Pensions jargon buster

Whether you’re baffled by pensions or you’re a finance boffin, here’s where you can check what the key terms mean.

Read about the 3 main kinds of pension

Many people get the State Pension and have at least one workplace or personal pension to try to gather enough money for later life. So, your pension situation is likely to look something like the following. Though take a look through the A-Z to find some of the alternatives.

1. State Pension – gets the ball rolling

If you pay National Insurance contributions over the years, you’ll be able to claim weekly payments from the government at some point in your 60s. (The age at which you can claim your State Pension is gradually increasing, depending on when you were born.)

Even if you get the full amount of the new State Pension (£221.20 per week from 6 April 2024), it’s unlikely to be enough to retire on – but it’s a good start.
More about the State Pension »

2. Workplace pension – gets you free money

Every employer in the UK must put certain staff into a workplace pension – like The People’s Pension – to meet the government’s auto-enrolment regulations.

For most people, this is basically a pot of money your employer helps you fill up. You pay a small percentage of your wages, and they add some more. You’ll normally get tax relief on the money you save into your pension pot too – this is like receiving a bonus on the amount you save at no extra cost to you.

Then, with pensions like The People’s Pension, your pot of money gets invested to grow over time.  You’ll normally be able to access your pension from either age 55 or 57 (this depends on when you joined the scheme and when you reach 55 – see minimum pension age change for more details).

3. Personal pension – keeps things flexible

Often similar to workplace pensions, but usually available directly to individuals rather than through the workplace. Like a stakeholder pension, for instance, which allows flexible payments to be made into the pension. Ideal if you’re self-employed or out of paid work.

Many employers previously offered stakeholder pensions. Some may have adjusted their pension schemes to meet the auto-enrolment regulations, while many employers have switched to workplace solutions like The People’s Pension.

The pension industry has gone through a lot of changes in the last few decades, so making sense of different pensions and jargon can be complicated. We’re here to help!

Additional voluntary contributions (AVCs)

These may be any additional money you pay into your pension – which you can do with The People’s Pension if you’d like to. Find out more about paying more into The People’s Pension. Or they may refer to an old kind of pension scheme our parent company, People’s Partnership, formerly B&CE, used to offer in the construction industry. Find out more about AVCs with B&CE.

Adjusted income

This definition of income may be relevant in assessing your annual allowance for tax relief.

It’s your income (from employment, property, investments etc) adjusted:

  • to include any money you or your employer have added to your pension pot
  • minus any taxable lump sums or death benefits you’ve received.

(You may come across the term threshold income as well.)

More about adjusted income from HMRC »

Admin account

The employer’s account within The People’s Pension is used for day-to-day administration, including submitting employee data and paying money into the Scheme.

If there’s more than one payroll being operated by the same employer (eg, a weekly and monthly payroll), a separate admin account is needed for each. This ensures the correct employee data is entered for each separate payroll and is used to differentiate employer accounts in Online Services.

Admin account contact

The person named as the account contact as part of the employer registration and account set-up process. They’re usually responsible for submitting the employee data, day-to-day administration of the admin account and being our first point of contact for any queries.

Admin account number

Each admin account has a unique 5 or 6-digit account number. This must be included when submitting employee data and in any correspondence with The People’s Pension. The admin account number can be found on the top right of Online Services once logged in.

Adventurous investment profile

One of the 3 investment profiles you can choose to invest your pension savings with The People’s Pension.  These are also sometimes referred to as lifestyle investment profiles.

This one means we’ll be more adventurous with how much of your money we invest in certain ways, compared to the balanced or cautious approach.

There’s more potential to make gains compared to the alternative profiles – balanced and cautious – but the value of your pension savings might go up and down more too. So, it may be suitable if you’re prepared to accept a higher risk. The idea is to make larger gains over the years, but it’s possible there’ll be significant ups and downs along the way.

However, as with all our investment profiles with The People’s Pension – you’ll get a glidepath, which helps to safeguard your pension savings as you move closer to retirement. What it means is your money gradually and automatically moves into more secure investments the closer you get to retiring.

The other 2 investment profiles available are the ‘balanced’ investment profile and the ‘cautious’ investment profile.

If you’re in The People’s Pension, and you’d rather not get involved in the investment choices, we’ll put you in the ‘balanced’ investment profile. If you’d like to take more of an interest, you can select either the ‘adventurous’ or ‘cautious’ investment profile options, or there are 8 investment funds you can choose between instead.

