Added Years
A type of Additional Voluntary Contribution which enables you to ‘buy' extra
years of service to enhance your final salary scheme. This means that your years
of service with your employer can be increased to give you a bigger pension based
on your final salary. <back>
Additional Voluntary Contributions
Your company pension plan must also offer you the opportunity
to make Additional Voluntary Contributions (AVCs). These are regular
or lump sum payments into your existing pension fund, which will
enhance your final income on retirement. <back>
Annuity
When you buy an annuity you are exchanging a lump sum for income in the future.
Unlike other investments, however, an annuity usually only pays out until you
die although you can have an option for guaranteed periods. There are several
types of annuity, designed to meet differing investor needs. <back>
Basic State Pension
For people who have paid sufficient relevant National Insurance contributions
while at work. <back>
Earmarking
An option on divorce for the settling of pension rights, whereby a percentage
of the pension benefit is set aside for the ex-spouse, also known as deferred
maintenance. <back>
Earnings Cap
The maximum salary on which you can base contributions to, and receive benefits
from, a tax approved pension scheme is £97,200 (year ending April 2003).
It only applies if you:
- contribute to a personal pension scheme (including
stakeholder arrangements);
- joined an occupational scheme set up since 14
March 1989; or
- joined any occupational scheme from 1 June 1989,
which was set up before 14 March 1989.
<back>
Equivalent Value
An option on divorce that involves valuing the pension rights accumulated during
the marriage. They are included in the total value of the assets to be split.
Pension rights are therefore traded off against other assets. <back>
Family Income Benefit
Life assurance that pays out a regular income rather than a lump sum, if you
die within the term. The income is paid until the term expires. <back>
Final Salary Schemes
An employer's pension scheme where your retirement benefits depend on the number
of years you've worked for the company and your final salary shortly before leaving
that employer. <back>
Free Standing Additional Voluntary Contribution (FSAVC) plan
These are similar to AVCs, but managed by an outside pension provider instead
of by your company's scheme. You can only establish an FSAVC plan if you are
a member of a company pension scheme. FSAVCs tend to be more flexible, allowing
you to add money whenever you want. However more of your money may get swallowed
up with administration charges than if you paid an AVC through your company's
Scheme. For this reason, for most people AVCs are a better deal. <back>
Group Personal Pension Plans (GPPs)
These are normal personal pensions, but are arranged as a group often by the
employer. As such, they can offer reduced charges or the employer may even pay
all the charges. Some GPPs offer special benefits such as free levels of life
cover or reduced underwriting terms, some of which may be lost if you change
employers. Many employers will contribute to a GPP, but unlike an occupational
pension scheme, they do not have to do so. <back>
Insurable Interest
The proposer must have some form of financial dependency on the life assured
when the contract is taken out. Where the proposer is the life assured or spouse,
there is an unlimited insurable interest, otherwise the interest is limited to
the value of the financial dependency. <back>
Maturity
The word used to describe the date, other than when a claim is made, on which
a contract taken out for a specific length of time becomes payable by the product
provider. <back>
Money Purchase Scheme
An employer's pension scheme where your retirement benefits depend on the amount
you've paid in, how much the investments have grown and annuity rates when you
retire. <back>
National Insurance
A form of taxation which you pay as you earn, used to fund certain state benefits. <back>
Occupational Pension
An employer's pension scheme. <back>
Pension Contribution Insurance (PCI)
This is a standalone contract linked to a personal pension arrangement. It is
intended to ensure that the value of your pension at retirement is maintained
on your behalf. PCI will ensure that your full pension contributions continue
to be paid in the event of inability to work due to illness or injury. It pays
the pension contributions until the selected retirement date or your subsequent
return to employment. The product provider ensures payment into the pension.
Currently, no providers make PCI available to persons who do not have a pension
arrangement with them. <back>
Pension Splitting
In a divorce settlement, this is where a share of the scheme member's rights
within the scheme transfers to the divorcing spouse. The ex-spouse could then
either retain benefits within the scheme or transfer them out, for example, to
a personal pension plan. <back>
Personal Pension
If you are self-employed or not a member of an employer's company scheme, you
may opt for a personal pension plan. <back>
Premium Holidays
Some personal pension plans also allow you to suspend premium payments, providing
an element of flexibility for the future. <back>
SERPS
State Earnings Related Pension Scheme - additional state pension entitlement
built up by people earning more than the minimum on which National Insurance
has to be paid (this is not available in respect of self-employed income). The
State Second Pension replaced SERPS on 6th April 2002. <back>
Stakeholder Pension
The name given to the new personal pension, introduced by the Government in April
2001. These are low cost contracts permitting contributions of up to £3,600
pa without the need for earnings. Those who do earn can pay the same amount as
presently permitted under personal pension plans if higher. Certain individuals
in existing employer's schemes will also be allowed to contribute at the same
time into these plans. <back>
State Second Pension (S2P)
The name given to the new additional state pension which replaced SERPS on 6th
April 2002. S2P is intended to provide a more generous state pension for people
on low or moderate earnings and for carers and people with a long-term illness
or disability. <back>
Stock Market
Where stocks and shares and bought and sold. <back>
Term Assurance
An insurance policy that pays a fixed amount of money if you die during the term
of the policy.
The Financial Services Authority does not regulate advice on all term assurance
contracts, although it does regulate the financial soundness of insurance companies. <back>
Unit Linked
Your contributions buy units in the selected fund. The value of the units depends
on the underlying assets in the fund. Consequently the value of your fund can
go down or up. There is a wide range of funds to choose from: some are relatively
low risk and others can be very speculative. <back>
Whole of Life Assurance
as the name suggests, can provide life cover without imposing a limited term. <back>
With Profit
At the end of each year the company declares two types of bonus - the reversionary
bonus and the terminal bonus. The reversionary bonus is added to the value of
the fund and is guaranteed to be paid at either maturity or on the earlier death
of the life assured. The terminal bonus is paid to policies which mature during
the following year (or those where the life assured dies). <back>
Hedgelands Financial Services Ltd, Hedgelands, Abbotskerswell, Newton
Abbot, TQ12 5PW
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Telephone
0845
165 1280
General Insurance
0845 165 1281
Fax
01626 332622
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