Jargon buster

A short generic guide to words and terms commonly used in pensions.

Active member
An employee who is currently paying into and building up benefits in their employer's pension scheme.

You can start learning more about your pension by selecting one of the sections below, depending on your membership type:

• Active ESPS members
• Active UPP members

Actuary
Professional advisers who calculate financial risks, the statistical likelihood of these risks occurring and the impact they may have. The actuary carries out regular valuations of the Scheme to see how it’s performing and whether there is enough money being paid in (assets) to cover the cost of paying pensions out (liabilities).

Additional Voluntary Contributions (AVCs)
AVCs are additional payments you can make into an arrangement to increase your overall retirement savings. You choose where to invest your money from a range of funds and the money you pay in gets tax relief in the same way as your normal Scheme contributions (subject to limits). 

If you're an active ESPS member, go to the boosting your ESPS benefits page to learn more. If you're an active UPP member, go to the boosting your UPP benefits page. 

Annual Allowance (AA)
This is the maximum amount you can save into all of your pension arrangements combined each tax year before tax is charged on any excess. The Annual Allowance is currently £60,000. 

However, a lower ‘Tapered Annual Allowance’ applies to high-earning pension savers and may affect those with a taxable income of more than £200,000.

A lower allowance of £10,000 may also apply if you’ve taken money out of your pension pot. This is known as the ‘Money Purchase Annual Allowance’.
 
You can find more information on the Annual Allowance on the tax allowances page or via the government website. 

Annuity
A series of payments made at regular intervals for an agreed period (often for the life of the person purchasing the annuity). Pension scheme members often choose to purchase an annuity by means of an insurance policy once they retire, although they’re no longer obliged to.

Beneficiary
Someone who will receive benefits from the Scheme following your death. Your beneficiaries are likely to include a partner or children (if any). However, you can name any people or organisations to receive a lump sum payment if you die before claiming your pension (or within five years of taking it) by completing an Expression of Wish form.

Benefits
Any payments made on behalf of your pension, including tax-free lump sums, pension payments and death benefits.

Benefit statement
A statement or estimate showing a member’s expected benefits from their pension scheme.

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

Contributions
The money you pay into your pension scheme or into your AVCs.

Deferred member
A person who is no longer paying into their employer's pension scheme, but who still has benefits in it that they haven’t yet taken payment of.

Learn more about your pension by selecting one of the sections below, depending on your membership type:

• Deferred ESPS members
• Deferred UPP members

Defined Benefit (DB) schemes
In DB schemes, the amount of income a member receives when they retire depends on the rules of the scheme and will be percentage of their salary multiplied by the number of years of service that counts towards their pension. The most common DB schemes are Final Salary Schemes. The Uniper Group of the ESPS categories are defined benefit arrangements.

Defined Contribution (DC) schemes
In DC schemes, the amount of contributions paid by the member and employer is set, but the amount of income received on retirement is not and depends on investment market performance. Also known as ‘money purchase’ schemes. The Uniper Pension Plan (UPP) is a defined contribution arrangement.

Dependant
Someone who relies to some extent on your income. Your partner and children are usually considered dependants, but you may have others.

Early retirement
Taking the benefits from your pension scheme before you reach your normal retirement age.

ESPS
The Electricity Supply Pension Scheme.

General Data Protection Regulation (GDPR)
GDPR is a new data protection law, which will be introduced across Europe on 25 May 2018, replacing the Data Protection Act 1998.
  
Ill-health retirement
When a pension scheme member retires for medical reasons before reaching the Scheme's normal retirement date.

Internal Disputes Resolution Procedure (IDRP)
The procedure for handling any complaints about the Scheme.
  
Lifetime Allowance (LTA)

This is the maximum amount you can save into all your pensions throughout your working life before you have to pay tax. The LTA for the tax year 6 April 2023 to 5 April 2024 is £1,073,100.

You would have to pay tax on any pension savings you have that are over the LTA limit. The amount of tax you owe will depend on your income tax rate, rather than the LTA charge that was in place before 5 April 2023.

You should be aware that from 6 April 2024, there is a limit of £268,275 on the amount you can take as a lump sum when you take your pension. This limit won’t affect you if you have Lifetime Allowance protections. 

You can find more information on the Lifetime Allowance on the tax allowances page or via the government website. 

Lump sum
A cash payment available to pension scheme members, usually at retirement. It is currently tax-free.

Member
A person who, having joined a pension scheme, has built up benefits under that scheme.

Money purchase pension
Another term for defined contribution schemes.

National Insurance contributions
Money taken from your pay by the government, which is used to fund the State Pension and other State benefits.

Normal pension age (NPA)
The earliest age at which a member can usually receive full pension benefits. 

Normal retirement age (NRA)
The age at which employees in a certain role usually retire.

Pension
A savings plan that is designed to be held until retirement age and looked after by Trustees.

Pension benefits
A general term for monies paid from a pension scheme.

Pension input period (PIP)
A period of time, aligned to the tax year, over which a member's contributions to (or benefits built up in) a pension are measured against the Annual Allowance.

Pension scheme administrator
The person or company that runs a pension scheme and carries out certain legal requirements, for example paying certain tax charges to HMRC.

If you have an ESPS pension, the administrator is Railpen, whereas if you have a UPP pension, the administrator is Fidelity. 

Pensionable earnings
The part of your earnings which qualify for the calculation of pension benefits and define the amount of contributions you pay.

Personal pension
A personal pension is a registered pension scheme that is independent of your employer.

Retirement
The period that occurs after an individual has stopped working in paid employment and takes their pension benefits. May it be long and happy! 

If you're a retired member, choose one of the sections below, depending on your membership type:

• ESPS pensioners
• UPP pensioners

State Pension
The pension paid to UK citizens by the Government when they reach State Pension age.

State Pension age (SPA)
The age you start to receive your State Pension benefits. You can work out your State Pension age using the gov.uk calculator.

Summary Funding Statement
A report which tells you the financial position of your Scheme at the time of its actuarial valuation or annual funding update. It also provides the main reasons for any changes in funding position and, if the Section is in deficit, it shows the agreed recovery plan.

Trustee
An individual or group responsible for governing a pension scheme.

Find out more about the Trustee of the Scheme on the meet the ESPS Trustees page.

UPP
The Uniper Pension Plan.

Valuation
An assessment of a scheme’s performance over a given time frame (every three years for defined benefit schemes) to compare funds being paid in against funds being paid out.