additional voluntary contribution
- (AVCs) pension contributions paid by an individual who is a member of an occupational pension scheme but makes extra payments to increase the value of the pension upon retirement. All employers offering occupational pension schemes are required to offer AVC arrangements. Alternatively, investors may contribute to free-standing additional voluntary contributions (FSAVCs). AVC schemes set up since July 1988 do not allow any tax free cash to be withdrawn and may be used only to purchase an annuity. Benefits under an AVC scheme linked to an employer's main scheme may be taken only at the same time as benefits under the main scheme.
executive pension plan
- form of occupational pension scheme arranged on a money purchase basis for one or more key employees of a company. Far higher levels of contribution are allowed under an executive pension plan than under a personal pension plan. There must be a contribution by the employer but the employee can also contribute. Tax-free cash under an executive pension plan is governed by occupational pension scheme rules.
personal pension plan
- Established under the Social Security Act 1986, personal pensions allow individuals to make their own provision for an income in retirement. Tax relief is allowable on the contributions at the investor's highest marginal tax rate. Investments grow free of all taxes to create a fund to be used at retirement to purchase an annuity. Up to 25% of the fund may be taken as tax free cash and the balance must be used to purchase an annuity. Alternatively, from July 1995 the balance may be used in an income withdrawal annuity arrangement.
occupational pension
- pension provided by an employer. Usually the pension payments are related to the person's salary in the final few years of employment.
S32 buy-out bond
- a form of pension policy used to transfer benefits from an occupational scheme to a money purchase arrangement but maintain the GMP element.
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