More about investing your pension »

Agreement to bind

An agreement where the employer agrees to enter into a legally binding contract with B&CE – provider of The People’s Pension.

This confirms that the principal employer and any participating employers will be bound by and meet their duties under the provisions of the Scheme Rules as part of their online registration process with The People’s Pension.

An agreement to bind can only be signed by a person who’s authorised to enter into contracts on behalf of the employer.

Annual allowance

The annual allowance is basically a limit on the amount of money you can build up in your pension pot and still get tax relief on.

For a defined contribution scheme, like The People’s Pension, the limit applies to the money you contribute from your wages (plus any tax relief you receive), as well as the money your employer contributes during the tax year.

For a defined benefit scheme, such as a final salary scheme, the limit is not the amount you save. Instead, it applies against the value of the increase in your pension benefits (known as benefit accrual) over the tax year.

The standard limit is £60,000, but it may be lower depending on how much you earn. High earners may get a lower annual allowance (known as the tapered annual allowance), and if you earn less than £60,000, the tax relief you can get is based on how much you earn. The limit may also be lower if you’ve taken any money out of your pension savings already.

Note: Whether you have one pension pot or many, it’s still the same one annual allowance to cover all your pensions – except the State Pension.

You can only get tax relief on pension contributions up to however much you earn.

For example, if you earn £30,000, your employer could contribute £10,000, you could contribute £16,000 and you could get tax relief of £4,000.

You can still get tax relief however much you earn up to £3,600. Even if you don’t work all year, you can pay up to £2,880 into your pension (from savings or other payees perhaps) and still get tax relief. For most people, the tax relief would be £720 – adding up to £3,600.

If you’re a high earner, you might get a lower annual allowance, known as the tapered annual allowance.

From April 2023, the tapered annual allowance only affects those who meet both of the requirements shown below:

  • your ‘threshold income’ is above £200,000, and
  • your ‘adjusted income’ is above £260,000.

Working out your threshold and adjusted income can be complicated. You can see how it works and some examples on HMRC’s website.

HMRC tapered annual allowance guidance page »

In practice, the tapered annual allowance will mean that for every £2 of taxable income you earn above £260,000, your annual allowance will reduce by £1. The maximum reduction is £50,000 – so anyone with an income of £360,000 or more will have an annual allowance of £10,000.

Have you started taking money from your flexi-access drawdown account, or taken a flexible lump sum (which is described by HMRC as an ‘uncrystallised funds pension lump sum’)?

If so, the amount you can pay into defined contribution pension schemes, like The People’s Pension, reduces each tax year from then on. This reduced allowance is known as the money purchase annual allowance, and for the current tax year it is £10,000 – so you can only get tax relief on the first £10,000 you save into defined contribution pension pots. If you still have a defined benefit (such as a final salary scheme), then you may still be able to pay up to £36,000 into it each tax year.

Your pension provider will let you know if the money purchase annual allowance starts to apply to you. Then you’ll have 91 days from that notification to tell any other pension providers you’re with that you’ve flexibly accessed your pension pot, and when you did so.

It’s okay, you can go over the limit, you just won’t get tax relief on any contributions you pay that exceed the limit in that tax year.

The amount you’ve exceeded the annual allowance by will be added to the rest of your taxable income for the tax year and be subject to Income Tax at the rate(s) that apply to you.

Because people often have multiple pensions – and the annual allowance covers all your pensions with the one limit – HMRC can’t just take the tax in the normal way. So, you’ll get what’s known as an ‘annual allowance charge’.

It either gets taken out of your tax return, or you might be able to ask your pension provider to pay it out of your pension savings. This is known as ‘Scheme Pays’, which means your pension would be reduced. If you want to use this method to pay your annual allowance charge from The People’s Pension, the charge must be at least £2,000. There are also time limits on when Scheme Pays can be used, so it’s a good idea to act promptly once the tax year ends.

You might be able to ‘carry forward’ any unused annual allowance from the previous 3 tax years to either reduce your annual allowance charge or remove it completely – though this isn’t possible if you’ve previously taken income from flexi-access drawdown, taken a flexible lump sum, or if you haven’t been a member of a registered pension scheme in the last 3 years.

It’s up to you to check how much you’re saving into your pension pot(s). If you’re not sure whether you’re nearing your limit, HMRC has this handy tool you can use:

HMRC’s annual allowance calculator »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Annual management charge (AMC)

At The People’s Pension, the AMC is made up of 3 elements:

  • An annual charge
  • A management charge of 0.5% (50p for every £100 saved)
  • A rebate on the management charge – the rebate level depends on how much is in your pension pot

Charges vary across different pension providers though – you might come across some higher ones, and some have monthly charges as well.

