The various terms used for teachers' pay and in particular the Teachers' Pension Scheme are described below (source: www.teacherspensions.co.uk)

Abatement – the reduction in pension (possibly to zero) during a tax year that may happen if a pensioner becomes re-employed after taking pension benefits in full.

Accrual Rate – in a defined benefit scheme pension benefits build up at a defined rate, known as the accrual rate.

Actuary – is an independent person who is professionally qualified to give advice as to the financial position of the scheme.

Additional Pension – the facility for scheme members (or their employer on their behalf), to buy additional annual pension.

Admitted Service – Until 1 May 1975, teaching employment in some independent schools was under the 1926 and 1963 statutory pension schemes for independent schools. This is called ‘Admitted Service’ and benefits are calculated separately from other service.

Annuity – income from a capital investment paid in a series of regular payments.

Age Retirement – retirement on or after the scheme’s Normal Pension Age (NPA) of 60 or 65, as appropriate.

Actuarially Reduced Benefits (ARB) – retirement benefits paid from age 55 and before the NPA of 60 (existing scheme member) or 65 (new entrant) reduced by a factor related to the scheme member’s age on the date the pension commences.

Additional Voluntary Contributions (AVC) – voluntary contributions that scheme members may pay to an AVC provider to provide an annuity in retirement. There are two types of AVCs: inhouse or free-standing. The TPS in-house AVC provider is Prudential. Free-standing AVCs are paid to an AVC provider of the scheme member’s choice.

Average Salary – the salary used for calculating retirement benefits and Death Grant.

Civil Partner – a person who has entered into a civil partnership with his or her same-sex partner.

Commutation (Conversion) – immediate payment of a single sum to extinguish pension entitlement, either because the scheme member’s pension is of a trivial value, or because the scheme member has a life expectancy of less than 12 months.

Conversion of Pension to Retirement Lump Sum – the option to give up £1 of pension in return for £12 of (tax-free) retirement lump sum up to a maximum of 25% of the overall pension value.

Contracting Out – members of the TPS are contracted out of the State Second Pension Scheme (S2P).

Contributory Salary – the salary on which contributions are paid.

Contributions Equivalent Premium (CEP) – a payment to the National Insurance Contributions Office (NICO) HMRC to reinstate the scheme member into the State Second Pension Scheme (S2P) when contributions are repaid or a transfer value is paid to another scheme unable or unwilling to accept the S2P liability.

Contributory Scheme – this is a pension scheme where both the employer and the scheme member have to pay contributions.

Death Grant – lump sum payment of three times average salary paid when a scheme member dies while in pensionable employment.

Defined Benefit Scheme – an occupational pension scheme that provides a range of retirement benefits based on pensionable service and salary.

Deferred Scheme Member – a scheme member who has left pensionable employment before NPA having completed the qualifying period necessary for payment of retirement benefits and whose benefits remain to his or her credit in the scheme.

Earmarking – a process by which some of the pension benefits due to a member are paid to the ex-spouse, as directed by a Court at the time of the divorce, but only paid when the member retires.

Early Leaver – a deferred scheme member who, because he or she left pensionable employment on or after 1 January 1986 having completed the qualifying period necessary for payment of retirement benefits, has special rights to a transfer value under the Pensions Schemes Act 1993.

Earnings Cap – a limit applied to the contributory salary of certain scheme members who are high earners.

Elected Further Employment – this is teaching employment after a member has claimed retirement benefits from the TPS and for which he/she has specifically signed an election on or after 1 April 2000 for it to be pensionable. These elections were discontinued from 1 January 2007.

Equivalent Pension Benefit (EPB) – a term used to describe pension entitlement earned under the State Graduated Pension Scheme and for some scheme members, the liability will be met by the TPS.

Excluded Employment – this is teaching employment which would have been pensionable but for an election to opt-out of the scheme or the absence of a part-time election prior to 1 January 2007.

Existing Scheme Member Service – reckonable service that carries an NPA of 60. This includes post 31 December 2006 reckonable service and reckonable service accrued on or before 31 December 2006, by a person who has not had a relevant break in service.

Family Benefits (Survivor Benefits) – long-term and short-term pension payable to surviving children of the scheme member and either: a surviving widow or widower, a civil partner, a financially dependent unmarried partner or financially dependent same-sex partner where the relationship is not a registered civil partnership.

Final Average Salary - This is the salary used in the calculation of benefits at retirement.

Free Standing Additional Voluntary Contributions - See Additional Voluntary Contributions.

Gainful Employment – any employment which demonstrates that a person’s ability to carry out any work is no longer impaired by at least 90%.

Guaranteed Minimum Pension (GMP) – this is the minimum pension which schemes must provide as a condition of being contracted out of SERPS for any period from 6 April 1978 to 5 April 1997. It is roughly equal to the additional pension you would have earned if you had not been contracted-out of SERPS.

HMRC – Her Majesty’s Revenue and Customs. Previously known as the Inland Revenue.

In-House AVCs – see Additional Voluntary Contributions.

Internal Dispute Resolution Procedure (IDRP) – the formal process through which scheme members or their beneficiaries have the right to appeal against any decision made by the administrators or managers of the scheme.

Ill-Health Retirement Benefits (IHRB) – benefits (which may be enhanced) awarded before 1 January 2007 on grounds of incapacity.

