PTM000001 - Glossary
A B C D E F G H I J K L M N O P Q R S T U V W
A
B
BCE
Benefit crystallisation event
Beneficiary
An individual who is any of a dependant, nominee or successor.
Benefit crystallisation event
A defined event that triggers a test of specified benefits against an individual’s available lifetime allowance.
C
CPI
The Consumer Prices Index, which is the general index of consumer prices published by the Statistics Board. Where that index is not published for a relevant month any substitute index or index figures published by the Statistics Board may be used (see section 279 Finance Act 2004).
D
Dependant
A person who was married to, or a civil partner of, the member at the date of the member’s death is a dependant of the member.
Additionally, if the rules of the pension scheme so provide, the above test can be extended to apply not only at the date of the member’s death, but to extend to the point in time when the member first became actually entitled to a pension under the pension scheme.
A child of the member (including a legally adopted child) is a dependant of the member if the child:
- has not reached the age of 23,
- has reached age 23 and, in the opinion of the scheme administrator, was at the date of the member’s death dependent on the member because of physical or mental impairment
- has reached age 23 but is covered by any of the transitional provisions described in PTM071200
- from 16 September 2016, and for the purpose of continued access to a dependant’s drawdown fund or flexi-access drawdown fund only (as explained at PTM072410) has reached age 23.
A person who was not married to the member or was not in a civil partnership with the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death the person was:
- financially dependent on the member
- the person’s financial relationship with the member was one of mutual dependence (the scheme rules will set out the criteria the scheme will use to determine mutual dependency)
- the person was dependent on the member because of physical or mental impairment.
E
Ex-spouse
An individual to whom pension credit rights have been or are to be allocated following a pension sharing order, agreement or equivalent provision.
F
Former civil partner
An individual to whom pension credit rights have been or are to be allocated following a pension sharing order, agreement or equivalent provision.
G
GMP
Guaranteed minimum pension - this has the same meaning as in the Pension Schemes Act 1993.
H
I
Insurance company
A person who has permission under Part 4 of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance.
J
K
L
M
Market value
The market value of an asset held for the purposes of a pension scheme is to be determined in accordance with section 272 of the Taxation of Chargeable Gains Act 1992 and section 278(2) to (4) Finance Act 2004 (where dealing with a right or interest in respect of money lent directly or indirectly to certain parties).
Master Trust scheme
A pension scheme that meets the definition of a Master Trust scheme under the Pension Schemes Act 2017.
N
Nominee
An individual (so the nominee cannot be a trust, charity or company for example) who is not a dependant of the member and who has been nominated by either the member or the scheme administrator. In relation to any particular benefits under an arrangement, an individual nominated by the scheme administrator only counts as a nominee of the member at any time if there are then no dependants of the member or no individual or charity nominated by the member in relation to the benefits.
Being nominated in relation to particular benefits under an arrangement includes a reference to being nominated in relation to:
- the scheme
- arrangements that include the arrangement
- the arrangement
- benefits that include the particular benefits.
The meaning of dependant for this purpose does not include a child of the member who has reached age 23, unless they are a dependant because of physical or mental impairment or the transitional provisions described in PTM071000 apply.
O
Occupational pension scheme
A pension scheme established by an employer or employers and having (or capable of having) effect so as to provide benefits to or in respect of any or all of the employees of that employer or employers, or any other employer (whether or not it also has effect so as to provide benefits to or in respect of other persons, or is capable of having such effect).
Certain centralised schemes for unconnected employers (see PTM022000) that don’t meet the definition of an occupational pension scheme are treated as an occupational pension scheme for the purposes of Part 4 Finance Act 2004. Unless the particular guidance states otherwise the term occupational pension scheme as used in PTM includes such schemes.
Overseas pension scheme
A pension scheme is an overseas pension scheme if it is not a registered pension scheme but it is established in a country or territory outside the UK and satisfies the requirements in regulation 2 of the Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Schemes) Regulations 2006 - SI 2006/206.
P
Pension credit
The pension sharing provisions in the Welfare Reform and Pensions Act 1999 (WRPA) introduced the ‘pension debit’ and ‘pension credit’. The ‘pension debit’ is the amount by which the value of the original member’s pension rights are reduced and the ‘pension credit’ the corresponding amount by which the ex-spouse’s or former civil partner’s pension rights are increased. Section 29 WRPA determines the value of the pension credit to be transferred to the ex-spouse or former civil partner.
Pension credit member
An individual who has rights in a pension scheme which are directly or indirectly attributable to pension credits.