Read more about our annual management charge.

To find out exactly how much you’re charged, please log into your Online Account and go to ‘Manage my pension’, followed by ‘Charges’.

Annuity

A regular income you can buy with your pension savings. It usually pays you an income for the rest of your life, although some pay for a shorter period.

There are quite a few kinds of annuity – each with different benefits.

  • You can shop around using what’s known as the open market option – meaning you can contact different annuity providers for estimates of how much income you could get.
  • Each annuity has different rates and features, like inflation-proofing or covering your partner.
  • Research what’s best for you – as once you buy an annuity, normally you can’t change your mind.

Although we don’t offer an annuity ourselves, we can help you transfer to a provider that does when the time comes.

More about your different options for taking pension savings »

Assessment

This is how employers check whether any of their employees should be automatically enrolled in a workplace pension. It depends how old you are and how much you earn.

  • It’ll be automatic if you earn enough and are between 22 and State Pension age.
  • But even if it’s not automatic, you’ll still be able to join if you’d like to.

Based on the current tax year…

  1. If you’re aged between 22 and the age you’ll get your State Pension, and if you earn more than £10,000 a year / £833 a month / £192 a week, then you’ll be automatically enrolled by your employer. Your employer will have to contribute to your pension savings, and normally you will have to as well.
  2. If you’re aged 16-74 and you earn more than £6,240 a year / £520 a month / £120 a week, you can opt into the scheme. Your employer will have to contribute to your pension savings, and normally you will have to as well.
  3. If you’re aged 16-74 and you earn less than £6,240 a year / £520 a month / £120 a week, you can request to join the scheme. You’ll have to contribute to your pension savings, but your employer doesn’t have to unless they want to.

Assets

An asset is something valuable that could be traded for money.

It could be a house, a car, a savings account, or, in terms of investments, it could be a bond, an insurance policy or stocks and shares.

Auto-enrolment

It’s law that all employers must put certain employees in a workplace pension scheme, like The People’s Pension, and make contributions for them.

Depending on your age and earnings, you may be automatically put into the pension scheme.

  • If so, you’d be classed as a type 1 employee. You can ask to leave (opt out) if you’d rather not have one though.
  • If not, you’d be classed as a type 2 employee. But don’t worry – you can still ask to join if you’d like to.

Based on the current tax year…

  1. If you’re aged between 22 and the age you’ll get your State Pension, and if you earn more than £10,000 a year / £833 a month / £192 a week, then you’ll be automatically enrolled by your employer. Your employer will have to contribute to your pension savings, and normally you will have to as well.
  2. If you’re aged 16-74 and you earn more than £6,240 a year / £520 a month / £120 a week, you can opt into the scheme.  Your employer will have to contribute to your pension savings, and normally you will have to as well.
  3. If you’re aged 16-74 and you earn less than £6,240 a year / £520 a month / £120 a week, you can request to join the scheme. You’ll have to contribute to your pension savings, but your employer doesn’t have to unless they want to.

Automated collection

The method used to pay pension contributions via your employer to The People’s Pension. The amount and date of any payments will be authorised by the admin account contact when employee data is submitted within their Online Services account. Payments are collected from the employer’s bank account and are protected by the Direct Debit Guarantee.

B&CE

B&CE is the former name of our parent company, People’s Partnership – originally called Building & Civil Engineering Holiday Scheme Management Limited.
Over the years, B&CE – the former face of People’s Partnership – has offered various employee benefit products.

Since B&CE began back in 1942, we’ve helped millions of workers with everything from holiday pay to saving for retirement. And as we’ve grown, we’ve kept the needs of working people, and their families at the centre of everything we do. During our B&CE years, we also created The People’s Pension – our workplace pension that’s a key retirement savings product for People’s Partnership.

Becoming People’s Partnership didn’t alter the importance we place on the connection we have with the construction industry. B&CE continues to offer some of its existing employee benefit products under the B&CE name.

Read more about us at the B&CE website »

Balanced investment profile

One of the 3 investment profiles you can choose for your pension savings with The People’s Pension.  These are sometimes referred to as lifestyle investment profiles.

This one means we’ll take a balanced approach to how much of your money we invest in certain ways, rather than a cautious approach or an adventurous approach.

