Part two of our helpful pensions glossary covers everything from L – Z. If you haven’t had a chance to take a look at part one, click here to brush up on your pensions terms from A-J, then get to grips with the second part in this Jones Hill double bill.
Lower Earnings Limit – This is the point at which your earnings will build up the right to state pension benefits.
Member – Different from an ‘active member’ of a plan, who is actively making payments, a ‘member’ is someone who is still entitled to benefits under their pension plan.
NIC – National Insurance Contributions are deducted from the income of all employees on a scale which is linked with income levels. You need 30 years of National Insurance Contributions in order to get a full State Pension on retirement.
Open Market Option – Buying an annuity from their own pension provider is not the only option for the retired, and more often that not it’s not the best option – we can compare rates and arrangements for other insurance providers and purchase the one that suits you best.
Preserved Benefits – These are classed as the benefits a pension scheme member has already earned when they stop making payments, or when their scheme closes. They are also known as frozen benefits, and they will be paid when the individual takes their benefits.
Redirecting payments – You can change the funds that future payments are invested in by redirecting your future payments. It won’t affect any payments that have already been invested, and many providers don’t charge for this service.
SIPPs – A self-invested personal pension gives the planholder maximum flexibility and choice with regards to their investments. It is best for those who are more comfortable with investment risk and they can be more expensive to run. SIPPs are also used for pension income drawdown contracts. Alternatives to SIPPs are SSAS – Small Self Adminstered Schemes. If you’re considering either, take professional, independent advice.
Tax Relief – Tax relief means that some of the money that would have been paid to HMRC will be paid into your pension plan instead, encouraging those saving for their retirement.
Upper Accrual Point – This is the maximum earnings that are used to build up the right to state pension benefits.
With-Profits Fund – If your pension plan contains this type of fund, your fund manager retains a percentage of the profits to supplement your investment earnings in the case of a bad year for returns. It helps to smooth out the instability of the stock market, but it can incur heavy penalties for those that cash in early., usually called a Market Value Reduction.
01225 775923
