Glossary of pension terms

Glossary of terms
Additional Voluntary Contributions (AVCs)These are extra payments to increase your future benefits. You can also pay AVCs to provide additional life cover.All local government pension funds have an AVC arrangement in which you can invest money through an AVC provider, often an insurance company or building society. AVCs are deducted directly from your pay and attract tax relief.
Admission BodyAn admission body is an employer that chooses to participate in the scheme under an admission agreement. These tend to be employers such as charities and contractors.
Assumed Pensionable PayThis provides a notional pensionable pay figure to ensure your pension is not affected by any reduction in pensionable pay due to a period of sickness or injury on reduced contractual pay or no pay, or relevant child related leave or reserve forces service leave. To see how this works refer to the section away from work
Assumed pensionable pay is also used to work out any enhancement to your pension awarded as a result of ill health retirement, any lump sum death grant following death in service, and any enhancement which is included in survivor benefits following death in service. To see how this works refer to the ill health retirement section.
Automatic Enrolment DateThis is the earlier of, the day you reach age 22 provided you are earning more than £10,000 (2016/17 figure) a year in the job, or the beginning of the pay period in which you first earn more than £10,000 (2016/17 figure) in the job, on an yearly basis, provided you are aged 22 or more and under State Pension Age at that time. See the section on automatic enrolment for more information.
Civil PartnershipA 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.
Club Transfer RulesClub transfer rules allow certain occupational pension schemes, mainly public service pension schemes, to calculate transfers on a special terms. See the section transferring in for more information.
Contracted OutThe LGPS was contracted out of the State Earning Related Pension Scheme (SERPS) and the State Second Pension (S2P) from 6 April 1978 to 5 April 2016. This meant that most people (up to their State Pension age) paid reduced National Insurance contributions for this period. For more information see the section increases from State Pension age.
Consumer Price Index (CPI)The Consumer Price Index (CPI) is the official measure of inflation of consumer prices in the United Kingdom. This is currently the measure used to adjust your pension account at the end of every scheme year when you are an active member of the scheme and, after you have ceased to be an active member, it is used to increase (each April) the value of your deferred pension in the scheme and any pension in payment from the scheme. The adjustment ensures your pension keeps up with the cost of living.
Designating BodyDesignating bodies are bodies which can designate employees for access to the scheme. Employees of town and parish councils, voluntary schools, foundation schools, foundation special schools, federated schools, technical institutes, Transport for London, and the Children and Family Court Advisory and Support Service, among others, can be designated for membership of the scheme.
DiscretionThis is the power given by the LGPS to enable your employer or your pension fund administering authority to choose how they will apply the scheme in respect of certain provisions. See the section what to expect from your pension fund & employer for more information.
Eligible ChildrenSee the section eligible child for a definition.
Eligible Cohabiting PartnerSee the section eligible cohabiting partner for a definition.
Eligible JobholderAn eligible jobholder is a worker who is aged a least 22 and under State Pension Age and who earns more than the annual amount of £10,000 (2016/17 figure).
Final PayThis is usually the pay in respect of (i.e. due for) your final year of scheme membership on which you paid contributions, or one of the previous 2 years if this is higher, and includes your normal pay, contractual shift allowance, bonus, contractual overtime (but not non-contractual overtime), Maternity Pay, Paternity Pay, Adoption Pay, Shared Parental Pay and any other taxable benefit specified in your contract as being pensionable. If you were part-time for all or part of the final year the whole-time pay that you would have received if you had worked whole-time is used and if your pay in your final year was reduced because of sickness or relevant child related leave, final pay is the pay you would have received had you not been on sick leave or relevant child related leave.
Guaranteed Minimum Pension (GMP)The LGPS guarantees to pay you a pension that is at least as high as you would have earned had you not been contracted out of the State Earning Related Pension Scheme (SERPS) at any time between 6 April 1978 and 5 April 1997. This is called the Guaranteed Minimum Pension (GMP).