The idea is your pension savings will go up and down in value less than an adventurous approach over the short term, but hopefully, over the long term, they’ll generate more of a return than the cautious approach.

And as with all our investment profiles – you’ll get a glidepath, which helps to safeguard your pension savings as you move closer to retirement. (This means your money gradually and automatically moves into more secure investments the closer you get to retiring.) The other 2 investment profiles available are the ‘adventurous’ investment profile and the ‘cautious’ investment profile.

  • If you’d rather not get involved in the investment choices, we’ll put you in the ‘balanced’ investment profile.
  • If you’d like to take more of an interest, you can select either the ‘adventurous’ or ‘cautious’ investment profile options.
  • Or there are 8 investment funds you can choose from instead.

More about investing your pension »

Beneficiary

Your pension savings will hopefully support you for as long as you live, but you can normally pass on anything that’s left over to a loved one – or to several people, a charity, a company etc.

If you die before you’ve accessed your pension savings (or before you’ve taken them all), the remaining value will be paid as a lump sum. If you’re in The People’s Pension, you can tell us who you’d like to receive this by nominating a beneficiary in your Online Account.

  • You can have more than one beneficiary and you can decide what percentage goes where.
  • While the lump sum is paid at the discretion of the Trustee, most beneficiary nominations are accepted.
  • And normally, the payment is tax free.

Bond

Bonds are one of the ways we can invest your pension savings.

It’s like a loan of your money to an organisation, and they promise to pay you back in full, with interest payments along the way.

Buddy transfer

This is where at least 2 members of a scheme transfer benefits in the same transaction to another registered pension scheme. You may also hear this referred to as a ‘block transfer’. Although there are a few other conditions that have to be met, most members benefit from a buddy transfer as they can normally keep any protected tax-free cash or protected retirement age after pension savings have been transferred.

Capital

A broad term describing the financial resources a company has available to use. That could be money in the bank or the equipment they own that helps them to complete their work.

Career average revalued earnings (CARE)

A type of defined benefit pension scheme that calculates an annual retirement income based on length of service in the pension scheme and your average earnings.

Carry forward

If you go over your annual allowance limit, you’ll normally have to pay tax on the excess – but in some cases you can carry forward any unused annual allowance from the previous 3 tax years, which may reduce the tax charge.

To carry forward, contributions must exceed your annual allowance in the current tax year (the standard annual allowance is currently £60,000). You’re then permitted to use any unused tax relief from the preceding 3 tax years, starting with the tax year 3 years ago. Please note, if the government changes the level of the annual allowance (like they did from 6 April 2023), any carry forward is capped at the level of the annual allowance for that year. The allowance for 2022/23 was £40,000, this means, for example, that any unused tax relief you wanted to carry forward from the 2022/23 tax year would be capped at £40,000.

You’ll need to meet 3 conditions to carry forward:

  • You must earn at least the amount you wish to contribute in total in the current tax year (unless your employer is making the contribution). For example, if your earnings are £50,000 – you can only contribute up to £50,000 and get tax relief on this.
  • You must have been a member of a UK-registered pension scheme (this does not include the state pension) in each of the tax years from which you wish to carry forward.
  • You haven’t triggered the money purchase annual allowance (MPAA) – ie, you have not started taking your money from a flexi-access drawdown account, and you have not taken a flexible lump sum (described by HMRC as an ‘uncrystallised funds pension lump sum’).

Your contributions may also be restricted if you’re affected by the Tapered Annual Allowance or Money Purchase Annual Allowance. For more information, visit the MoneyHelper website.

You can use the pension annual allowance calculator on the government’s website to see how much you can carry forward, or check if you have an annual allowance tax charge.

Cautious investment profile

One of the 3 investment profiles you can choose for your pension savings with The People’s Pension. These are also sometimes referred to as lifestyle investment profiles.

This one means we’ll be more cautious about how much of your money we invest in certain ways compared to the balanced or adventurous approach.

So, you might not make as many gains over the long term as the other investment profiles – balanced and adventurous – but it does provide a bit more protection from the ups and downs of the investment market.

And as with all our investment profiles – you’ll get a glidepath, which helps safeguard your pension savings as you move closer to retirement. It means your money gradually and automatically moves into more secure investments the closer you get to retiring.

The other 2 investment profiles available are the ‘adventurous’ investment profile and the ‘balanced’ investment profile.

  • If you’d rather not get involved in the investment choices, we’ll put you in the ‘balanced’ investment profile.
  • If you’d like to take more of an interest, you can select either the ‘adventurous’ or ‘cautious’ investment profile options.
  • Or there are 8 investment funds you can choose between instead.

