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6 April 2006, the effective date of pensions simplification when primary legislation, detailed in the Finance Act 2004, introduced a single tax regime for all UK pension schemes.

Active member

An individual who is accruing benefits under the scheme.

Adequate value

The value needed as security for a loan to an employer which will not trigger any unauthorised payment charge if:

  • the market value of the assets charged when the loan is given is at least equal to the value of the loan, plus interest which will accrue;
  • the value of the assets falls after the loan is made to an amount less than the outstanding loan and the reduction in value is not attributable to any steps taken by the sponsoring employer or a connected party (this is to prevent value being taken out of the security after the loan is made);
  • the security takes priority over any other charge over the assets (i.e. must be a first legal charge).

Alternatively secured pension

A type of pension no longer available. Originally payable from age 75, increased to age 77 from 22 June 2010, which was an alternative to purchasing a lifetime annuity or receiving a scheme pension.

The amount of pension that could be drawn down was between 55% and 90% of the amount of annuity that could be provided using the Government Actuary’s Department’s annuity rate applicable for a person age 75.

Annual allowance

The maximum contribution, which can normally be paid to all pension schemes in respect of a member and receive tax relief in one tax year, is known as the annual allowance. The annual allowance from the 2017/2018 tax year is £40,000 per annum.

If a member qualifies as a high earner in a tax year, their annual allowance is reduced, on a tapered sliding scale from £40,000 to £10,000, depending on their earnings for that year. If a member has already taken some or all of their benefits, their annual allowance may be restricted to £4,000 per annum as a result of a money purchase annual allowance test.

Annual allowance charge

A tax charge that must be paid if pension contributions for a member in a tax year exceed the annual allowance.


See Lifetime Annuity

Annuity protection lump sum death benefit

A lump sum benefit paid in respect of money purchase benefits upon death of a member who was in receipt of a scheme pension or lifetime annuity.


A section of a registered pension scheme, which can be used to provide benefits on a money purchase basis, a defined benefit basis, or both in respect of the same member.

Associated employer

An employer that is associated to a sponsoring employer of the registered pension scheme which directly or indirectly:

  • controls the sponsoring employer;
  • is controlled by the sponsoring employer;
  • is controlled by a third party who also controls the sponsoring employer.

Authorised employer loan

A loan, fully compliant with legislation, made by a pension scheme to a sponsoring employer.

Authorised employer payment

Payments that a scheme may make to a sponsoring employer that comply with legislation.

Authorised member payment

A payment a registered pension scheme is allowed to make to or in respect of a member of the pension scheme. The only permitted payments are pensions, death benefits, lump sums, recognised transfers, scheme administration payments and pension sharing orders.

Authorised surplus payment charge (payment of surplus to employer)

A 35% tax charge on the payment made to a sponsoring employer from a pension scheme where a surplus has arisen in the scheme fund.

Auto-enrolment staging date

The date when legal duties, coming into effect from 1 October 2012, first require employers to enrol staff that meet certain criteria into a qualifying pension scheme.

Employers will have variable staging dates depending on their size.




See Nominated Beneficiary.

Benefit crystallisation event (BCE)

See Crystallisation event.

Benefits (provided by scheme)

Payments made or benefits provided from sums or assets held by the scheme.


A consideration that is treated as borrowing to a registered pension scheme that requires repayment from assets held for the purposes of the scheme.

A registered pension scheme may borrow up to a maximum of 50% of the net scheme assets.



Capped drawdown

A pension that is paid as income withdrawal from a scheme as an alternative to purchasing a lifetime annuity or receiving a scheme pension. From 6 April 2015 only those who had already allocated funds to provide capped drawdown before that date can take further capped drawdown benefits.

The amount of pension that can be drawn down via capped drawdown is between 0% and 150% of the amount of annuity that could be provided using the Government Actuary’s Department’s annuity rate applicable for the member at the time they take benefits. The level of capped drawdown must be reviewed at least every three years and annually after age 75.

If the permitted maximum pension is exceeded in any pension year the funds will automatically be deemed to have converted into flexi-access drawdown.


Tax relief on contributions in excess of the annual allowance can be obtained by using any unused annual allowance from the previous three qualifying tax years. This facility is called carry-forward. Any contributions paid after 5 April 2017, using unused annual allowance from the 2014/2015 to 2016/2017 tax years, will be based upon a £40,000 annual allowance limit for each year. However if benefit payments have resulted in the lower money purchase annual allowance being applied no carry-forward will be available.