Pension debit
The pension sharing provisions in the Welfare Reform and Pensions Act 1999 (WRPA) introduced the ‘pension debit’ and ‘pension credit’. The ‘pension debit’ is the amount by which the value of the original member’s pension rights are reduced and the ‘pension credit’ the corresponding amount by which the ex-spouse’s or former civil partner’s pension rights are increased.
Pension sharing order
An order or provision made as listed in section 28(1) of the Welfare Reform and Pensions Act 1999 (or the Welfare Reform and Pensions (Northern Ireland) Order 1999 (SI 1999/3147)) following a divorce or the dissolution of a civil partnership.
Personal representatives
In relation to a person who has died, this means (in the UK) persons responsible for administering the estate of the deceased. In a country or territory outside the UK, it means the persons having functions under its law equivalent to those administering the estate of the deceased.
Public service pension scheme
A pension scheme that is either:
- established by or under any enactment of the UK parliament, or of a parliament of a country or territory other than the UK, or any political subdivision of such a country or territory
- approved by a relevant governmental or Parliamentary person or body, or specified in an order made by the Treasury.
Q
Qualifying recognised overseas pension scheme
A recognised overseas pension scheme is a qualifying recognised overseas pension scheme if it satisfies certain HMRC requirements. The scheme manager must have correctly notified HMRC that the scheme is a recognised overseas pension scheme and provided evidence to HMRC where required. The scheme manager must also have signed an undertaking to inform HMRC if the scheme ceases to be a recognised overseas pension scheme and to comply with any prescribed information requirements imposed on the scheme manager by HMRC. The recognised overseas pension scheme must not be excluded by HMRC from being a qualifying recognised overseas pension scheme.
R
Recognised overseas pension scheme
An overseas pension scheme that satisfies the requirements of regulation 3 of the Pension Schemes (Categories of Country and Requirements for Recognised Overseas Schemes) Regulations 2006 - SI 2006/206.
Recognised transfer
A transfer representing a member’s accrued rights under a registered pension scheme to another registered pension scheme (or, in certain circumstances, to an insurance company) or a qualifying recognised overseas pension scheme.
Relevant UK earnings
Any one or more of the following types of income:
- employment income such as salary, wages, bonus, overtime, commission providing it is chargeable to tax under section 7(2) Income Tax (Earnings and Pensions) Act 2003
- income which is chargeable under Part 2 of Income Tax (Trading and Other Income) Act 2005 (trading income) 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 which is chargeable under Part 3 ITTOIA 2005 and is immediately derived from the carrying on of a UK (and/or an EEA) furnished holiday lettings business, whether individually, or as a partner acting personally in a partnership - here a ‘UK furnished holiday lettings business’ (see Chapter 6 Part 3 ITTOIA 2005) means a UK property business so far as it consists of the commercial letting of furnished holiday accommodation and a ‘EEA furnished holiday lettings business’ means an overseas property business so far as it consists of the commercial letting of furnished holiday accommodation in one or more EEA states (in either case if there is a letting of accommodation only part of which is holiday accommodation, a just and reasonable apportionment is to be made to determine the amount of the income from that business that is to be counted)
- patent income, but only where the individual alone or jointly devised the invention for which the patent in question is granted - patent income means:
- royalties or other sums paid regarding patent use and charged to tax under section 579 ITTOIA 2005 (intellectual property)
- amounts on which tax is payable under section 587 ITTOIA (sales of patent rights) or section 593 ITTOIA (death of seller of patent rights)
- amounts on which tax is payable under section 472(5) of the Capital Allowances Act 2001 (balancing charge) or paragraph 100 of schedule 3 to that Act (balancing charges).
Relevant UK earnings are to be treated as not being chargeable to income tax if, in accordance with arrangements having effect by virtue of section 2(1) TIOPA 2010 (double taxation arrangements), they are not taxable in the United Kingdom.
Relevant UK individual
An individual is a relevant UK individual for a tax year if:
- the individual has relevant United Kingdom (UK) earnings chargeable to income tax for that year
- the individual is resident in the UK at some time during that year
- the individual was resident in the UK both at some time during the 5 tax years immediately before that year and when the individual became a member of the pension scheme, or the individual, or the individual’s spouse, has for the tax year general earnings from overseas Crown employment subject to UK tax (section 28 ITEPA 2003).
Relievable pension contribution
A contribution paid to a registered pension scheme by or on behalf of a member of that scheme, unless one or more of the following exceptions applies. A payment is not a relievable contribution if either:
- the member was aged 75 or over when the contribution was made
- the contribution is paid by the member’s employer
- the payment is an age related rebate or a minimum contribution paid by HMRC to a contracted-out pension scheme under section 42A(3) or section 43 of the Pension Schemes Act 1993 or the corresponding Northern Ireland legislation, or it is a life assurance premium contribution in accordance with section 195A Finance Act 2004.
