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Glossary

A glossary of terms for the the Institute of Chartered Accountants’ Staff Pensions Fund (the SPF).

Contents

A

  • Annual Allowance

    The maximum amount of pension contributions you can invest in any tax year while still receiving tax relief.

  • Annual Management Charge (AMC)

    The charge to cover set up and management costs, administration, and day-to-day fund management.

  • Annuity

    An annuity is a financial product that in exchange for a single lump sum payment will provide you with an income for the rest of your life you can use all or part of your pension fund to buy an annuity from an insurance company.

  • Automatic Enrolment

    Automatic Enrolment was introduced by the government to encourage people to save more for their retirement. employers will automatically enrol their eligible employees into their pension scheme. employees then have the option to opt out.

B

  • Beneficiary

    A person (or persons) to whom a pension member would like their benefits to be paid in the event of the members death.

  • Benefits

    The proceeds derived from your pension policy where you decide to access your accrued money and choose your retirement option(s) – e.g. purchase of an annuity, going into flexi-access drawdown, taking your fund as cash (Uncrystallised Funds Pension Lump Sum/s) etc.

C

  • Contributions

    A payment into your pension plan made by you, your employer or any other person.

D

  • Deferred members

    These are members who are no longer paying into the Fund, and who are no longer employed by the ICAEW.

  • Defined Contribution Pension

    A pension arrangement into which the member and or their employer pay agreed amounts of money, which is invested to provide a value at retirement from which an income can be taken. The future value of the fund (and hence income) is not known in advance.

E

  • Employed 2010 Members

    This refers to members who stopped paying into the Fund and building up pensionable service as at 30 June 2010, when the Fund closed to new members, but who are still employed by ICAEW.

G

I

  • Income tax

    The amount of tax you pay from your earnings.

  • Inflation

    This is the increase in the cost of living overtime. Inflation means the value of money reduces over the years. So, if you choose a level annuity - that is, one that does not increase year by year - overtime it will gradually buy you less and less, as the price of everything else increases.

L

  • Lifetime Allowance

    The Lifetime Allowance is a limit on the value of pay-outs from your UK registered pension(s) - whether lump sums or retirement income - that could be made without triggering an extra tax charge. In the event of death-in-service, any lump sum benefit paid from an employer’s UK registered Life Assurance Scheme would also count towards your Lifetime Allowance limit.

N

  • Normal Pension Age

    Although there is no age at which members must start to receive their pension from the Fund, the Fund needs a Normal Pension Age (NPA) to use as a guide, so we can calculate benefits due to members. Different schemes will have different NPAs. Your NPA in this Fund is based on when you left pensionable service, that is the date you stopped building up benefits in the Fund:

    • If you left pensionable service before 1 November 1987, your NPA is 60 if you are a woman, and 65 if you are a man.
    • If you left pensionable service between 1 November 1987 and before 14 August 2006, your NPA is 62 whether you are male or female.
    • If you left pensionable service from 14 August 2006 your NPA is age 65.

P

  • Pension Commencement Lump Sum (Tax-Free Cash)

    A lump sum available to members when they take their pension benefits, normally up to 25% of the value of their pension pot. Taking a lump sum means that the amount left to buy an annuity or use for drawdown will reduce. The lump sum is paid free of tax.

  • Pension Fund

    A pot of money you have built up to provide your benefits. 

  • Pensioner members and dependents

    These members are currently receiving a pension from the Fund.

S

  • State Pension

    The State Pension is a regular payment from the Government that you can get when you reach State Pension Age. To get it you must have paid or been credited with a certain level of National Insurance Contributions.

  • State Pension Age (SPA)

    The age at which an individual becomes entitles to receive their State Pension. This can vary depending on the individuals age and/or gender.

  • Statement of Investment Principles

    A written statement of the principles governing decisions about investment for an occupational pension scheme, which trustees are required to prepare and maintain. Trustees must have regard to advice from a suitably qualified person and consult with the employer.

T

  • Tapered Annual Allowance

    New legislation introduced from 6 April 2016 affecting anyone with ‘threshold income’ above £200,000 per annum and adjusted income above £240,000 per annum. For those impacted, the Annual Allowance, which is £40,000 for 2020/21, is reduced on a sliding scale up to a maximum reduction of £36,000 (resulting in a tapered Annual Allowance of £4,000 for someone who has adjusted income of £312,000 or more).

  • Tax Relief

    A tax concession given in respect of employee payments into a pension scheme. The effect of this relief is that the actual amount paid to the pension provider will be increased when applied to the individuals pension contract. Payments made via salary sacrifice obtain this relief by being deducted before Income Tax is calculated.

  • Transfer

    You can transfer the value of some pensions between providers.

V

  • Volatility

    The level of unpredictable change over a period of time, normally short term, in the investment market.