Glossary

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Actuarial Reduction
This reduction, determined by the Board, is applied to your compensation if you start receiving payments from us before your Normal Pension Age (NPA).
Accrual rate
The rate at which pension benefits build up for members in defined benefit (DB) schemes. The accrual rate is the proportion of your salary that would be awarded as pension for each year you were a member of a DB scheme. Accrual rates are usually expressed as fractions such as 1/60th or 1/80th.
Active member
A member of a pension scheme who’s currently accruing pensionable service.
Assessment Date
The date at which an employer with a defined benefit pension scheme goes bust.
Assessment period
During this time, the PPF investigates whether it can assume responsibility for a scheme. The assessment period starts at the assessment date which can be found on your statement of compensation entitlement.
Assets
Everything that the trustees hold for the pension scheme. This can include investments, bank balances and any amounts owed to the scheme.
Admissible rules
Rules of the former pension scheme after the application of a statutory test.
Attachment order
An order made by the court as part of a financial settlement on divorce or dissolution of a civil partnership. It earmarks part of the member’s pension, which means part of their compensation will become payable to their ex-spouse or former civil partner when the member retires.
Basic Rate (BR)
The basic rate of income tax in the UK is 20%. This means the member will be taxed 20% on the whole amount received.
Beneficiary Claim form
A form to be completed after a member’s death to provide information to the PPF about any spouse, civil partner, relevant partner or eligible children who may be entitled to receive compensation following the member’s death.
Beneficiary member
Also known as a survivor compensation member. The spouse, civil partner or relevant partner of a member who’s receiving compensation following the member’s death.
Benefit Crystallisation Event (BCE)
Between 6 April 2006 and 5 April 2024, if a member retired from a pension scheme it was a classed as a Benefit Crystalisation Event (BCE)
Benefit modeller
This is a functionality on the member website that allows certain registered members to get an estimate of their compensation at different ages with different lump sum percentages up to and including the maximum available.
Benefit statement
The online benefit statement is available to registered members. It’s an estimate of your compensation at your Normal Pension Age, ignoring future inflation. It’s based on the information we hold about you at the date of calculation.
Board of the Pension Protection Fund
A statutory body established under the provisions of the Pensions Act 2004. The PPF became operational on 6 April 2005.
Cash Equivalent Value (CEV)
In order to provide the court with the necessary information during divorce proceedings or the dissolution of a civil partnership, there must be a valuation of your compensation entitlement which is known as a Cash Equivalent Valuation (CEV).
Child compensation member
The child of a deceased member who’s receiving compensation following the member’s death.
Civil partner
An individual in a civil partnership with the member under the Civil Partnership Act 2004.
Civil partnership
A relationship between two individuals registered under the Civil Partnership Act 2004.
Commutation Factor
The 'exchange rate' used when a member chooses to exchange part of their benefit for a cash lump sum.
Compensation
If the PPF has assumed responsibility for a scheme, it will make compensation payments to the scheme’s members. These payments replace the scheme pension benefits in accordance with the Pensions Act 2004.
Compensation cap
There is a statutory limit on annual compensation that anyone under Normal Pension Age (NPA) at assessment date will be tested against.
Compensation commencement lump sum
A tax-free lump sum derived by reducing the amount of annual compensation.
Compensation credit member
As a result of a Compensation Sharing Order you’ll become entitled to a share of your ex-spouse or former civil partner’s compensation. When the Compensation Sharing Order is implemented you too will become a member of the PPF (known as a compensation credit member).
Contracted Out Pension Equivalent (COPE)
The pension a member will get from their workplace/personal pension provider for the time they were contracted out of the additional state pension.
Compensation payment
Payments of compensation made by the Board.
Consumer Prices Index (CPI)
The general index of consumer prices published by the Office of National Statistics. The increases to PPF compensation in deferment and payment for certain periods of service are linked to CPI. Please see our FAQs for further details.
Contracting/Contracted Out
Under the state pension rules before 2016, workplace or private pension schemes could choose to ’contract out’ of the additional state pension. Contracting out means opting out of the additional state pension. As a member of the contracted out scheme you would have paid lower National insurance contributions.
Many Defined Benefit (DB) schemes were ’contracted out’ in the past. This meant that members of those pension schemes paid less in National Insurance contributions.
Deferred compensation
As long as you aren’t already receiving part of your entitlement, you can put off receiving payments up until the age of 75.
Defined Benefit (DB) scheme
A pension scheme where scheme members are promised a set amount of benefit, for example where benefits are worked out in line with their length of service and salary.
Defined Contribution (DC) scheme
See Money Purchase Scheme.
Deferred member
A PPF member who isn’t receiving compensation yet.
Early retirement
This means you’re taking your compensation at an earlier date than your Normal Pension Age. Your payments will be decreased to take into account the fact that they’re being paid earlier.
Early retirement factor (ERF)
A factor that is used to determine what your compensation will be if you decide to take payment of your benefits before your Normal Pension Age. Normally compensation is lower as it will be paid before Normal Pension Age.
Eligible child
An eligible child is one who is your biological child (born or unborn at the date of your death), an adopted child, or child who was financially dependent upon you at the time of your death and who is:
- Under 18, or
- Over 18 and under 23 and in qualifying education, or
- Over 18 and under 23 and has a qualifying disability.
Emergency Tax Code
The tax code that is normally applied to the first monthly payment as we've yet to receive the correct tax code from HMRC.
Employer
The company that employed you while you were in pensionable service for your former pension scheme.
Estate
The name for someone’s assets after they’ve died.
Ex-spouse
An individual who was previously married to a PPF member.
Executor (of the state)
The person legally obliged (usually named in a will) to distribute the estate as per the deceased’s wishes as well as ensuring all eligible debts are paid.
Former civil partner
An individual who was previously in a civil partnership with the member.
Former pension scheme
The member’s pension scheme for which the PPF assumed responsibility.
Guaranteed Minimum Pension (GMP)
The effect of this was a reduction in their state pension. GMP is the minimum guaranteed level of pension, which a pension scheme had to provide to members if they were contracted out between 6 April 1978 and 5 April 1997 to make up for this reduction.
Guaranteed Minimum Pension (GMP) Equilisation
This is where schemes must take into account the differences between men and women when paying Guaranteed Minimum Pension benefits (GMP).
Independent trustee
A trustee who has no connection to the scheme, the employer or members. Independent trustees may well be appointed to a scheme when the employer is bankrupt.
Indexation
The way in which payments may be adjusted with reference to changes in the Consumer Prices Index (CPI) to take into account of inflation.
Inflation-linked increases
These are increases based on factors determined by inflation.
Insolvency event
A qualifying insolvency event must happen to a company before its scheme can be considered for the PPF.
Late retirement