Cash balance scheme

An arrangement which is a type of money purchase scheme and receives a guaranteed return on its investments.

Chargeable gain

The profit made on the disposal of an asset. A registered pension scheme is exempt from capital gains tax, which is the tax payable on a chargeable gain made on the disposal of certain assets.


Any body of persons or a trust established for charitable purposes only, which is registered with the Charities Commission.

Common Investment Fund

A fund established, within a Family Pension Trust, and used by some or all of its members to jointly invest in an asset or assets.

Compensation payment

An authorised payment made in respect of a member‘s liability to a sponsoring employer in respect of a criminal, fraudulent or negligent act or omission by a scheme member.

Connected party

A connected person is:

  • a scheme member;
  • a scheme member’s spouse or civil partner;
  • a scheme member’s relative;
  • a scheme member’s spouse or civil partner’s relative;
  • a scheme member’s business partner and their spouse or civil partner’s relative;
  • a company controlled by a scheme member either alone, or with any persons listed above, where the participating employer(s) is not controlled by a scheme member alone or with any of the persons listed above.

Relative, means a brother, sister, ancestor or lineal descendant. It does not include nephews, nieces, uncles and aunts.


A payment made to a registered pension scheme for the purpose of benefit provision.

Controlling director

A member who, at any time after 16 March 1987 and within 10 years of retirement or leaving service or leaving pensionable service, has been a director and, either on his or her own or with one or more associates has beneficially owned or been able to control, directly, indirectly or through other companies, 20% or more of the ordinary share capital of the company. For the purposes of this definition:

  • associate means in relation to a director, any relative (i.e. brother, sister, ancestor or lineal descendant. It does not include nephews, nieces, uncles and aunts) or partner, the trustees of any settlement in relation to which the director is, or any relative of his or her (living or dead) is or was, a settler and, where the director is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of the deceased person, the trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and
  • the expression ‘either on his or her own or with one or more associates’ requires a person to be treated as owning or, as the case may be, controlling what any associate owns or controls, even if he or she does not own or control share capital on his or her own.


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The use of all or part of a fund to provide benefits is known as a crystallisation event.

Crystallisation event

A crystallisation event takes place when a member draws some form of benefit from a scheme. Each event uses up all or part of the member’s lifetime allowance and when this is exceeded, it will trigger a lifetime allowance charge. There are eleven such events including taking lump sum and pension benefits, payments of death benefits and transfers to certain overseas schemes.




The act of withdrawing tax-exempt privileges by HM Revenue & Customs which has the power to de-register a scheme and levy a tax charge for serious breach of rules.

De-registration threshold

The amount required for HM Revenue & Customs to withdraw scheme registration, presently set if the scheme chargeable payment percentage exceeds 25% of the fund during any 12-month period.

Deferred member

Someone who is not currently accruing benefits under the scheme and who is not receiving benefits.

Defined benefit lump sum death benefit

The lump sum benefit payable on death of a member in a defined benefit arrangement if:

Defined benefits scheme

Where the funding of a member‘s benefits is calculated with reference to a set level of pension benefits at normal retirement age.

Defined contribution

A contribution paid to a defined contribution scheme, also known as a money purchase scheme.


A dependant is defined as one of the following at the death of the member:

  • a spouse or civil partner;
  • a child of the member who;
    • is under 23;
    • is over 23 and dependent on grounds of physical or mental impairment;
    • is taking, or is to take, dependant’s drawdown and who reached their 23rd birthday after 15 September 2016;
  • a person who is not a spouse, civil partner or child of the member, but
    • is financially dependent on the member;
    • has a financial relationship with the member and a mutual dependency;
    • is a person who is dependent on the member on the grounds of physical or mental impairment.



Employer financed retirement benefit scheme

A scheme set up to provide retirement benefits for employees that is not a registered pension scheme, which will not receive any tax privileges after 6 April 2006.

Previously referred to as a Funded Unapproved Retirement Benefits Scheme (FURBS)

Employer sponsored pension scheme

A registered pension scheme only available through an employer, which is run by the pension scheme trustees.

Enhanced lifetime allowance

A lifetime allowance, above the standard lifetime allowance, which may apply for a member if:

Enhanced protection

A method of protecting a member‘s fund plus all future investment growth from the lifetime allowance charge.

