Glossary

AVC (Additional Voluntary Contribution)

These are extra contributions you made when you were an active member. When you retire, you will use your AVC savings to give you extra pension benefits. AVCs are Defined Contribution pension savings. 

CARE (Career Average Revalued Earnings)

CARE is a type of Defined Benefit pension where your pension is worked out using your earnings in each year you are a member, rather than your final salary. Each year’s earnings are increased (revalued) up to retirement to allow for inflation. 

Company

The principal employer of the MSD Pension Scheme is Merck Sharp & Dohme (UK) Limited  

The principal employer of the MSD Animal Health Pension Scheme is MSD Animal Health UK Limited.  

If you built up pension benefits while working for another company that is now, or became part of the Principal Employers, those benefits are still covered by the Principal Employer - even if that old company has left the Scheme or no longer exists. 

Contracting out

Historically, DB pension schemes like the Company’s Schemes were able to contract out of the State Second Pension (S2P). This allowed the Company and member to pay lower National Insurance contributions in exchange for the pension scheme providing the member with benefits broadly at least as much as S2P. The Government ended the option for DB schemes to contract out from 6th April 2016. 

DB (Defined Benefit) 

A type of pension arrangement where the income you receive in retirement is worked out using a set formula, usually based on your salary and how long you were a member of the Scheme. The amount of pension you receive is not directly based on investment performance. CARE and Final Salary are two types of DB pension. 

DC (Defined Contribution) 

A type of pension arrangement where the amount paid in (by you and the employer) is known and recorded in your individual account. The value of pension benefits at retirement is unknown and determined by the level of contributions and investment returns.  

Dependant

Someone who relies on you financially, such as your spouse, eligible child, or another person the Trustee considers to be financially dependent on you. For more details, the Trust Deed and Rules includes the Scheme’s formal definition – available on request by contacting the Administrators – see the Contacts page. 

Final Salary

A type of Defined Benefit pension where your pension is based on your salary near the time you leave or retire (your Final Pensionable Salary) and how long you were a member. Each year you build up a fraction of your Final Pensionable Salary, so your pension reflects pay increases up to retirement. 

GMP (Guaranteed Minimum Pension) 

A minimum level of pension that the Scheme must pay to certain members who were ‘contracted out’ of part of the State Pension in the past. It is designed to make sure you receive at least as much pension as you would have built up in the old State Earnings Related Pension Scheme (SERPS).  

Normal Minimum Retirement Age

The earliest age most people can take money from their pension without extra tax charges. It is currently set by the government at 55 and is due to rise to 57 from 6 April 2028, unless you have a protected earlier age or retire due to ill‑health. 

Normal Retirement Age

The age specified in the Scheme’s Trust Deed and Rules as a member’s normal retirement age. 

Schemes

The MSD Pension Scheme and the MSD Animal Health Pension Scheme.  

Tax-free cash sum

When you retire, you may be able to take part of your pension as a one‑off lump sum, tax‑free under current law. The maximum is usually up to 25% of the overall value of your Scheme benefits. Taking a tax‑free cash sum will reduce the amount of pension you receive. 

Trust Deed and Rules

The legal documents which set out members’ rights and the Trustee’s obligations under the Scheme. 

Trustee

MSD Pensions Trustee Limited, the legal body responsible for running the Scheme, making sure it is managed in line with the Trust Deed and Rules and in members’ best interests.