More about investing your pension »

Ceasing active membership

This is where you stop contributing to your pension scheme, either because you have left your employer or because you’ve requested payments to stop. If you cease active membership you won’t be entitled to a refund and the contributions you’ve made will remain invested in your pension pot. You’ll be considered to have ceased active membership if:

  • you joined via contractual enrolment and leave at any time or,
  • you joined via auto-enrolment and leave 1 calendar month or more after joining. If you choose to leave within 1 calendar month of joining, this is normally called opting out and you may be entitled to a refund of contributions paid.

Citizens Advice Bureau

You can get free face-to-face pensions guidance from the Citizens Advice Bureau, as well as the range of advice you can already get there – finance, employment, discrimination etc.

Alternatively you could speak to Pension Wise – a free, impartial service set up by the government to help you make sense of the options you have for accessing your pension savings.

Combined pension pots

If you’re thinking about taking your pension savings soon and have more than one pension pot, it’s worth thinking about the value of your combined pension pots.

That way you can get an estimate of what you can do with your pension savings (perhaps get an income from an annuity or flexi-access drawdown or get lump sum payments).

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Commutation

This is quite a formal term we don’t see too often these days. It just means turning some or all of a pension pot into a cash sum, instead of getting the money as a retirement income.

Company name

The full, legal name of the employer as registered with Companies House, or as it appears in the constituting document of that employer if it’s not a registered company.

Company pension

Nowadays, this is more often a workplace pension – sometimes referred to as an employer, occupational, works or work-based pension.

  • Previously many employers offered stakeholder pensions, defined benefit pensions and other solutions.
  • But since the government’s auto-enrolment law, most employers are either offering an auto-enrolment pension scheme like The People’s Pension, or they may have adjusted their old pension scheme to make sure it meets the government’s regulations.

Company registration number

The registration number given to companies when they register with Companies House. Employers not registered with Companies House should enter another relevant registration number.

If the number they give the employer is less than 8 digits, the employer should add a zero at the front when signing up to The People’s Pension.

Construction Industry Joint Council Working Rule Agreement (CIJC)

The CIJC agreement is a working agreement used within the construction industry that, among other things, states what sort of pension contributions workers should receive in their pension schemes.

More information can be found in our guide.

Contractual enrolment

Contractual enrolment is an alternative to auto-enrolment.

All employers need to have a pension scheme that can be used for auto-enrolment – but they can choose to use this pension scheme for contractual enrolment instead if they’d like to.

Rather than having to work out which employees need to be put into an auto-enrolment pension scheme, employers can just put all their employees in.

Each employee must agree to join the pension scheme, and to have contributions deducted from their salary. This consent is given when they accept the terms set out in their employment contract – that’s why it’s known as ‘contractual enrolment’.

  • The pension scheme used must meet the criteria of an auto-enrolment pension scheme.
  • All employees who must be enrolled under auto-enrolment regulations, must instead be contractually enrolled into the pension scheme by their auto-enrolment date
  • employees can’t opt out of the pension scheme.
  • If an employee stops being an active member of the contractual enrolment pension scheme, the employer still has a duty to review their status and their eligibility for auto-enrolment.
  • All employers must still register with The Pensions Regulator to confirm they’ve complied with the auto-enrolment legislation.

It’s worth noting that contractual enrolment isn’t a way for employers to avoid the auto-enrolment legislation – there are complexities, and if in doubt, we recommend employers take legal advice.

Contributions

Contributions are the amounts of money that get added to your pension pot – usually on a regular basis.

  • Usually, you’ll pay a small percentage from your wages, and your employer will pay some more.
  • And, if you were auto-enrolled, your employer’s payment must meet at least the government’s minimum percentage.
  • A lot of employers set the percentages at the auto-enrolment minimum levels, but some give you more.

The other thing to note is that, if you are auto-enrolled, an employer’s contributions are often only based on the part of your salary that’s between £6,240 and £50,270 – although some employers do go above the upper limit.

More about contributions »

Contributions basis

This is sometimes referred to as the ‘earnings basis’.

Crystallised

When you access your pension savings, these will normally become ‘crystallised.’ Any of your pension pot that hasn’t been crystallised will be uncrystallised.

There are several ways of taking your pension savings. More often than not, if you’ve taken money from your savings, they’ll be crystallised. Additionally, where you have the option to take only part of your pension savings, the money that you don’t take will normally remain uncrystallised.

