Pension Buzzwords
The pension landscape is often recognised for its changing rules and complex terminology. As a Fund, our aim is to make understanding your pension as simple and straightforward as possible – so you can focus on building your future.
This article aims to break down the most common pension buzzwords to make sure our members are fully equipped with the information needed to make any pension decisions.
Active Member: Active Members are members currently paying into the scheme and building up their pension. For more information visit here.
APC: Additional Pension Contributions (APCs) are extra contributions that increase your pension. APCs are taken off your pay, along with your normal contributions and go directly to your NESPF pension account where they remain, increasing with the cost of living until you take your pension. For more information visit here.
AVC: Paying Additional Voluntary Contributions (AVC) is another method you can use to boost your pension pot. They are extra pension contributions that are invested separately in funds managed by our AVC provider Prudential. AVCs are taken off your pay, just like normal contributions and are transferred to your Prudential account. For more information visit here.
CARE: “CARE” stands for “Career Average Revalued Earnings” a type of defined benefit scheme where your pension is based on your earnings and length of membership in the scheme.
Contribution Rate: This is the percentage of your salary that you pay into the scheme. How much you pay depends on how much you earn. When you first join and every April after, your employer will decide your contribution rate by comparing your annual pay with the pension scheme's contribution rates. To view your contribution rate visit here.
DB: DB, or Defined Benefit schemes such as the LGPS provide a guaranteed income for life at retirement. DB pensions are based on how many years you’ve been in the pension scheme and your salary.
DC: DC, or Defined Contribution schemes build up a ‘pot’ which you can use to fund your retirement. How much income you might get from a DC scheme depends on the amount you pay in, investment choices and performances, and the choices you make at retirement. The value of your pension is not guaranteed and can go up or down depending on how the investments perform.
Death Grant: This is a tax-free lump sum worth 3 times your pay for active members which will be paid upon your death. You can tell us who you would like to receive this grant by updating your death grant nominations via My Pension+ or by completing an Expression of Wish form.
Deferred Member: Deferred members are those who have a pension on hold within the scheme, so they are no longer paying in, but their pension pot remains with us until it is paid out. To find out more click here.
Final Salary: Final Salary pension is pension built up before 1 April 2015 and is based on your final pay and length of membership.
LGPS: This abbreviation stands for Local Government Pension Scheme. Our Fund is a part of this scheme which serves employees working in local government or others working for organisations enrolled in the scheme.
McCloud Judgement: The McCloud Judgement relates to two employment tribunal cases that were brought against the Government. The claimants argued that protection introduced following changes to public sector pension schemes in 2014/2015 amounted to unlawful discrimination as the protections only applied to certain older members. For more information visit here.
McCloud Remedy: The McCloud Remedy refers to the changes put in place to remove the age discrimination in Local Government Pension Schemes. For more information visit here.
Normal Pension Age: Normal Pension Age (NPA) is simply the age you can retire and receive your pension benefits in full, unreduced. Normal Pension Age differs depending on when you were paying in to the scheme.
Pension Commencement Lump Sum (PCLS): PCLS refers to the tax-free cash lump sum that you can swap some pension for when you retire.
Rule of 85: Rule of 85 means member's whose age plus scheme membership (in whole years) equals 85 may be able to take their pension before their Normal Pension Age, without it being reduced for early payment. To find out more click here.
Survivor’s Pension: A survivor's pension is payable to your husband/wife, or Civil Partner, or *Eligible Cohabiting partner every year until they die. How much a survivor's pension is depends on when you were a member of the scheme and for how long.