When pension legislation changed on 6 April 2006, anybody with a pension fund likely to exceed the lifetime allowance could register for enhanced protection.

Enhanced protection could also be used in tandem with tax-free lump sum protection where the tax-free lump sum protection entitlement was over £375,000.

Enhanced protection is lost if contributions are made to, or benefits are accrued in, any pension arrangements on or after 6 April 2006. Transfers of benefits from a member’s other pension arrangements can normally be made without enhanced protection being lost but advice must be taken as this is not always the case. It is no longer possible to apply for this protection.



Family Pension Trust

A private registered pension scheme independently established under an individual trust. Anyone may be a member of the scheme, provided they have the consent of the trustees. Members need not belong to the same family.

Final salary scheme

Where a member‘s benefits are calculated with reference to their earnings and service.

Fixed protection

The lifetime allowance has been reduced on a number of occasions since it was first introduced. Each time, members with funds that exceeded, or were likely to exceed, the reduced lifetime allowance have been offered the opportunity to apply for fixed protection, provided they did not already have primary, enhanced, or fixed protection.

  Application Deadline Protected Lifetime Allowance
Fixed Protection 2012 5 April 2012 £1,800,000
Fixed Protection 2014 5 April 2014 £1,500,000
Fixed Protection 2016 None £1,250,000

There is no application deadline for fixed protection 2016 but if you want to claim this you will need to ensure that you apply before taking benefits.

If contributions are made to, or benefits are accrued in, any pension arrangements at any point after fixed protection has come into effect, it will be lost.

Flexi-access drawdown

From 6 April 2015, income may be taken from a fund as flexi-access drawdown. There are no restrictions on the level of income that can be taken under flexi-access drawdown, but all payments are subject to taxation at the member’s, or beneficiary’s, marginal income tax rate and will trigger a money purchase annual allowance test.

Flexible drawdown

Flexible drawdown was available until 5 April 2015, and enabled an income to be taken from a fund, provided the member met the minimum income requirement. All flexible drawdown benefits were automatically converted to flexi-access drawdown from 6 April 2015.



Guarantee period

A period of time within which the payment of benefits to an individual are guaranteed. Their guaranteed benefits will be paid to their nominated beneficiary should they die within this period.

Guaranteed annuity rates

A rate guaranteed at the outset of a pension arrangement when converting a member‘s funds into an annuity.




HM Revenue & Customs.

Formerly known as the Inland Revenue.

Hybrid scheme

A combination of money purchase, cash balance and defined benefit schemes.



In specie

A Latin phrase, often used referring or in relation to pension scheme contributions or transfers of assets between schemes. It means “in its actual form”, so, rather than converting the asset to a cash value before transferring in cash, the asset itself is transferred. Examples of assets that might be transferred in specie are TIPs, property, OEICs, unit trusts, stocks and quoted or unquoted shares.


Relevant UK earnings chargeable under Schedule D or E of the Income and Corporation Taxes Act 1988.

Income drawdown

Income drawdown is a term used to refer to taking income from a pension fund. From April 2015, income drawdown is taken through flexi-access drawdown. Some members, who were drawing income prior to 6 April 2015, may receive their income as capped drawdown.

Income drawdown fund lump sum death benefit

A lump sum payable where a member dies in receipt of benefits from the fund. It may be paid to a beneficiary free of tax if the member dies prior to age 75, or subject to a tax charge of 45% from age 75.

Independent Trustee

A trustee who is not connected with the employer, member or other trustees appointed to advise and assist member trustees in the management of their scheme.

Individual protection

Individual Protection 2014

Members with funds that exceeded £1,250,000 on 5 April 2014 could have applied for a personalised lifetime allowance equal to the value of their funds, subject to an overall limit of £1,500,000, until 5 April 2017. Individual protection 2014 will not be lost if contributions are made to any of the member’s pension arrangements from 6 April 2014, but funds in excess of their personalised lifetime allowance will be subject to a tax charge when they take benefits.

Individual Protection 2016

Members with funds that exceeded £1,000,000 on 5 April 2016 can apply for a personalised lifetime allowance equal to the value of their funds, subject to an overall limit of £1,250,000. Individual protection 2016 can be applied for by members with existing pension protection, with the exception of primary protection and individual protection 2014. There is no deadline by which this application needs to be made. Individual protection 2016 will not be lost if contributions are made to any of the member’s pension arrangements from 6 April 2016, but funds in excess of their personalised lifetime allowance will be subject to a tax charge when they take benefits.