This is when you decide to start receiving your compensation payments later than your Normal Pension Age. Your payments will then be increased to take into account the fact that they’re being paid later.
Late Retirement Factor (LRF)
A factor that is used to determine what your compensation will be if you decide to take payment of your benefits after your Normal Pension Age. Compensation is higher as it will be paid after Normal Pension Age.
Liabilities
Amounts that a pension scheme will have to pay now and in the future. The most common liability is paying pensions.
Lifetime Allowance (LTA)
The maximum amount a member can take from all of their pensions (except beneficiary pension and the state pension) across their lifetime without incurring an additional tax charge.
Long Service Cap
A member with 21 years or more pensionable service in their former scheme will have a higher compensation cap applied if they are under Normal Retirement Age at the Assessment Date.
Lifetime Allowance (LTA) Protection
If a member had pension benefits over certain levels they could apply to HMRC to protect them.
Lump Sum Allowance (LSA)
The Lump Sum Allowance (LSA) limits the amount of tax-free lump sum that an individual can take across all of their pension arrangements. The allowance is currently £268,275.00.
Money Purchase Scheme
Also known as defined contribution schemes. Money purchase "pension pots" are made up of member and employer contributions (if applicable) plus investment returns and tax relief, and are used to purchase an annuity. Benefit levels are not guaranteed.
Nomination
In pension terms, the member selecting someone to be the beneficiary upon the member’s death.
Nomination form
A form for the member to complete to provide information to the PPF in respect of a relevant partner.
Normal Pension Age (NPA)
The age under the admissible rules of the former pension scheme at which the member was entitled to payment of their pension without actuarial adjustment, disregarding any special provision for early payment.
One Time Code (OTC)
This is a six digit code that is sent to either your mobile phone or landline as an additional security measure during the registration, login and forgotten password processes. The code can only be used once and you’ll receive a different one every time.
Protected Retirement Age (PRA)
Certain scheme rules allowed members to retain their minimum retirement age even if legislation increases this age in the future.
Payment confirmation certificate
This is the document sent to pensioner members with the Welcome pack letters.
Pensioner
A scheme member who’s currently receiving a pension from the scheme.
Pensioner member
A member who’s receiving compensation from the PPF and isn’t a vested member.
Pensionable service accrued
The amount of time someone worked at a company whilst being a part of the workplace pension scheme.
Protected pension age
You have to be 55 years old or over to retire early, unless you have the right to take your pension earlier under the rules of your former pension scheme (known as their protected pension age).
PPF Levels of Compensation
The PPF pay compensation instead of pension income. There are two levels, 90% and 100%. Generally you will receive 100% compensation for tranches where you had reached your Normal Pension Age prior to the scheme entering the assessment period, and 90% for those where you reached your Normal Pension Age after this date. If you began receiving your pension on the grounds of ill health, or are in receipt of a beneficiary pension, these will be paid at 100%.
P60
A document issued yearly which shows the amount earned from an employment/pension as well as the tax paid in a given tax year.
Qualifying disability
A child aged 18 or over can still be eligible to receive compensation (up to the age of 23) if they can’t undertake full time paid employment due to a disability which is covered by the Equality Act 2010.
Qualifying education
A child aged 18 or over can still be eligible to receive compensation (up to the age of 23) if they’re in full time education. They will need to confirm their eligibility each year until they no longer qualify.
Relevant partner
A relevant partner is someone who you aren’t married to or in a civil partnership with, but who you live with as if you’re married or in a civil partnership.
Retail Prices Index (RPI)
A measure of inflation which was commonly used up until 31 March 2011.
Retirement illustration
When you’re nearing your date of retirement, you might want to know how much compensation you’ll receive from us. We’ll help you figure that out with an illustration.
Retirement forecast
If you’re not about to retire just yet, but do want to get an estimate of what your future compensation might look like, you can request a forecast.
Revaluation
Increases in deferred compensation.
Separate scheme lump sum (SSLS)
Defined non-commutable lump sum provided by the admissible rules in addition to compensation. A member who was entitled to a SSLS in their former scheme is not able to commute any of their compensation to add to their lump sum.
Scheme Delivery Associate
The PPF employee assigned to work with the trustees of schemes as they progress through the assessment period.
Spouse
A person married to a member of the PPF.
Stand Alone Lump Sum (SALS)
Before 6th April 2006 members of some pension schemes were able to be awarded benefits entirely in the form of a lump sum, with no accompanying entitlement to an annual pension. The right to a SALS is retained by a member providing they don’t accumulate any benefits in the scheme after that date. A SALS must be paid as one single payment.
Statement of compensation entitlement
A statement that details your entitlement to compensation from the PPF.
Statement of early compensation entitlement
Statement that details the level of compensation which would be payable if you chose to retire before your Normal Pension Age.
Survivor’s compensation
The compensation that’s paid to a spouse, civil partner or relevant partner following the member’s death.
Survivor compensation member
Also known as a beneficiary member. The spouse, civil partner or relevant partner of a member who’s receiving compensation following the member’s death.
Tax deducted at source
Tax is taken directly from your payment and sent to HMRC.
Tax free cash recycling
HMRC has rules on members using their tax free lump sum to increase contributions into other pension arrangements which must be declared. If you aren't within the rules, HMRC may apply a tax charge.
Terminal ill health payment
A terminal ill health payment is a lump sum payment generally equal to two times the annual compensation the member would be entitled to, were they to retire.
Terminal Ill Health Lump Sum
In PPF terms it's two times the annual compensation paid to the member as tax free one off payment if eligible.
Tranche
A tranche is a slice/piece of your compensation. Your compensation may have one or more tranches. Tranches can refer to different Normal Pension Ages or when different revaluation or increase rates apply.
Trivial Commutation
This term simply means taking all the payments that you're due as a one-off payment rather than taking it in monthly instalments. Only the PPF can make these types of payments.
Trivial Commutation Limit
The maximum amount a member can have across all of their pensions to be able to take trivial commutation. It currently stands at £30,000. This is the maximum value, not the maximum annual amount allowed.
Trivial Commutation Window
From the first time a member takes trivial commutation from any pension, they have a maximum of 12 months to receive payment of a trivial commutation lump sum from any other pensions. After this they must take any other pensions as per normal.
Trustee
A person or company responsible for administering the assets and liabilities of a pension scheme.
Uncommuted
A full benefit which hasn't been partially exchanged for tax free cash.
Vested compensation member
A vested – or mixed compensation – member is already receiving part of their compensation, while another part of their entitlement is still due to commence.
Welcome pack
A personal information pack detailing the compensation you’ll receive from the PPF when we’ve assumed responsibility for your former pension scheme.
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Actuarial Reduction