The People’s Pension doesn’t accept crystallised transfers in. If you’re wanting to transfer to us, make sure your pension savings are uncrystallised.

You can transfer crystallised funds between other schemes, but they must be transferred on a like-for-like basis. For example, if you’re transferring a drawdown, it would need to be transferred to another drawdown. You can normally also use your crystallised drawdown funds to purchase a lifetime annuity.

Cyclical re-enrolment

Just another term for re-enrolment.

Declaration of compliance

A form that tells The Pensions Regulator what an employer has done to comply with their employer auto-enrolment duties. Employers also have to re-declare their compliance within 5 months of their re-enrolment date (which occurs approximately every 3 years).

An employer with The People’s Pension will need to know:

  • The pension is an occupational pension scheme
  • The name of the Scheme is The People’s Pension
  • The EPSR or employer pension scheme reference is the 5 or 6-digit employer account number with us
  • The pension scheme registry (PSR) number is 12005993
  • The scheme address is The People’s Pension, Manor Royal, Crawley, RH10 9QP

Default retirement age (DRA)

Up until October 2011, employers were able to force employees to retire when they reached 65 years of age (known as the default retirement age). It’s now up to you when you decide to stop working. But there may be some maximum age requirements for when you have to start taking your State Pension, or any other workplace pension.

Deferral date

If the employer opts to use postponement when carrying out their auto-enrolment duties, the amount of time the employer chooses to postpone for is known as the ‘postponement period’. The last day of the postponement period is called the ‘deferral date’.

Deferred member

If you’ve left a workplace pension scheme (or it’s closed), and you haven’t accessed all your pension savings yet, then you’re a deferred member.

  • You could transfer your pension savings to another pension scheme (like The People’s Pension).
  • Or it might be possible for you to just wait, and access your pension savings after you reach your normal minimum pension age.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Defined benefit pension

A type of pension employers offered regularly not so long ago – giving you a guaranteed income every year from your retirement. The government and some employers still operate these schemes although some may not be available to new employees.

  • How much you get is based on your salary and the number of years you worked there.
  • Also known as final salary scheme (FSS), or career average revalued earnings (CARE).
  • The good news is we’re living longer – the bad news is most employers can’t afford this type of pension anymore. If you’ve ever had one, make sure you keep track of it (and don’t transfer it to a defined contribution pension scheme without seeing if it’s really worth your while).

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Defined contribution pension

With this type of pension scheme, you get a pension pot, and you and/or your employer add money to it. (Like The People’s Pension.)

  • The money is invested for you over time – to build up a pot of pension savings to help you in later life.
  • How much you end up with you depends on how much you save, charges and how your investments perform.
  • There are a few kinds of defined contribution pension – these include personal, workplace occupational (like The People’s Pension) and stakeholder.

Direct from payroll

This is the automated online process of submitting employee data from payroll software to The People’s Pension. Employee data will usually be submitted by the payroll administrator.

Admin account contacts should ensure they’re familiar with the ‘direct from payroll’ process.

Dividend

This is how a company distributes profits with people who hold shares in the company.

Duties start date

This is the date the auto-enrolment duties started to apply to an employer who employed their first member of staff after 1 October 2017. The duties apply immediately from the first day the first employee starts working for the employer.

For more information on duties start date please visit The Pensions Regulator’s website.

Earnings basis

This describes which of the employee’s earnings are used for calculating pension contributions. You may also see this referred to as ‘Contribution basis’. There are typically 4 definitions:

  • Qualifying earnings: worked out using total pay but only between the £6,240 and £50,270 thresholds (2023/24). Minimum contributions – Employer: 3% | Total: 8%. Here’s how to calculate contributions using the thresholds.
  • Set 1: pensionable earnings (basic): worked out using at least basic pay*. Contributions from first £1 earned – no thresholds. Minimum contributions – Employer: 4% | Total: 9%. Must certify at least every 18 months.
  • Set 2: pensionable earnings (85%): worked out using at least basic pay. When combining all employees using this set (including all employees you’re certifying for), the average basic pay must always make up at least 85% of the average total pay^. Contributions from first £1 earned – no thresholds. Must certify at least every 18 months. Minimum contributions – Employer: 3% | Total: 8%.
  • Set 3: total earnings: worked out using everything that an employee is paid. Basic pay, plus all other earnings. Contributions from first £1 earned – no thresholds. Must certify at least every 18 months. Minimum contributions – Employer: 3% | Total: 7%.