Lifetime allowance

The lifetime allowance is sometimes referred to as the standard lifetime allowance. It is the maximum pension fund that an individual can accumulate from all of the pension schemes of which they are a member during their lifetime, without being subject to a tax charge, known as the lifetime allowance charge.

A member’s fund must be tested against the lifetime allowance when they take benefits and again at age 75.

The lifetime allowance from the 2017/2018 tax year is £1,000,000. This will increase annually in line with the consumer price index from 6 April 2018.

Lifetime allowance charge

A tax charge that is applied to funds in excess of the lifetime allowance when a crystallisation event occurs. It is:

  • 55% of the excess over the lifetime allowance if the fund is taken as cash;
  • 25% of the excess over the lifetime allowance if the fund is taken as pension.

Members who have enhanced protection will not be subject to the lifetime allowance charge. If members have primary protection, fixed protection or individual protection they may be subject to the lifetime allowance charge, but to a lesser amount than if they had no protection.

Lifetime allowance enhancement factor

The factor by which the standard lifetime allowance of a registered pension scheme is enhanced for members who chose to protect fund values at 5 April 2006 before 5 April 2009.

Lifetime allowance excess lump sum

The further lump sum payable where the member‘s lifetime allowance has been fully used to provide benefits. A lifetime allowance charge of 55% is levied on the excess over the member’s lifetime allowance before this excess is paid.

Lifetime annuity

An investment offered by insurance companies as a way of converting capital, usually from a pension fund, into a guaranteed income. The annuity must be payable until the member‘s death or the end of any guarantee period should the member die within such a period.


A loan from the pension scheme to another party. For a loan to a sponsoring employer the following restrictions apply:

  • does not exceed 50% of the net asset value of the scheme (maximum for all loans);
  • has a maximum term of five years;
  • is secured as a first charge on assets of adequate value;
  • must be repaid in regular capital and interest instalments;
  • must be at an interest rate no lower than a prescribed amount.

Loans to third parties are not restricted to 50% of the fund.

A loan may not be made to members or a connected party.

Lump sum death benefit

The lump sum payable upon death from a member‘s share of fund.



Marginal income tax rate

After any tax-free allowances and allowable expenses have been taken into account, the amount of tax you pay on your income is calculated on a series of tax bands, using different tax rates. The highest rate you pay is known as your marginal income tax rate. Your income can include, for example, earnings from employment, pension income, investment income etc.

Market value

The price which an asset might reasonably be expected to fetch when sold on the open market.


Any active member, pensioner member, deferred member or pension credit member of the
pension scheme.

Member Trustees

Members of a scheme who are also trustees and are referred to as member trustees. The trustees’ responsibilities for the scheme include the investment strategy and the payment of any benefits.

The member trustees must not be:

  • minors;
  • persons convicted of an offence involving dishonesty or deception;
  • those with undischarged arrangements with creditors;
  • disqualified directors;
  • persons of unsound mind;
  • persons disqualified from being a trustee by The Pensions Regulator.

Any member trustees finding themselves in one of these categories are automatically disqualified by legislation.

Member-directed pensions

A registered pension arrangement, where the investment decisions are controlled by the member(s).

Member’s designated funds

Funds or assets held for the purpose of an individual’s arrangement that comprise the member’s income drawdown pension fund at any time.

Member’s income drawdown pension fund

All assets held for the purpose of the individual’s arrangement which:

Relevant uncrystallised funds for a member are treated as having been designated under the arrangement for the payment of income drawdown.

Minimum income requirement

The minimum income requirement (MIR) was the amount of secured pension income, that a member must have had for life, to draw an income via flexible drawdown. Flexible drawdown is no longer available and therefore there is no minimum income requirement.


A member of a registered pension scheme who is under 16 years of age, or 18 if not in full time employment.

Money purchase annual allowance

A member who has taken some or all of their benefits may be restricted to an annual allowance of £4,000 as a result of a money purchase annual allowance test.

Any contributions paid by the member, or on their behalf, into any defined contribution scheme will be tested against a money purchase annual allowance limit of £4,000 per annum. If this limit is exceeded, the amount of contributions over £4,000 will give rise to an annual allowance charge.

