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SPECIAL REPORT: OCCUPATIONAL PENSIONS

Over the last five years the face of pensions has changed considerably, even before taking into account the emotive subject of supposed pensions mis-selling.

One thing remains constant, however; there is still much that is misunderstood regarding the basics of the subject. The technical phraseology and jargon used by the drafting legislators and Inland Revenue Pension Schemes Office is, inevitably, adopted by the pensions adviser. All parties, occasionally, forget to use plain English when talking with the lay public. It is easy to see why misconceptions occur and 'popular myth' takes over.

We hope, therefore, that this brief question and answer session will confirm what you already know, and clarify some of those hazy areas of knowledge.

If you have a general query which you think may be of interest to other visitors to the site please email your query to us (Please note that whilst we can attempt an explanation, we cannot offer advice).

Questions you may have on Occupational Pensions

1. Is there any difference between an occupational pension scheme, a superannuation scheme, a company scheme and a personal pension?

2. What is the difference between a pension scheme, a pension plan and a pension fund?

3. Can anyone set up a pension?

4. What is meant by the 'earnings cap'?

5. What is the 'married women's stamp'?

6. What is an 'insured pension scheme'?

7. If I leave work temporarily on maternity leave, will my pension entitlement suffer?

8. Articles about pension which appear in the press use phrases like 'remuneration', 'final pensionable salary', 'scheme earnings', 'P60 earnings', and similar phrases. Are they all talking about the same thing? Why can't there be standard definitions to make things easier to follow?

9. What is a 'final salary' scheme?

10. What is a 'formula based' scheme?

11. What is a 'money purchase' pension?

12. What is a defined benefit scheme?

13. What is a defined contribution scheme?

14. What is the maximum pension I can take?

15. How much can I contribute towards my pension?

16. What is the difference between an AVC and an FSAVC contract?

17. What is the difference between a Top Hat scheme and an Executive Pension Plan?

18. If I want to leave the company, I suppose that all of may contributions and all of the company's contributions can be transferred to the scheme my new employer runs?

19. Is a transfer as described in Q18 a right?

20. I've heard colleagues referring to their pension rights being 'frozen' and even 'pupped'! I have a deferred pension. What is the difference between them?

21. What is a 'Section 32 buyout'?

22. Can a pension be joint life, or life of another, like life assurance?

23. Does my employer have to contribute to the occupational scheme I belong to? Does he have to contribute for each member?

24. How do I get income tax relief on my pension scheme contributions when I join?

25. If a member leaves the scheme that I belong to with less than two years' scheme membership, they are entitled to a refund of their contributions. If they were to "opt out" of the scheme but still work for the company, can they receive a refund of their contributions as well?

26. When averaging salaries to calculate final remuneration, is the earnings cap applied before or after averaging?

27. I joined my current company in 1982, but didn't join the company's occupational pension scheme until 1992. Does pensionable service for Inland Revenue maximum benefits start from 1982 or 1992?

28. Can I take a tax-free cash sum but defer taking the pension from my company scheme?

29. What is the maximum rate by which a pension in payment can increase?

30. Can dividends be included in pensionable salary?

31. Can an employee pay for the life cover under an occupational pension scheme?

32. Is it possible to retire on a "2/3 pension" before Normal Retirement Date (NRD)?

33. What legal documents govern a pension scheme?

34. What sort of powers do the Trustees of an occupational pension scheme possess?

35. What does the Term "Free Cover Level" mean in respect of an Occupational Pension Scheme?

36. I have been told by a friend that the State Pension Age for women is now 65. I am now 56 and was looking forward to retirement in 4 years time. Is this information correct?

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REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.