the increase in value of defined benefits) in a year, exceed a set amount called the 'annual allowance'. The annual allowance has been set at £235,000 for the 2008/2009 tax year, increasing to £255,000 by the 2010/2011 tax year. It is then expected to increase further.
Annuity - a product issued by insurance companies which converts your client's pension fund into a pension income. There are different annuity types to suit different circumstances.
Appropriate personal pension scheme - a personal pension scheme that can accept National Insurance rebates where a member is contracted-out of the State Second Pension and can accept Protected Rights included as part of a transfer payment.
Benefit crystallisation event - a defined event, such as the commencement of income withdrawal or the purchase of an annuity, that triggers a test of the value of benefits taken against the Lifetime Allowance.
Beneficiaries - the persons who will receive a pension income benefit under the policy following the policy holder's death.
Commission - the payment that you receive for arranging and advising your clients about their plan.
Company pension scheme/occupational pension scheme - a pension scheme set up by a company or employer to provide benefits for employees (or groups of employees).
Contracted out - individuals are contracted-out if they are in employment which is contracted-out by reference to an occupational pension scheme or have elected to contract-out via an appropriate personal pension scheme, or a Stakeholder Pension scheme.
Conventional annuity - an annuity which provides a regular income on a set basis for life. Once the annuity has started the basis cannot be changed.
Crystallised funds - pension funds that have been used to provide benefits for a member (e.g. to provide an income through income withdrawal or used to purchase an annuity).
Defined benefits - where a pension scheme provide a set level of benefits for its members. For example, a pension of 1% of earnings at retirement for each year of service with the employer, with a dependant's pension of one-half of the member's pension.
Dependant - a husband, wife, civil partner, child under 23, child over age 23 and dependant on your client because of physical or mental impairment, or any other person who is dependant on your client either financially or because of physical or mental impairment.
Dependant's guarantee period option - an option to provide a continuing income for your client's spouse, civil partner, dependant or another nominated person if your client dies within a selected period of five or ten years of their investment in the policy for the remainder of the selected period.
Evidence of health procedure - our standard procedure for determining whether an i2Live Annuity policyholder, or joint annuitant is an impaired life for the purpose of transferring a tranche segment to an annuity with another insurance company or friendly society.
Excess funds - fund in excess of the Lifetime allowance on which a tax charge is payable.
Free-standing additional voluntary contributions schemes - employee contributions that are made to a pension provider under the terms of a company pension scheme, but are entirely separate from the company pension scheme.
Guaranteed minimum pension - the minimum pension provided by a company pension scheme for a scheme member who was contracted-out of SERPS up to 6 April 1997.
Impaired life - someone whose life expectancy, in our opinion, is significantly lower than average as defined in our Evidence of Health Procedure current at the time a request for a transfer of a tranche segment to an annuity with another insurance company or friendly society is made.
Income withdrawal - another alternative to buying an annuity. It allows your client to draw an income from their pension fund up to age 75 while leaving the fund invested. (Also known as unsecured pension or income drawdown).
Joint life option - this enables a pension income to continue to a dependant on the policy holder's death.
Lifetime allowance - an overall limit on the value of pension benefits from all pension schemes. If the value of pension benefits exceeds this limit, then a tax charge will be made by HM Revenue & Customs on the excess amount.
Lifetime annuity - an annuity contract purchased from an insurance company of your client's choosing that provides your client with an income for life, and which meets the conditions imposed through paragraphs three, schedule 28 of the Finance Act 2004 (as amended).
Maximum supportable income - the maximum income that we calculate can be maintained by your client's pension fund for the rest of their life. This is based on assumptions including future life expectancy and investment returns.
Mortality credit - a credit added to your client's fund from the unused funds of other i2Live Annuity holders on their death.
Mortality cross-subsidy - annuity rates are set with the knowledge that some people will die before their average life expectancy and some will live beyond it. The unused funds for those who die earlier than expected help to pay annuities for those who live on. This process is called mortality cross subsidy.
Mortality drag - if your client does not use an annuity to provide a pension income they will not benefit from mortality cross-subsidy. To compensate for losing the mortality cross-subsidy your underlying investments need to grow by an extra amount.
Non-protected rights - the pension fund built up from payments that do not represent Protected Rights or Safeguarded Rights.
Occupational pension scheme - a registered pension scheme set up by a company or employer to provide benefits for employees (or groups of employees).
Open market option (OMO) - your client's right to shop around and buy their annuity from the company offering the best deal for them.
Pension commencement lump sum (PCLS) - HM Revenue & Customs allows your clients to take part of their pension fund as a cash sum, currently tax-free, when they take a pension income. It is normally 25% of the fund from which income is being taken but may be different for some pension plans.
Pension credit - the benefits to which a former spouse or civil partner of an individual become entitled following a pension sharing order.
Pension income - the income your client gets from their pension savings either by buying an annuity or through income withdrawal (or alternatively secured pension).
Pension sharing order - an order made in accordance with the Welfare Reform and Pensions Act 1999 which allows rights to be split on divorce or on formal dissolution of a civil partnership.
Personal pension - a pension set up in an individual's own name.
Phased retirement - the movement of funds in stages, usually from a personal pension (such as i2Live Accumulator) to income withdrawal or annuity purchase, to meet income needs (e.g. to phase retirement as working hours are gradually reduced).
Protected rights - the pension fund built up from payments received as a result of being contracted-out of the State Second Pension (or previously SERPS)
Registered pension scheme - a pension scheme which is registered with HM Revenue & Customs.
Retirement annuity contract - a type of personal pension which could only be started before 1 July 1988.
RU55 - this regulatory update details the continuous professional guidance notes and guidance on illustrating critical yields in respect of financial advisers providing advice on income withdrawal. Full details can be found at http://www.fsa.gov.uk/pubs/additional/RegUp55.pdf.
RU67 - this regulatory update details the requirements for record keeping, information given to investors on risk factors and continued professional development in respect of financial advisers providing advice on income withdrawal. Full details can be found at http://www.fsa.gov.uk/pubs/additional/RegUp67.pdf.
Safeguarded rights - the benefits to which a former spouse or civil partner of an individual becomes entitled following a pension credit awarded after a pension sharing order which is attributed to an individual's contracted-out benefits.
Section 32 contract - an individual contract to which pension benefits from a company pension scheme can be transferred. These contracts generally provide greater flexibility and personal control than under a company pension scheme while providing minimum pension guarantees.
Stakeholder pension - a type of personal pension scheme that has to meet minimum standards set down in law.
State second pension - The second tier of the State Pension, paid in addition to the basic State Pension, from which your clients can contract-out.
State Earnings Related Pension Scheme (SERPS) - a previous second tier of State Pension now replaced by the State Second Pension.
Transfer value/transfer payment - the value of your client's pension benefits transferred from one registered pension scheme to another.
Uncrystallised funds - pension funds that have not yet been used to provide a benefit (e.g. a pension income through income withdrawal or an annuity) and so have not been crystallised.
Unsecured pension - an alternative to buying an annuity. It allows your clients to draw an income from their pension fund up to age 75 while leaving the fund invested. There are two types of unsecured pension - income withdrawal as explained previously and a short-term annuity.
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