Money purchase annual allowance test

A money purchase annual allowance test is triggered by the following events:

  • income received from flexi-access drawdown;
  • starting to receive scheme pension income, from a scheme with 12 or fewer scheme
    pensioners, after 5 April 2015;
  • being in receipt of an uncrystallised funds pension lump sum;
  • drawing income in excess of the maximum permitted from capped drawdown (a type of
    income drawdown available prior to 6 April 2015); and
  • being in receipt of flexible drawdown benefits before 6 April 2015.

Money purchase benefits

Benefits that can be provided by the fund built up in a money purchase scheme to provide benefits for a member.

Money purchase scheme

Where a member‘s entitlement is determined by the size of their accrued interest in the scheme. This will be based on contributions, transfers of other benefits and investment return. A money purchase scheme is also known as a defined contribution scheme.




National Employment Savings Trust


Non-Mainstream Pooled Investments; the collective term for unregulated collective investment schemes (UCIS) and close substitutes, for example pooled investments or funds containing unusual, speculative or complex assets, product structures, investment strategies, terms and features. A full definition can be found in the Financial Conduct Authority Handbook.

Nominated beneficiary

A person or body that is nominated by an individual to receive death benefits. The nominated party is not limited to an individual or dependant. It could include such bodies as charities, societies or clubs.


A nominee can be anyone who has been nominated by the member, other than a dependant, to receive their benefits on death. If the deceased has made no nomination and there are no dependants, the scheme administrator can nominate an individual to become entitled to the funds.

Normal minimum pension age

Currently this is age 55. Prior to 6 April 2010 it was age 50.



Occupational Scheme

A pension scheme established by an employer to provide benefits for any or all of its employees.


An open ended investment company, or OEIC, is a professionally managed collective investment fund; a form of shared investment, that pools a saver’s money with thousands of other people’s and invests in shares, bonds, property, cash assets or other investments in the world’s stock markets.


The ‘operator’ is the individual or company responsible to the members for managing and administering the assets and income of, and the benefits payable under, the scheme in accordance with relevant pensions and tax legislation, the scheme’s constitution and the regulatory system pension scheme established to provide benefits for any or all of its members.

Overseas pension scheme

A pension scheme, other than a registered pension scheme, which is established in a country or territory outside the United Kingdom.



Participating employer

Any employer, including the principal employer, who participates in a registered pension scheme.

Payments by registered pensions schemes

These can be made from the scheme in the following ways:

Any payment or benefit that does not comply with legislation will be deemed an unauthorised payment.

Pension commencement lump sum

A lump sum payment made on a crystallisation event subject to the following criteria:

  • the member becomes entitled to it when they become entitled to a relevant pension;
  • it is paid when all or part of the member’s lifetime allowance is available;
  • it is paid within a defined period;
  • it is paid when the member has attained the normal minimum pension age (or ill health condition is satisfied);
  • it is not an excluded lump sum.

Any payment not meeting these requirements will be treated as an unauthorised payment.

Pension credit

A credit that arises when a member‘s pension benefits are shared with their spouse as part of their divorce settlement. The pension credit is the amount by which the member’s pension rights are increased.

Pension credit member

Someone who has rights under the scheme which are attributable to pension credits, i.e. after divorce.

Pension debit

A debit that arises when a member‘s pension benefits are shared with their spouse as part of their divorce settlement. The pension debit is the amount by which the ex-spouse’s pension rights are reduced.

Pension protection

In changes to pensions legislation, which have come into effect since 6 April 2006, the Government included facilities for members with funds that exceeded, or were likely to exceed the lifetime allowance, to apply for their accrued benefits to be protected.
Primary protection
Enhanced protection
Tax-free lump sum protection
Fixed protection
Individual protection

Pension protection lump sum death benefits

A lump sum payable upon death if:

  • it is paid in respect of a defined benefits arrangement;
  • it is paid in respect of a scheme pension to which the member was entitled at the date of death;
  • the member has specified that it is to be treated as a pension protection lump sum death benefit.

The amount must be paid within two years of the date of death.

Pension relief at source (PRAS )

When a member contributes to a Rowanmoor SIPP or Family Pension Trust we will reclaim income tax at the basic rate from HM Revenue & Customs . It may take some time for payment to be made by HMRC. Once received, the tax rebate is then added to the member’s funds. Tax relief above the basic rate of tax must be reclaimed by the member via a self-assessment tax return.