Lifetime Allowance (LTA) – is the amount set by HMRC on total pension saving payable from a scheme before an additional tax becomes payable. This is set at £1.5m in tax year 2006/07.

Minimum Pension Age (MPA) – the earliest age at which retirement benefits (excluding ill-health retirement benefits) can be paid from the TPS (age 55 for new entrants, age 55 from 2010 for existing members).

Multiple Employment – concurrent part-time pensionable employment with more than one TPS employer.

New Entrant Service – reckonable service that carries a NPA of 65. This includes: post-31 December 2006 reckonable service accrued by a person who (i) enters pensionable employment for the first time on or after 1 January 2007, or (ii) re-enters pensionable employment after 1 January 2008 after a Relevant Break in service.

Nominated Beneficiary – an adult relative of an unmarried scheme member who has been nominated to receive a survivor pension on the death of the scheme member. This only applies to certain relatives and payment of the pension is subject to a financial dependency test.

Normal Pension Age (NPA) – the earliest age (age 60 for existing scheme member rights or age 65 for new entrant rights) at which a scheme member can take their unreduced retirement benefits.

Opting Out – the facility for a person to formally opt out of pensionable employment.

Partial Incapacity Benefit (PIB) – (post 31 December 2006) immediate payment of unreduced retirement benefits awarded on grounds of permanent incapacity for teaching, but capable of other gainful employment (See also Total Incapacity Benefit).

Pension Credit Member – former spouse or former registered civil partner who is credited with pension rights in the scheme by virtue of a Pension Sharing Order.

Pensionable Employment – a period of full-time or part-time employment during which teachers’ pensions contributions were, or are being, paid.

Pension Guarantee – the guarantee to pay the balance of five years’ pension if a pensioner dies within five years of retirement.

Pensions Increase – annual increase applied to deferred scheme benefits and pensions in payment.

Pension Sharing – where the scheme member’s marriage ends in divorce or registered civil partnership is dissolved and a Pension Sharing Order provides the former spouse or civil partner with a share of the scheme member’s pension.

Phased Retirement – the opportunity for members to drawdown part of their pension benefits whilst reducing their earnings by at least 25% for a minimum of one year.

Premature Retirement Benefits (PRB) – immediate payment of unreduced retirement benefits to scheme members aged 50 or over (55 or over if first joined the TPS on or after 6 April 2006) but under 60 and the employer certifies that his employment was terminated by reason of redundancy or in the interests of the efficient discharge of the employer’s functions.

Qualifying Period – the period (usually two years) a scheme member must complete in order to qualify for the award of retirement benefits.

Qualifying Service – service that counts towards the qualifying period that a scheme member needs to complete to be entitled to retirement benefits.

Reckonable Service – Service which counts for benefits. This can include service from pensionable employment, any additional service previously purchased and any service credited into the TPS from another pension scheme.

Re-Instatement – payment back to the scheme of contributions (plus interest) withdrawn from the TPS before 1 June 1973.

Re-Employment – employment following retirement.

Relevant Break in Service – a period when a person was not in pensionable employment for a period of five years or more.

Retirement Age – the age at which a person retires from his employment.

Retirement Benefits – Pension and (tax-free) lump sum payable subject to completion of a qualifying period and other conditions depending on the type of retirement.

Scheme Administrator – the person or body responsible for the day-to-day management of the scheme, including the maintenance of members’ records, calculation and payment of benefits and the collection of contributions.

Short Service Incapacity Grant – a one-off payment made to scheme members who become incapacitated but who have not completed the qualifying period for payment of retirement benefits.

State Earnings Related Pension Scheme (SERPS) – SERPS was also known as the additional State Pension. It ran from 6 April 1978 to 5 April 2002 when it was replaced by the State Second Pension.

State Second Pension (S2P) – the second tier of the state pension arrangements from 6 April 2002.

Surviving Partner Benefits – the term used to cover pension payable on the death of a scheme member to the surviving widow, widower, civil partner, financially dependent unmarried partner or financially dependent same-sex partner where the relationship is not a registered civil partnership.

Total Incapacity Benefit (TIB) – (post 31 December 2006) additional ill-health retirement benefits awarded to scheme members permanently incapacitated for teaching and not capable of gainful employment.

TPAS – The Pensions Advisory Service (formally OPAS). An independent voluntary organisation that provides information and guidance to members of the public, covering State, company, personal and stakeholder schemes.

Transfer-In – the acceptance of a transfer value from another pension scheme that is used to purchase reckonable service in the TPS.

Transfer-Out – payment of a transfer value to another pension scheme that extinguishes pension rights in the TPS.

Transfer Value – the actuarial value of a scheme member’s accrued benefits in the TPS payable to another pension scheme able and willing to accept the transfer value.

Unlimited Aggregation – separate periods of pensionable employment that aggregate towards the same NPA and pension is calculated on the total.

Unmarried Partner – a survivor pension may be paid if certain conditions are met and, on the scheme member’s death, the surviving partner is able to demonstrate financial dependency or financial interdependency and where the relationship has been previously notified to TP by the scheme member.

Unregistered Civil Partner – a survivor pension may be paid if certain conditions are met and, on the scheme member’s death, the surviving partner is able to demonstrate financial dependency or financial interdependency, and where the relationship has been previously notified to TP by the scheme member.

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