The Sunday Mail
Passive Management
An investment approach that aims to mirror or track the performance of a financial index. This is normally done by either investing in the exact constituents of an index or by taking a representative sample of that index. The managers of the fund have lower expenses than active fund managers, and the charges to investors are therefore lower.
PAYE (Pay As You Earn)
HM Revenue & Customs’ system for collecting income tax from the pay of employees as they earn it.
Pension Credit
A benefit for people who have a relatively low income, even if they have some savings and modest retirement income, and can be paid on top of a state pension scheme. There are two elements — the Guarantee Credit, which can be claimed by pensioners aged 60 or over, and the Savings Credit for those 65 or over. The latter rewards pensioners with a second pension or modest savings. This term is also used to describe an amount of pension transferred to an ex-spouse following divorce.
Pension Fund
General term used to describe the investment fund built up in a pension plan and used at retirement to provide a continuing income.
Pension Income
The regular income provided by a pension annuity or via flexi-access drawdown.
Pension Transfers
Refers to the process by which the current value of a pension plan can be transferred from one registered pension scheme to another registered pension scheme. The value is normally transferred direct from one employer or pension provider to another.
Pensionable Earnings
Earnings on which benefits and contributions in a pension scheme are calculated.
Pensionable Service
Period of service with a company that is used in the calculation of pension benefits in a defined benefit/final salary scheme.
Tax Relief
The UK government encourages you to save for your retirement by giving you tax relief on pension contributions. Tax relief works by reducing your tax bill or increasing your pension fund.
Tax Year
A period of time used for tax calculations. In the UK this starts on 6 April each year and finishes on 5 April the following year.
Term Assurance
A simple life assurance policy that pays out on the death of the customer during the time period in years specified by the policy.
Terminal or Final Bonus
A discretionary bonus that may be added to a with-profits policy out of a life fund’s surplus profit. This bonus would be payable at the end of the term of the policy (at maturity), or when a claim is made e.g. death or surrender.