Accrual rate

Active member

Assessment Date

Assessment period

Assets

Admissible rules

Attachment order

Basic Rate (BR)

Beneficiary Claim form

Beneficiary member

Benefit Crystallisation Event (BCE)

Benefit modeller

Benefit statement

Board of the Pension Protection Fund

Cash Equivalent Value (CEV)

Child compensation member

Civil partner

Civil partnership

Commutation Factor

Compensation

Compensation cap

Compensation commencement lump sum

Compensation credit member

Contracted Out Pension Equivalent (COPE)

Compensation payment

Consumer Prices Index (CPI)

Contracting/Contracted Out

Deferred compensation

Defined Benefit (DB) scheme

Defined Contribution (DC) scheme

Deferred member

Early retirement

Early retirement factor (ERF)

Eligible child

Emergency Tax Code

Employer

Estate

Ex-spouse

Executor (of the state)

Former civil partner

Former pension scheme

Guaranteed Minimum Pension (GMP)

Guaranteed Minimum Pension (GMP) Equilisation

Independent trustee

Indexation

Inflation-linked increases

Insolvency event

Late retirement

Late Retirement Factor (LRF)

Liabilities

Lifetime Allowance (LTA)

Long Service Cap

Lifetime Allowance (LTA) Protection

Lump Sum Allowance (LSA)

Money Purchase Scheme

Nomination

Nomination form

Normal Pension Age (NPA)

One Time Code (OTC)

Protected Retirement Age (PRA)

Payment confirmation certificate

Pensioner

Pensioner member

Pensionable service accrued

Protected pension age

PPF Levels of Compensation

P60

Qualifying disability

Qualifying education

Relevant partner

Retail Prices Index (RPI)

Retirement illustration

Retirement forecast

Revaluation

Separate scheme lump sum (SSLS)

Scheme Delivery Associate

Spouse

Stand Alone Lump Sum (SALS)