*What is basic pay? Includes all earnings in an employee’s basic salary. It also includes statutory sick pay statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay.

^What is total pay? Includes basic pay, and any commission, bonuses, overtime. This list is not exhaustive, and employers may include other types of pay.

For more information, visit The Pensions Regulator’s website.

Earnings trigger

The level of earnings from which an employee is assessed as a Type 1 employee – someone who must be put into a pension scheme.

For more information, read The Pensions Regulator’s ‘guidance on working out who to put into a pension’.

EasyBuild

EasyBuild was a stakeholder pension that B&CE launched for construction employees back in 2001. It closed in March 2020.

This was the kind of pension that was popular in the workplace before automatic enrolment started in 2012.

Eligibility status

Employees will fall into one of 2 categories:

Type 1 – employees who must be put into a pension scheme (eligible jobholders).

So, any employees who are aged between 22 and the State Pension age (SPA) and earn over £10,000 per year, or £833 per month or £192 per week.

Type 2 – if an employee is a type 2 employee (because they don’t meet the type 1 criteria above), they won’t be put into the pension scheme automatically, but they can still ask to join it if they’d like to.

For more information, read The Pensions Regulator’s guidance on ‘working out who to put into a pension’.

Eligible jobholders

An employee who must be auto-enrolled and is:

  • aged between 22 and State Pension age (SPA) and
  • earns above £10,000 a year / £833 a month / £192 a week (current tax year) – known as the earnings trigger and
  • working or ordinarily working in the UK.

These employees must be put into a pension scheme and have money paid into their pension pots on a regular basis.

If you’ve been described as an ‘eligible jobholder’ before, you may hear this now classed as ‘type 1’ (‘entitled workers’ and ‘non-eligible jobholders’ are now known as ‘type 2’). It’s just one of the ways The Pensions Regulator is simplifying jargon to make it less complicated.

Emergency tax

If you’re taking a regular payment/cash lump sum from your pension pot (and you’re not taking your pot under the small pension pot rules), the first payment will be taxed using an emergency tax code. It ensures that you receive the basic personal allowance and it also assumes you’re entitled to 1/12th of this allowance each month but doesn’t take into account any other allowances or relief you may be entitled to. We’ll keep using the emergency tax code until HM Revenue & Customs (HMRC) tells us (and you) what your correct tax code should be. This means the amount you receive from us may not be the full amount you’re due, as we’ve had to deduct tax at a higher rate.

We’ll confirm the details of this payment so you can reclaim any overpaid tax from HMRC.

Employee data

This consists of employee details and pension contribution amounts.

Employee data can be transferred from an employer to The People’s Pension by uploading a file, adding it manually in their Online Services account, or transferring it automatically via a payroll software provider (if their payroll software provider supports this).

Employee data will usually be submitted by the admin account contact, or another party who’s been granted access to the admin account, eg a business adviser (accountant, bookkeeper or payroll professional).

Employer pension

Nowadays, this is a workplace pension – sometimes known as occupational, works, company or work-based pension scheme.

Previously, many employers offered stakeholder pensions, defined benefit pensions and other solutions, but since the law on workplace pensions changed, gradually all employers are having to offer access to a workplace pension scheme.

Enhanced annuity

If your health or lifestyle is expected to reduce your life expectancy, you could qualify for an enhanced annuity and get extra income.  These may also be referred to as impaired life annuities.

Although we don’t offer annuities ourselves, we can help you transfer to a provider that does when the time comes.

More about your different options for taking your pension savings »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Enter data

One of the ways employee data can be submitted online to The People’s Pension. The process is available to all employers who, when signing up to The People’s Pension, choose to manually enter their employee data rather than submit it using a file.

Employee data will usually be submitted by the admin account contact, or another party who’s been granted access to the admin account, eg a business adviser (accountant, bookkeeper or payroll professional).

The admin account contacts should ensure they’re familiar with the file upload process. Visit our resource library for more information.

Entitled employees

If you’ve been described as an ‘entitled’ employee before, you’re now classed as a type 2 employee. (‘Non-eligible’ employees are also type 2, and ‘eligible’ employees are now known as type 1 employees.)

The change is nothing to worry about – it’s just one of the ways The Pensions Regulator is simplifying jargon to make it all a bit less complicated.

Entitled worker

If you’ve been described as an ‘entitled worker’ before, you’re now classed as a type 2 employee. (‘Non-eligible jobholders’ are also type 2, and ‘eligible jobholders’ are now known as type 1 employees.)

