Jargon buster - Police Pension Schemes
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If a police officer is reengaged after retirement, their pension may be reduced temporarily.
Rate at which pension benefits build up for each year and part year of pensionable service.
In the new Police Pension Scheme, extra years of service bought by the member. For the Police Pension Scheme see added sixtieths.
In the Police Pension Scheme, extra portions of pension bought by the member. For the New Police Pension Scheme see added years.
Additional Voluntary Contributions (AVC)
Payments, normally through an assurance company, to provide extra pension benefits. AVCs can be free-standing or in-house. The in-house AVC for the Police Pension Scheme ceased in 2010, although existing contracts can continue. There is not an in-house AVC in the new Police Pension Scheme can not.
The Police Pension Schemes are national schemes administered at a local level by individual police authorities.
When a member gives up (allocates) all or part of their pension (except injury pension) to someone wholly or partly dependent on them. It is intended that the whole cost of the beneficiary’s pension is covered by the amount of pension the member gives up, taking into account age, relative life-expectancy and so on.
The amount by which the value of your pension benefits may increase in any one year, including the year that all of your benefits become payable, without having to pay income tax on the excess. It is set by HM Revenue and Customs - there is a link to their website on our useful links page.
A contract usually sold by an insurance company used to make payments to the holder at specified intervals, usually after retirement.
Approved career break
Extended unpaid leave taken with the agreement of your force, with the right to return to work at the same rank as when you left. Continuity of service is maintained. Although you do not pay pension contributions, and will not accrue pensionable service, you will remain a member of the PPS or NPPS (unless you have opted out) and will continue making contributions on your return to work.
Payments that a pension scheme is allowed to make without being subject to a penalty tax charge.
Pension benefits built up in the Police or new Police Pension Schemes, including annual pension, lump sum and death benefits.
Benefit crystallisation event (BCE)
An HM Revenue and Customs term for when benefits from your pension come into payment. When a BCE occurs, benefits received must be tested against the Lifetime Allowance (LTA). If exceeded, a tax charge will be imposed on the excess
A person who is, or will be, an entitled to benefits under pension scheme rules when specific events occur – for example a partner who would be entitled to a pension if the member were to die.
Cash equivalent transfer value (CETV)
The capital value of a member’s pension benefits. The calculation is used during divorce or dissolution of a civil partnership or to transfer benefits out of one pension scheme into another pension scheme.
Cash equivalent premium (CEP)
The employee’s part of the Contributions Equivalent Premium (CEP), recovered by Police Pensions if a person with less than two years’ pensionable service receives a refund of contributions.
The employee’s part of the Contributions Equivalent Premium (CEP), deducted from any refund of contributions made by Police Pensions to a person who leaves with less than two years’ pensionable service.
In the Police Pension Scheme 1987, exchanging some pension in order to receive a retirement lump sum. In the New Police Pension Scheme 2006, exchanging retirement lump sum to increase the yearly pension. Commutation of the whole of a very small pension is called trivial commutation.
Compulsory retirement age (CRA)
The age at which you must retire, depends on rank.
Someone dependent on a scheme member financially or because they are disabled
Pension rights held by someone who left the scheme before their pension was due to be paid, deferred to be paid later. The age at which a deferred pension can be paid is different in the PPS and the NPPS and may be paid sooner for reasons of ill health, with restrictions for members who left service on disciplinary grounds.
Someone with deferred pension benefits.
Where pension benefits build up more quickly after a while, as in the Police Pension Scheme. Single accrual is where benefits build up evenly for each year of service, as in the New Police Pension Scheme.
Final salary scheme
A kind of defined benefit pension scheme in which the benefits are worked out as a proportion of final salary (final pay). The PPS and NPPS are final salary schemes.
See Additional Voluntary Contributions (AVC)
A payment made to officers leaving the pension scheme who are not entitled to pension benefits
Guaranteed minimum pension (GMP)
Applies to any service members have in contracted-out pension schemes between 1978 and 1997. Contracted out schemes, including the PPS, must provide a minimum amount of pension for this service, roughly the same as the member would have earned in SERPS had they not been in a contracted-out scheme. Police pensions are always the same or more than any GMP.
See Additional Voluntary Contributions (AVC)
Lifetime Allowance (LTA)
The capital value of all of a person’s pension rights (not only those from the Police Pension Schemes) will be tested against a single Lifetime Allowance (LTA) each time you take pension benefits. If the total is more than the LTA, extra tax will be due on the excess. The Lifetime Allowance does not include any state retirement pension, state pension credit or any spouse’s, civil partner’s or dependants' pensions. The LTA is set by HMRC - there is a link to their website on our useful links page. .
Minimum Income Guarantee
The minimum income guarantee relates to injury awards. It is between 15% and 85% of final pay, depending on length of service and degree of disablement. An officer permanently disabled as a result of being injured whilst on duty may receive an injury award if ¾ of their ill health pension, plus certain social security benefits in respect of the injury, do not add up to the minimum income guarantee.
In the NPPS, ordinary pension is payable to a member who retires with at least two years’ service on or after age 55.
In the PPS, an ordinary pension can be paid once a member reaches age 50 and has 25 years’ pensionable service. If you have 30 years’ pensionable service, you may retire with an immediate pension before age 50.
Pay As You Go (PAYG)
The Police Pension Schemes are pay-as-you-go schemes. Pensions are paid out of ongoing Government expenditure when they are due. In contrast, some schemes are funded which means that members' pension rights are covered by assets held under trust.
Age at which pension, other than ill health pension, may be paid.
Pension credit member
An ex-spouse or ex-civil partner who has pension rights because of a pension sharing order made upon divorce or the dissolution of a civil partnership. He or she will receive their pension at age 60 (PPS) or 65 (NPPS).
Pension debit member
A member who has given over part of his or her pension rights to an ex-spouse or civil partner made on divorce or dissolution of a civil partnership.
The total fund of money that constitutes the basis of someone’s retirement pension, also called the capital value.
The parts of earnings from which pension contributions are paid, includes basic salary, London weighting, pay from temporary promotion and competence related threshold payments.
A money purchase pension provided through a contract between an individual and a pension provider.
Service (employment) which qualifies a member to receive a pension. For police schemes, this generally means calendar length of service for which pension contributions are payable, and service from transfers into the scheme
Voluntarily leaving service, or being required to leave service on grounds of age, efficiency or as an alternative to dismissal. The term is often also used to mean claiming pension benefits when they become due for payment.
Short service pension
Also called a short service award. The name of the pension you would receive if you retire on age grounds before being entitled to an ordinary pension.
Where pension benefits build up evenly for each year of service, as in the New Police Pension Scheme. Dual accrual is where benefits build up more quickly after a while, as in the Police Pension Scheme.
State pension age
The age at which a person may claim their state pension. Currently 60 for women and 65 for men. The state pension age for women will increase to 65 between 2010 and 2020, and state pension age for men and women will increase.
The whole of a very small pension may be exchanged for a one-off lump sum payment. If your pensions, for all pensions except the state pension, are below a certain amount and you are aged between 60 and 74, your remaining police pension may be paid as a one-off lump sum. This is called trivial commutation. The part of the trivial commutation payment that would normally have been a yearly pension will be taxable, and anything that would normally have been paid as a tax-free retirement lump sum will be tax-free.
A pension scheme will be subject to a penalty tax charge if it makes an unauthorised payment.
In the NPPS, describes a couple with an exclusive, committed and long term relationship, but who are not married or in a civil partnership with each other.