Pension sharing order or provision

An order or provision as described in section 28(1) of the Welfare Reform and Pensions Act 1999 (WRPA99) which is made in accordance with the provisions of that Act. WRPA99 makes provisions to allow financial settlements on divorce or nullity of marriage to include the splitting of pension rights of either or both parties to the settlement.

At the date of the financial settlement the pension rights can be split between both parties (the former couple in marriage) by varying amounts depending on the terms of the settlement.

Pensioner member

Someone who is currently in receipt of benefits from the scheme.

Permitted margin

The amount by which a member‘s pension may increase before it is treated as a further benefit crystallisation event.

Permitted maximum

The maximum pension commencement lump sum that can be taken without it being treated as an unauthorised payment. For a member without the benefit of pension protection this will be 25% of their uncrystallised fund.

Personal pension

A pension policy taken out by an individual to provide pension benefits.

Personal representatives

A person who represents the interests of a member who has died.

  • In the United Kingdom, this will be the person responsible for administering the estate of the deceased.
  • In a country or territory outside the United Kingdom, this will be the person(s) having functions under its law equivalent to those of administering the estate of the deceased.

Primary protection

A method of providing protection to a member‘s fund, which was over the lifetime allowance on 5 April 2006 from the lifetime allowance charge. It protects the value of the member’s fund and growth on the protected fund, limited to the increase in the lifetime allowance, or £1,800,000 if higher, from lifetime allowance charge. If primary protection has been granted the member will be entitled to an enhanced lifetime allowance, known as a personal lifetime allowance, when they take benefits from the scheme.

Primary protection could not be used to protect a fund below the lifetime allowance and had to be applied for before 5 April 2009.

Principal Employer

An employer in which the special powers and duties in relation to the trust, such as appointment and removal of trustees and amendment of provisions are vested.

Protected Rights

‘Protected rights’ is the term used to describe the pension fund built up from payments made to a pension scheme by HM Revenue & Customs from National Insurance contributions, if you had contracted out of the state second pension (S2P); previously known as the State Earnings-Related Pension Scheme (SERPS). If you were a member of a contracted-out final salary scheme between 6 April 1978 and 5 April 1997, these rights are referred to as guaranteed minimum pension.


Commercial organisations that market pension arrangements to employers either as specially designed products or as “off-the-shelf” arrangements.

Purchased life annuities

A purchased life annuity is not a pension annuity but is a special investment offered by insurance companies as a way of converting capital, other than from a pension fund, into an income. The annuity maybe payable until death, or the end of any guarantee period should the annuitant die within such a period, or may be for a defined term.



Qualifying pension scheme

A workplace pension scheme that meets certain minimum standards set by legislation, including minimum contribution rates.

Qualifying recognised overseas pension scheme (QROPS)

An overseas pension scheme established in a country recognised by HM Revenue & Customs, from or to which transfer payments may be made without triggering an unauthorised payment charge.

Qualifying tax years

A qualifying tax year is one in which the member was a member of a registered pension scheme.



Recognised transfers

A transfer of a member‘s rights to another registered pension scheme or a qualifying recognised overseas pension scheme.

Registered pension scheme

A pension scheme registered under Chapter 2 Part 4 of the Finance Act 2004.

Chapter 2 of the Act, sections 153 to 159 contains all the details for the registration of schemes, appeals against refusal to register by HMRC and de-registration.

Relevant commencement date

The date on which the member‘s rights begin to accrue under a scheme. For a money purchase scheme this is the date that the first contribution is paid in respect of a member and for a defined benefit scheme the date upon which the member is advised that they have entitlement under the scheme.

Relevant pension schemes

Any registered pension schemes from which the member is entitled to benefits for the purposes of a crystallisation event.

Relevant UK earnings

Income on which tax-relief is able to be claimed in respect of contributions in excess of £3,600 per tax year and which is defined as:

  • employment income;
  • income which is chargeable under Schedule D and is immediately derived from the carrying on or exercise of a trade, profession or vocation (whether individually or as a partner acting personally in a partnership);
  • income to which section 529 ICTA (patent income of an individual in respect of inventions) applies.

