The fraction used in working out a member’s pension entitlement in a final salary scheme. The pension may be one-sixtieth for each year of pensionable service up to a maximum of two-thirds of final salary.

1.The accumulated assets of a pension scheme. 2. Amount built up in an individual’s pension scheme while an active member to fund his retirement benefits. The fund value depends on the level of contributions and investment earnings. Final salary schemes have a notional cash equivalent transfer value (CETV) which is calculated actuarially to give the fund value that would arise in the event of the member leaving the scheme at the date of the calculation.
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See: pension plan.

Methods used at each valuation to fix the contribution rate for the scheme. A number of different types of methods exist. The accrued benefit method and the projected benefit method are popular in the UK.

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.

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.

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.

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.

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.

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.