Local GovernmentThe term local government in this booklet also covers police and fire civilian staff, a coroner, civil servants engaged in probation provision, a Mayoral development corporation, a conservation board, a valuation tribunal, a passenger transport authority, the Environment Agency, and non-teaching employees of an Academy employer, an Education Action Forum, a sixth form college corporation or a Further or Higher Education Corporation.
Normal Pension AgeNormal Pension Age is linked to your State Pension Age for benefits built up from April 2014 (but with a minimum of age 65) and is the age at which you can take the pension you have built up in full. If you choose to take your pension before your Normal Pension Age it will normally be reduced, as it's being paid earlier. If you take it later than your Normal Pension Age it's increased because it's being paid later. See the section when you can retire for more information.
Occupational Pension SchemeThese schemes are also called company pension schemes. It's a scheme set up by an employer to provide pension or death benefits for its employees. An occupational pension can provide pension benefits on a money purchase, defined benefits, cash balance or hybrid arrangement basis. The two most common arrangements for occupational schemes are defined benefits (such as the LGPS) and money purchase. If you leave a job you'll normally have to stop building up pension savings in that employer's scheme.
Pension accountEach scheme year the amount of pension you have built up during the year is worked out and this amount is added into your active pension account. See the section how your pension is calculated to find out how a pension account works. You will have a separate pension account for each employment. That pension account will hold the entire pension built-up for that employment. In addition to an active member's pension account there are also deferred member's, pension member's, flexible pension member's, deferred pensioner member's, pension credit member's, and surivor member's pension accounts.
Pension creditA pension credit is a share of an ex-spouse's or ex-civil partner's pension benefits, as awarded by a Court under a Pension Sharing Order, or by a qualifying agreement in Scotland, following a divorce or a dissolution of a civil partnership.
Pensionable Pay See the section pensionable pay for a definition.
Public Service Pension SchemeA public service pension scheme includes a pension scheme covering civil servants, the judiciary, the armed forces, any scheme in England, Wales or Scotland covering local government workers, or teachers, or health service workers, or fire and rescue workers or members of the police forces; or membership of a new public body pension scheme.
Relevant Child Related LeaveRelevant child related leave includes periods of Ordinary Maternity, Adoption or Shared Parental Leave (normally first 26 weeks), Paternity Leave and any periods of paid Additional Maternity or Adoption Leave (normally after week 26 weeks up week 39) or paid Shared Parental Leave.
Reserve Forces LeaveThis occurs when a Reservist is mobilised and called upon to take part in military operations. The period of mobilisation can range from three months or less and up to a maximum of 12 months. During a period of reserve forces service leave you will, if you elect to stay in the LGPS during that leave, continue to build up a pension based on the rate of assumed pensionable pay you would have received had you not been on reserve forces service leave.
Scheme YearThe scheme year runs from 1 April to 31 March each year.
SERPS (State Earnings Related Pension Scheme)This is the extra earnings related part of the state pension that employed people could earn up to 5 April 2002. LGPS members were automatically contracted out of SERPS, and most paid lower national insurance contributions as a result. SERPS was replaced by the State Second Pension (S2P) from 6 April 2002.
State Pension AgeThis is the earliest age you can receive the state basic pension. State Pension Age is currently age 65 for men. State Pension Age for women is currently being increased to be equalised with that for men and will reach 65 by November 2018. The State Pension Age will then increase to 66 for both men and women from December 2018 to October 2020. Under current legislation the State Pension Age is due to rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046. However, the government has announced plans to link rises in the State Pension Age above age 67 to increases in life expectancy. You can use the Government's State Pension Age calculator to find out your state pension age.
State Second Pension (S2P)The State Second Pension (formerly SERPS) was the additional state pension, payable to individuals from State Pension Age if they attained State Pension Age before 6 April 2016. Initially, S2P was an earnings-related pension but from April 2009 it began building up as a flat rate pension until 6 April 2016 when it was replaced with the new single tier State Pension. For information about the new State Pension click here.
Vesting PeriodSee the section vesting period for a definition.