Relevant UK individual

An individual who meets any of the following conditions in a tax year :

  • has relevant UK earnings chargeable to income tax for that year;
  • is resident in the United Kingdom at some time during that year;
  • was resident in the United Kingdom both at some time during the five tax years immediately before that year and when the individual became a member of the pension scheme;
  • they or their spouse has for any tax year general earnings from overseas Crown employment subject to UK tax.

Relevant uncrystallised funds

Funds held in respect of a member that:

Relevant valuation factor

Used to value a member‘s pension rights which are expressed as a defined pension e.g. a final salary scheme when testing the value of the member’s rights against the lifetime allowance. In relation to any such registered pension scheme, or any arrangement under such a registered pension scheme the factor is 20.

Reportable financial instruments

Reportable financial instruments are any product traded on a regulated market.  These include, but are not limited to, shares, bonds, structured products, exchange traded funds, FX forwards and options and derivatives.

Retail investment products

‘Retail Investment Product’ is defined in the FCA Handbook as:

  1. a life policy; or
  2. a unit; or
  3. a stakeholder pension scheme; or
  4. a personal pension scheme; or
  5. an interest in an investment trust savings scheme; or
  6. a security in an investment trust; or
  7. any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in a financial asset; or a structured capital-at-risk product;

whether or not any of a) to g) are held within an ISA or a child trust fund (CTF).




Scheme Administrator

An appointed person(s) or organisation responsible for the functions conferred or imposed on the scheme Administrator by the rules of the registered pension scheme.

The scheme Administrator must be resident in the UK or another EU state and have made the required declaration to HM Revenue & Customs (HMRC).

The scheme Administrator will be responsible for certain critical functions relating to the smooth running of the scheme.

These include, amongst others:

  • registering the pension scheme with HMRC;
  • completing and delivering a Pension Scheme Return and providing accounts, statements and other documents in connection with the return, if required by HMRC to do so;
  • completing certain reports and providing certain information to HMRC within specified time limits (in accordance with The Registered Pension Schemes (Provision of Information) Regulations;
  • ensuring certain information is available to other people, for example members, insurers, personal representatives;
  • accounting for and making quarterly returns of tax due under Part 4 of Finance Act 2004 to HMRC;
  • making an appeal (if appropriate) against any decisions of HMRC made under Part 4 of the Finance Act 2004.

Scheme Administrator employer payment

A payment to an employer for their employee’s time spent on the administration or management of the scheme. Any payments made that exceed arm’s length terms will be treated as an unauthorised payment.

Scheme Administrator payment

A payment to a member for their time spent on the administration or management of the scheme. Any payments made that exceed arm’s length terms will be treated as an unauthorised payment.

Scheme chargeable payment

Any payment made by a scheme in breach of HMRC regulations, which includes any unauthorised payment or unauthorised borrowing.

Scheme Operator

See Operator

Scheme pension

A pension payable by a life assurance company selected by the scheme Administrator, or by the scheme Administrator from the fund as calculated by the Scheme Actuary.

In both cases the pension is payable at least annually until the later of the member‘s death or the end of a guarantee period if it is subject to any guarantees.

Scheme returns

A reportable return required by HM Revenue & Customs at certain times.

Examples are:

  • Event Report
  • Accounting for Tax Report
  • Pension Scheme Return

Scheme sanction charge

A sanction levied on the scheme Administrator of a registered pension scheme, where that scheme makes certain payments that are not authorised.


An investment made by a registered pension scheme in a sponsoring employer or associated employer.

Serious ill health lump sum

A lump sum paid by a scheme to a member equal to their entitlement in the scheme if their life expectancy is less than one year. The following criteria must be met:

  • before it is paid the scheme Administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year;
  • it is paid when all or part of the member’s lifetime allowance is available;
  • it is paid in respect of an uncrystallised arrangement;
  • it extinguishes the member’s entitlement to benefits under the arrangement.

Short service refund lump sum

A payment by a scheme to a member to refund their contributions if they leave service before qualifying for a benefit because of short service. Such a payment is usually subject to a tax charge.

Short term annuity

An annuity payable for no more than 5 years.

Sophisticated investor

A retail client with extensive investment experience and knowledge of complex instruments, who should understand and evaluate the risks and potential rewards of unusual, complex and/or illiquid investments such as NMPIs, mindful of the protections not offered by such non-mainstream offerings.

Special lump sum death benefit charge

A charge to Income Tax of 45% where certain lump sum death benefits are paid by a registered pension scheme. The person liable to the special lump sum death benefits charge is the scheme Administrator.

