Morgan Lloyd Small Self Administered Pension Scheme - GLOSSARY

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GLOSSARY

A
B
C
D
E
G
H
I
L
M
N
O
P
Q
R
S
T
U
W

A

Alternatively secured pension

Income that is paid to a member direct from a pension scheme after age 75.

Is paid from age 75 onwards.

Amount of income is calculated using the GAD rate for a 75 year old regardless of the age of the recipient.

Income level must be within 55% and 90% of the GAD rate for a 75 year old.

Income levels must be reviewed annually.

Alternatively secured pension fund

Funds that have been designated to provide a scheme member (who is aged 75 or over) with an alternatively secured pension.

Annual allowance

The Annual Allowance is the maximum tax relievable amount that can be paid into a pension scheme

The published Annual Allowance for the tax years 2006/2007 to 2015/2016 is:

Tax Year	Annual Allowance

2006/2007	£215,000
2007/2008	£225,000
2008/2009	£235,000
2009/2010	£245,000
2010/2011	£255,000
2011/2012	£255,000
2012/2013	£255,000
2013/2014	£255,000
2014/2015	£255,000
2015/2016	£255,000

Annual allowance charge

A tax charge at the rate of 40% in respect of the amount of contribution to one or more registered pension schemes exceeds the amount of the annual allowance for the tax year.

Annuity protection lump sum death benefit

A lump sum benefit paid following the death of a scheme member who died before age 75 and was in receipt of either a lifetime annuity or scheme pension.

B

Basis amount	The basis amount is the base calculation for determining the maximum level of unsecured pension or alternatively secured pension. The basis amount represents the annual amount of income that the unsecured pension fund or alternatively secured funds could purchase at the initial calculation and review points.
BCE	Benefit crystallisation event
Benefit crystallisation event	Whenever a benefit event occurs, a certain amount is deemed to crystallise for lifetime allowance purposes. The amount crystallised represents the capital value of the benefit, and is measured against the lifetime allowance to ensure this is not exceeded.
Borrowing	A pension scheme may borrow up to 50% of its total asset value for any approved purpose. This can facilitate the payment of benefits or assist in the purchase of further investments, normally commercial property.

C

Chargeable amount

The amount that crystallises for lifetime allowance at a benefit crystallisation event that is in excess of an individual's lifetime allowance. The chargeable amount is the amount on which the lifetime allowance charge arises.

Charity lump sum death benefit

A lump sum benefit paid from a money purchasearrangement to a charity following the death of a scheme member (or a dependant of such a member) who is aged 75 or over. Such a lump sum cannot be paid where there is still a surviving dependant of the member.

Connected Party

A connected party is:

A scheme member
A Scheme member’s husband or wife
A scheme member’s relative
A scheme member’s husband or wife’s relative
A scheme member’s business partner and their husband, wife or 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 persons listed above. Relative means a brother, sister, ancestor or lineal descendant. It does not include nephews, nieces, uncles and aunts.

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.
A child of the member is a dependant of the member if the child has

not reached the age of 23, or
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.

E

Enhanced Protection

Protection of all benefits accrued before 6 April 2006 (and all growth thereafter) from the lifetime allowance. This is subject to certain conditions being met, for example no further pension contributions can be paid.

G

GAD	The Government Actuary’s Department.
GAD tables	The Government Actuary's Department Tables on a single life basis. These are used when calculating a member’s unsecured or alternatively secured income.

H

HMRC	Her Majesty’s Revenue and Customs. Formerly known as the Inland Revenue.

I

Intellectual Property

Intellectual property (IP) is a field that refers to creations such as musical, literary, and artistic works; inventions; and symbols, names, images, and designs used in commerce, including

copyrights,

trademarks,

patents, and

domain name. Under intellectual property law, the holder has certain

exclusive rights to the Intellectual Property.

L

Lifetime allowance

The overall ceiling on the amount of tax-privileged savings that any one individual can accumulate over the course of their lifetime. The published levels are:

The published standard lifetime allowance for the years 2006/2007 to 2015/2016 is:

Tax Year	Lifetime allowance

2006/2007	£1,500,000
007/2008	£1,600,000
2008/2009	£1.650,000
2009/2010	£1,750,000
2010/2011	£1,800,000
2011/2012	£1,800,000
2012/2013	£1,800,000
2013/2014	£1,800,000
2014/2015	£1,800,000
2015/2016	£1,800,000

Lifetime allowance charge

An income tax charge on any pension benefits in excess of the lifetime allowance:

25% if the excess funds are retained in the pension fund.
55% if the excess funds are paid as a lump sum.

Lifetime annuity

A pension contract purchased from an insurance company that provides a member with an income for life.

