A legally binding undertaking from the pension provider that payments to a pensioner will continue for a given term, or up to a specified amount, regardless of the pensioner’s earlier death.
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Pension liberation schemes/trust busting
Schemes under Opra investigation as they are tainted with dishonesty. Promoters advertise that they are able to turn an individual’s pension fund into an immediate tax-free cash. They often use offshore facilities, invent a fictitious employer’s identity to secure a transfer from the individual’s pension scheme and take 20-30 per cent of the fund in the process.
Pension mortgage
Interest-only mortgage where interest payments run parallel with payments into a personal pension fund. The capital is repaid out of the tax-free cash option available at retirement, usually permitted between ages 50 and 75, which period is taken into account when fixing the mortgage term.
Pension plan
Retirement program created to provide an individual with a monthly income payment for the remainder of his or her life.
Pension plan (Pensions)
A type of retirement plan designed to pay employees and their spouses with a monthly income for the rest of their lives, after they have met age and service requirements. Death and disability benefits are also usually part of the plan. Under the Employee Retirement Income Security Act, the pension plan must supply the retired person with an income for the remainder of his or her life, and half that to a surviving spouse.
Pension Protection Fund (PPF)
A UK protection scheme operative from 2005 for defined benefit schemes and hybrid schemes whose employers become insolvent leaving the pension scheme unable to pay its liabilities. Pensioners will be guaranteed 100% of their pensions and non-pensioner members will be guaranteed 90% of their accrued pensions. PPF is funded by a levy on all relevant private sector schemes. See MINIMUM FUNDING REQUIREMENT.
Pension Reform Act
See: Employee Retirement Income Security Act (ERISA).
Pension revaluation
The application to the preserved benefits of early leavers of indexation, escalation or the award of discretionary increases. PSA93 imposes a minimum level of revaluation in the calculation of guaranteed minimum pension and of other preserved benefits.
Pension Review
The Pension Transfer and Opt Out Review instituted by the Securities and Investment Board (now replaced by the FSA) in 1994 and now an s.404 scheme.
Pension scheme
A means by which an individual can make pension provision. This may be either collective or individual and with or without the involvement (by means of contributions or otherwise) from the individual’s employer. Technically, the term is used to refer to a personal pension scheme or a free standing additional voluntary contributions scheme that has been approved by the Inland Revenue. The term company pension scheme is often used to describe occupational pension schemes.