Other lump sum death benefits are payable free of tax.

Sponsoring employer

Any employer who establishes or participates in an occupational pension scheme.


Anyone nominated by a previous beneficiary, to receive death benefits from a scheme, or if no nomination has been made by the previous beneficiary the scheme administrator may nominate a successor.



Tax relief at source

See pension relief at source (PRAS)

Tax relief on contributions

The tax relief that an active member or sponsoring employer of a registered pension scheme is entitled to claim on contributions paid.

Tax-free lump sum protection

A method to protect the tax-free lump sum benefit after 6 April 2006.

Tax-free lump sum protection with enhanced protection or primary protection was available where a member’s total lump sum rights at 5 April 2006 exceeded £375,000. Application had to be made to HMRC before 5 April 2009 in conjunction with enhanced or primary protection.

Scheme specific lump sum protection is available where a member’s lump sum rights at 5 April 2006 exceeded 25% of their pension fund in a specific scheme. Scheme specific lump sum protection is completed through the Scheme Administrator.

The Pensions Regulator

The regulatory body for work-based pension schemes in the UK. Visit for more information about their services.

Trivial commutation lump sum

From 6 April 2015 a trivial commutation lump sum benefit can not be paid by a defined contribution scheme without incurring a tax charge, although it could prior to this date.
Trivial commutation lump sum benefits can only be paid by defined benefit schemes and is a lump sum which may be payable from a member’s entitlement. A member may qualify to take all of their pension fund as a lump sum if it is within set limits.


A Trust gives its members rights to benefit from the scheme but the scheme’s assets do not belong to any particular member.


A person or company appointed to carry out the purpose of a trust.

Trustee Investment Plan

A trustee investment plan, or TIP, is an investment plan designed for schemes like the Rowanmoor Family Pension Trust, including self-invested personal pensions (SIPPs) and small self-administered schemes (SSASs). They are generally available in the UK through life assurance companies and invest in life assurance company funds.

Trustees in Bankruptcy

A trustee in bankruptcy is the person or entity that looks after the distribution of a bankrupt’s estate to creditors.



Unauthorised borrowing

An amount of money that exceeds the maximum borrowing that a scheme is permitted. Any amount exceeding this is unauthorised and will incur an unauthorised payment charge.

Unauthorised employer payment

A payment to a sponsoring employer that is not specifically authorised is classed as an unauthorised employer payment and could result in an unauthorised payment charge.

Unauthorised payment

An unauthorised payment to, or in respect of, the member, employer or both from scheme funds.

Unauthorised payment charge

A tax charge where an unauthorised payment is made which is levied at a rate of 40%.

Liability for the charge is on:

  • the employer for payments they receive;
  • any member for payments they receive, or made in respect of them, but should the payment have been made after a member died then the person who received the payment will be liable;

An unauthorised payment may be subject to an unauthorised payment surcharge and a scheme sanction charge.

Unauthorised payment surcharge

An additional tax charge of 15% of the unauthorised payment which is levied when the amount of the unauthorised payments made within a 12-month period exceeds 25% of the fund.

Uncrystallised funds

The parts of a member‘s fund that have not been used to provide any benefits.

Uncrystallised funds lump sum death benefit

A lump sum paid from the fund or part of a fund of a member from which no benefits have commenced to be paid. The fund may be paid to a beneficiary without tax charge if the member dies before the age of 75 and within two years of the date of death. If the member dies from age 75 funds will be taxed at 45%.

Uncrystallised funds pension lump sum

From 6 April 2015, funds in a money purchase scheme may be withdrawn as an uncrystallised funds pension lump sum. This is different from flexi-access drawdown, as all funds are paid at once. Twenty five percent of an uncrystallised funds pension lump sum may be paid tax-free with the remaining 75% subject to tax at the member’s marginal income tax rate.

Unsecured pension

A type of pension, no longer available, that was not secured as a pension for life. Such a pension was paid as income withdrawal from the scheme fund instead. As the scheme fund could vary, the level of unsecured pension was reviewed every five years.

The review looked at the level of the member‘s fund and the annuity that the fund would purchase, based on tables issued by the Government Actuary’s Department. The maximum payable was 120% of this annuity.



Value shifting

The shifting of assets or liabilities to the detriment of the scheme and to the benefit of a third party is classed as an unauthorised payment.


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