Loan

A loan can be made to a connected employer as long as the following 5 conditions are met:

is secured as a first charge.
does not exceed 50% of the pension asset value.
Has a maximum term of 5 years
Must be repaid in equal capital and interest instalments
Interest must be at a commercial rate

M

Money purchase benefits	Benefits provided under a pension scheme, the rate or amount of which is calculated by reference to an amount available for the provision of benefits to or in respect of the member (whether the amount so available is calculated by reference to payments made under the scheme by the member or any other person or employer on behalf of the member, or any other factor).
Money purchase arrangement	A pension arrangement where the fund accumulates by the payment of contributions.

N

Nominated date

This means

in the case of a money purchase arrangement other than a cash balance arrangement, such date as the individual or scheme administrator nominates, or
in the case of any other arrangement, such date as the scheme administrator nominates.

Normal minimum pension age

This is

age 50 for the period before 6 April 2010
age 55 on or after 6 April 2010.

O

Occupational pension scheme

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

P

Pension commencement lump sum	A lump sum benefit paid to a member of a registered pension scheme (who is aged under 75) which is paid tax free. This will normally be 25% of the pension fund unless special protection measures apply.
Pension credit	An amount of pension awarded to an ex spouse from a divorce settlement.
Pension credit member	An individual who has rights in a pension scheme because of pension credits that have been awarded
Pension debit	An amount of pension reduced for a member because of a credit awarded to an ex spouse from a divorce settlement.
Pension input amount	The amounts as arrived in accordance with sections 230 to 237 of Finance Act 2004
Pension input period	The period in which a members’ pension rights are assessed against the annual allowance.
Pension sharing order	An order or provision made as in section 28(1) of the Welfare Reform and Pensions Act 1999 following a divorce or the dissolution of a civil partnership.
Pension year	The period the maximum unsecured pension and alternatively secured pension limits apply to.
Primary Protection	Protection of all funds over £1.5million accrued before 6 April 2006 from the lifetime allowance. The level of protection increase in line with increases in the lifetime allowance.

Q

Qualifying recognised overseas pension scheme (QROPS)

A list of overseas pension schemes that a member may transfer to if it satisfies certain HMRC requirements.

R

Registered pension scheme

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

Relevant UK earnings

Income on which tax relief may apply to contributions in excess of £3,600 over tax year. This means:

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 of Income and Corporation Taxes Act 1988 (ICTA) (patent income of an individual in respect of inventions) applies.

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 five 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.

S

Scheme administrator	The person or body appointed to be responsible for the discharge of the functions conferred or imposed by the rules of the scheme. The Scheme Administrator must be resident in an EU member state or in Norway, Liechtenstein or Iceland.
Scheme chargeable payment	A taxable payment made by the scheme as a result of a breach in HMRC regulations.
Scheme pension	A pension provided by an Insurance Company or Scheme Administrator for life that provides a member with an income for life.
Secured pension	Either a lifetime annuity or scheme pension.
Serious Ill Health	It will be possible for members to totally commute any benefits not yet in payment on the grounds of serious ill-health at any age prior to 75. This will be subject to the Scheme Administrator obtaining medical evidence confirming that the member’s life expectancy is less than 1 year. The amount of the commuted benefits will be tested against their available lifetime allowance, and as long as the benefits are less than this they will be paid tax-free.
Standard lifetime allowance	See Lifetime Allowance

T

Trivial commutation lump sum

A lump sum benefit paid to a member of a registered pension scheme (who is aged under 75) because all their pension entitlements are below 1% of the lifetime allowance. The member must be between the age of 60 and 75.

U

Unauthorised employer payment	An unauthorised employer payment is a payment by a registered pension scheme that is an occupational pension scheme to or in respect of a sponsoring employer or a former sponsoring employer which is not an authorised employer payment, or anything which is treated as being an unauthorised payment to a sponsoring employer or former sponsoring employer under Part 4 of Finance Act 2004.
Unauthorised member payment	An unauthorised member payment is a payment by a registered pension scheme to or in respect of a member or a former member of that pension scheme that is not an authorised member payment, or anything which is treated as being an unauthorised payment to or in respect of a member or former member under Part 4 of Finance Act 2004.
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 2004 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.
Uncrystallised funds	Funds held in respect of the member in a pension scheme that have not as yet been used to provide that member with a benefit.
Unsecured pension	Income that is paid to a member direct from a pension scheme. Can be paid up to age 75. Amount of income is calculated by the Government Actuary’s Department (GAD) rates. Income level can be between zero and 120% of the GAD rate. Income levels must be reviewed every 5 years, but can be review at earlier intervals.
Unsecured pension fund	Funds that have been designated to provide a scheme member (who is aged below 75 ) with an unsecured pension.
Unsecured pension fund lump sum death benefit	A lump sum benefit paid following the death of a member before age 75 from an unsecured pension fund

W

Winding-up lump sum

A lump sum benefit paid to a member of a pension scheme because the scheme is being wound-up and their accrued benefits under the scheme are deemed trivial.