RPI
The Retail Prices Index, which is the general index of retail prices (for all items) published by the Statistics Board. Where that index is not published for a relevant month any substitute index or index figures published by the Statistics Board may be used (see section 989 Income Tax Act 2007).
S
Scheme administrator
The person or persons appointed in accordance with the pension scheme rules to be responsible for the discharge of the functions conferred or imposed on the scheme administrator of the pension scheme by and under Part 4 of Finance Act 2004. This person must be resident in the United Kingdom, an EU member state or in Norway, Liechtenstein or Iceland (EEA states which are not EU states). The person must have made the declarations to HMRC required by section 270(3) Finance Act 2004.
Scheme manager
The person or persons administering, or responsible for the management of, the pension scheme.
Sponsoring employer
In relation to an occupational pension scheme the employer, or any of the employers, to or in respect of any or all of whose employees the pension scheme has, or is capable of having, effect so as to provide benefits.
Standard lifetime allowance
The overall ceiling on the amount of tax-privileged savings that any one individual can accumulate over the course of their lifetime without taking any special factors into account that may increase or decrease the tax-privileged ceiling.
For each of the tax years 2021 to 2022, 2022 to 2023, 2023 to 2024, 2024 to 2025 and 2025 to 2026, the amount is £1,073,100.
For the tax year 2006 to 2007, the amount was set at £1,500,000 and changed in subsequent tax years as follows:
| Tax year | Standard lifetime allowance |
|---|---|
| 2007 to 2008 | £1,600,000 |
| 2008 to 2009 | £1,650,000 |
| 2009 to 2010 | £1,750,000 |
| 2010 to 2011 | £1,800,000 |
| 2011 to 2012 | £1,800,000 |
| 2012 to 2013 | £1,500,000 |
| 2013 to 2014 | £1,500,000 |
| 2014 to 2015 | £1,250,000 |
| 2015 to 2016 | £1,250,000 |
| 2016 to 2017 | £1,000,000 |
| 2017 to 2018 | £1,000,000 |
| 2018 to 2019 | £1,030,000 |
| 2019 to 2020 | £1,055,000 |
| 2020 to 2021 | £1,073,100 |
Where an individual has certain protections from the lifetime allowance, all references in PTM to the standard lifetime allowance are replaced with the amount protected for so long as the lifetime allowance remains less than the amount protected. The protections and the amount replacing the standard lifetime allowance are as follows:
Fixed protection - £1,800,000 (applies from 6 April 2012).
Fixed protection 2014 - £1,500,000 (applies from 6 April 2014).
Individual protection 2014 - an amount of more than £1,250,000 up to a maximum of £1,500,000 representing the value of the member’s pension rights on 5 April 2014 (applies from 6 April 2014).
Fixed protection 2016 - £1,250,000 (applies from 6 April 2016).
Individual protection 2016 - an amount of more than £1,000,000 up to a maximum of £1,250,000 representing the value of the member’s pension rights on 5 April 2016 (applies from 6 April 2016).
Successor
An individual (so the successor cannot be a trust, charity or company for example) who has been nominated by any of the following:
- a dependant of the member
- a nominee of the member
- a successor of the member
- the scheme administrator (but in relation to any particular benefits under an arrangement relating to a dependant, nominee or successor of the member (the ‘beneficiary’) in that capacity, an individual nominated by the scheme administrator only counts as a successor of the member at any time after the beneficiary’s death if there is then no individual, or charity, nominated by the beneficiary in relation to the benefits).
Being nominated in relation to particular benefits under an arrangement includes a reference to being nominated in relation to:
- the scheme
- arrangements that include the arrangement
- the arrangement
- benefits that include the particular benefits.
Where a successor of the member is an individual who is also a dependant of the member, the individual in the capacity of a successor of the member is to be treated as not also being a dependant of the member.
T
U
Unauthorised payments charge
Tax due under section 208 Finance Act 2004 on either unauthorised member payments or unauthorised employer payments. The rate of tax is 40% of the unauthorised payment.
Unauthorised payments surcharge
Tax due under section 209 Finance Act that is paid in addition to the unauthorised payments charge. The tax will be due where total unauthorised payments go over a set limit in a set period of time of no more than 12 months. The rate of tax is 15% of the unauthorised payments.
V
Valuation assumptions
The valuation assumptions in relation to a person, benefits and a date are assumptions that:
if the person has not reached such age (if any) as must have been reached to avoid any reduction in the benefits on account of age, that the person reached the age on the date, and
the person’s right to receive the benefits had not been occasioned by physical or mental impairment.