Pension Glossary
T App1 – PENSION GLOSSARY
| Term | Definition |
|---|---|
| Accumulation Phase | The period during which pension contributions are made and investment returns are accumulated. |
| Annual Allowance | The maximum amount that can be contributed to pensions each tax year with tax relief without incurring a tax charge. |
| Annuity | A financial product that converts a pension pot into a guaranteed income for life or a fixed period. |
| Auto-Enrolment | A UK government policy requiring employers to automatically enrol eligible workers into a workplace pension scheme. |
| Beneficiary Drawdown | An option allowing a beneficiary to take income from a pension fund after the member's death. |
| Defined Benefit (DB) | A type of pension that provides a guaranteed income based on salary and years of service. |
| Defined Contribution (DC) | A pension scheme where the retirement income depends on the contributions made and investment performance. |
| Drawdown | A method of accessing pension savings by withdrawing income while leaving the rest invested. |
| Flexi-Access Drawdown | A flexible income option allowing pension savers to draw variable amounts from their pension pot. |
| Lump Sum | A one-off payment taken from a pension pot, up to 25% of which is usually tax-free. |
| Lifetime Allowance (LTA) | The maximum value of pension benefits you can build up without incurring a tax charge. Abolished from April 2024. |
| Money Purchase Annual Allowance (MPAA) | A reduced annual allowance for those who have accessed a DC pension and wish to continue contributing. |
| Nomination of Beneficiaries | A form used to inform a pension provider who should receive your pension benefits after death. |
| Pension Commencement Lump Sum (PCLS) | The tax-free lump sum you can usually take (up to 25%) when you access your pension. |
| Pension Input Amount | The total value of contributions and benefit accruals in a tax year used to test against the annual allowance. |
| Pension Pot | The total value of savings in a defined contribution pension scheme. |
| Pensionable Earnings | Earnings used to calculate pension contributions or benefits, often excluding bonuses or overtime. |
| Residue Pension Funds | Funds remaining in a drawdown pot at death, which may be passed to beneficiaries. |
| State Pension | A regular payment from the UK government to people who have reached State Pension age and paid sufficient National Insurance. |
| Tapered Annual Allowance | A reduction in the annual allowance for high earners based on their total income. |
| Tax-Free Cash | The portion of your pension pot (typically 25%) that can be taken free of income tax. |
| Uncrystallised Funds | Pension savings that have not yet been accessed (no lump sum or drawdown taken). |
| Uncrystallised Funds Pension Lump Sum (UFPLS) | A way to access pension money directly without entering drawdown, 25% of each withdrawal is tax-free. |
| Workplace Pension | A pension scheme arranged by an employer that employees contribute to, often with employer contributions. |
| Expression of Wish | Another name for a Nomination of Beneficiaries form. |
For a deeper dive on any topic, see RetirePlan.co.uk
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