Glossary

A

Accident, sickness and unemployment insurance (ASU) - Also known as Mortgage protection insurance and Payment protection insurance.

Accrual rate - The rate at which pension benefits build up each year in a final salary pension.

Administrator - A person who is designated to be responsible for the operation and administration of a plan.

AER (Annual Equivalent Rate) - The rate of interest earned within a year; irrespective of how often interest is added to your account. The higher the AER, the better the return.

Annuity - An annuity converts a lump sum into retirement income.

Approved person (FSA Register) - Someone the FSA has approved to perform certain roles for an FSA authorised firm or an appointed representative.

B

Beneficiary - The person(s) you name to receive certain benefits (such as life insurance) upon your death.

Benefits - refers to the full range of programs sponsored by your employer

Benefit Period - A period of time, during which deductibles and other benefit requirements must be satisfied.

C

Cafeteria plan - A plan in which the employer offers a variety of different benefits, and the employees choose those benefits that fit their individual needs.  Examples of benefits offered in the cafeteria include group-term life insurance, dental insurance, disability and accident insurance, and reimbursement of healthcare expenses.

Cash ISA - A savings account with a limit on how much you can save in each tax year. The interest on the savings is tax free.

D

Defined benefit plan - A plan in which employees are promised that upon retirement they will receive a specific amount of money according to a formula, a calculation that may be based on how long the employee worked for the company, and how much he or she earned. 

Defined contribution plan - This kind of plan refers to one in which the employer makes regular contributions of a specified amount of money.  In contrast to a defined benefit plan, it does not promise the employees any specific amount of retirement benefits.   The employee's retirement benefit will depend on how much was contributed to his or her account, and how the plan's investments performed over the years. 

E

Employee - You are classed as an employee if you're working under a contract of employment.

Eligibility - The rules under a specific benefit program that determine who is eligible for coverage (employees and dependents) and when qualified participants can enrol in the options available to them.

Employee Assistance Program (EAP) - Provides family support services that address a variety of concerns such as legal support, bereavement counseling, eldercare counseling and other issues.

F

Final salary pension - Also known as a defined benefits scheme, this is a pension available through an employer. The amount of pension you get is worked out on your salary at or near retirement, or when you left employment, and your pensionable service.

Financial Ombudsman Service - The official independent complaints scheme which works to resolve complaints between consumers and businesses providing financial services.
Financial Services Authority (FSA) - The UK financial services regulator.

Financial Services Compensation Scheme (FSCS) - The FSCS can pay compensation to customers of authorised firms if a firm is unable, or likely to be unable, to pay claims against it.

G

Grace Period - Time period that follows the premium due date when the coverage and policy remain in force.

Group Personal Pension - A type of personal pension offered by some employers but not classified as occupational.

Guaranteed Issue Underwriting - The applicant is guaranteed coverage up to an agreed amount or level without evidence of insurability.

H

Health cash plans - Insurance that provides limited cash sums towards everyday healthcare bills.

I

Independent financial adviser - A professional who advises on suitable financial products after researching the whole market having investigated your needs and circumstances.

Insurability - The health status of an insurance applicant which makes him/her acceptable to an insurance company.

ISA (Individual Savings Account) - Savings or investment products that earn tax-free interest. You can only invest up to a set limit in each tax year.

K

Key Features documents - Important information for you, set out in a standard way, so you can compare service, product and costs.

L

Life insurance - Life insurance is a way to provide some financial security for people who depend on you if you died. There are different types, but the policy usually pays out a lump sum or an income when the person insured dies.

Lifetime allowance - The maximum value of fund a pension scheme member can accumulate without incurring a tax charge.

M

Money-purchase plan - A defined-benefit plan in which the employer must contribute a specific amount of money each year to each participant's account.  The amount of each contribution generally depends on that person's pay.

N

National Insurance contributions (NICs) - You pay NICs from your pay to qualify for certain social security benefits including the State Pension.

Normal retirement age - Employer may create a pension plan based on an assumption that employees will decide to retire at some age, and the employer can decide what that age will be. Companies frequently pick age 65.

O

Occupational pension - A pension which is only available through employers and run by pension scheme trustees. There are two types - salary-related (also called 'defined benefits' or 'final salary') and money purchase (defined contribution).

P

Payroll deduction - The employee's share of premiums deducted from his or her payroll earnings and then paid to the insurance company by the employer.

Portability - A provision of voluntary coverage that allows a terminating employee (other than for reason of retirement or disability) to continue coverage at the same or reduced benefit amount to a stipulated age, depending on the coverage.

Pre-existing condition - A mental or physical problem suffered by an insured prior to the effective date of insurance coverage.

S

Small self-administered scheme (SSAS) - This is an occupational pension scheme for a small number of members who are usually all company directors or key staff.

Stakeholder pension - A pension that meets government standards for charges, access and flexibility.

T

Tax - A charge you pay to the government - there are different types of tax but income and inheritance tax are the ones most people may be aware of.

Tax-free lump sum - HM Revenue & Customs (HMRC) limits how much you can take as a tax-free lump sum from your personal or stakeholder pension fund - currently up to a quarter (25%) of your fund - before converting the fund into income. For occupational pensions it depends on the rules of the scheme.

Term life insurance - An insurance policy that provides a specified benefit to a designated beneficiary upon the policyholder's death.

V

Voluntary benefits - Optional benefit plans sponsored by the employer, but fully paid for by employees who elect coverage.  These benefits are generally available at special group rates or discounts, making them more cost-effective than employees could obtain on their own.  Examples include vision benefits, life insurance, disability insurance, long-term care insurance, legal services, and college savings plans.

W

Waiting period - A specified number of days that the insured must wait before becoming eligible for coverage.

Wellness benefits - A broad range of employer-sponsored programs and activities designed to promote the good health of employees.  Wellness benefits may include physical fitness programs, preventive care tests and screenings, smoking cessation, health risk appraisals, and stress management.

Winding up - The closing of a company's occupational pension scheme.