The change is nothing to worry about – it’s just one of the ways The Pensions Regulator is simplifying jargon to make it all a bit less complicated.

An entitled worker (now called a Type 2 employee) doesn’t need to be auto-enrolled.

They can ask to join an employer’s pension scheme, but an employer doesn’t need to pay money into their pension pots unless they’d like to.

An entitled worker is:

  • aged between 16 and 74 and
  • has earnings less than the lower earnings threshold (currently £6,240 a year / £520 a month / £120 a week for the current tax year).

EPSR number

ESPR stands for Employer Pension Scheme Reference – this is the employer’s 5 or 6-digit admin account number, which they have with The People’s Pension. The person who deals with the admin on their account will have this.

Equities

When you buy shares in a company, these are known as equities. As an investor, the aim is to increase your wealth by benefiting from any increase in the share price and from any dividends you receive. These are not guaranteed however, and the value of your investment can go down as well as up over time.

Equity fund

A pension investment fund, which invests in shares.

If you choose one of our investment profiles for The People’s Pension, we usually invest your money in an equity fund to grow your savings over the earlier years. But later on, we try to safeguard your pension savings as you approach retirement – in what’s known as your glidepath. During this glidepath stage, we’ll gradually move your money away from the equity fund.

Extinguish

If it’s possible to take all of your pension pot as a lump sum, this might also extinguish (stop) any benefits or rights you had in that pension arrangement – such as any benefit payable in the event of death – and indeed the pension arrangement itself.

File data requirements

Our ‘file data requirements’ describe the exact format and content requirements of the file, so that it can be submitted successfully to the employer’s admin account.

These are available from our resource library.

File upload

One of the ways employee data can be submitted online to The People’s Pension. An employer’s file needs to contain details of the employees joining the Scheme (Type 1 – employees who must be put into a pension scheme and Type 2 – employees who don’t need to be put into a pension scheme but can ask to join) and those already in the Scheme, plus the amount of contributions to be paid for each employee.

The employee data will usually be uploaded to the admin account by the admin account contact, or another party who’s been granted access to the admin account, eg a business adviser (accountant, bookkeeper or payroll professional).

The admin account contacts should ensure they’re familiar with the file upload process. Visit our resource library for more information. Admin account contacts can run the system in training mode beforehand to get familiar with the process of uploading employee data.

Final salary schemes

A defined benefit pension that calculates an annual retirement income based on your length of service and your final salary.

If you still have one, it’s probably worth hanging on to!

Final salary schemes (FSS)

A defined benefit pension that calculates an annual retirement income based on your length of service and your final salary.

If you still have one, it’s probably worth hanging on to!

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Financial Conduct Authority (FCA)

An independent organisation regulating the conduct of over 50,000 businesses – including our parent company B&CE.
Financial Conduct Authority »

The FCA can also help you check if an adviser is authorised to give you advice, which can give you greater protection if things go wrong. Check out their Financial Services Register.

Financial Ombudsman Service (FOS)

This is where you can complain about a bank, an insurer or a finance company.

  1. First, you have to raise a complaint with the company and give them 8 weeks to sort out your problem…
  2. But if you’re not happy after that, you may be able to go to the FOS.

Financial Ombudsman Service »

FOS covers financial complaints and personal pension schemes. There are lots of other ombudsmen. The Pensions Ombudsman (TPO) for example, which covers workplace pension schemes like The People’s Pension.

Financial Services Authority (FSA)

This is what the Financial Conduct Authority (FCA) was known as a while ago. In 2013 the FSA split into the FCA and the Prudential Regulation Authority (PRA).

Flexi-access drawdown

This gives you flexible access to your pension savings to take money out, and it’s one of the ways you can access your pension savings after you’ve reached your normal minimum pension age.

You can normally take up to 25% tax-free cash when you access your benefits (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount). You can either take your tax-free cash in chunks or all at once. Under HMRC rules, for every £1 of tax-free cash you take, £3 will be moved to a flexi-access drawdown account that we’ll set up for you. Once you’ve money set aside in flexi-access drawdown, if you’d like to you can take ad-hoc withdrawals from your flexi-access drawdown account, while leaving the rest of your money invested to grow further. This could be especially handy if you’re only partially retiring. Also known as income drawdown.

  • You can normally take up to 25% tax-free cash when you access your benefits (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount). Under HMRC rules, for every £1 you take as tax-free cash, £3 is moved to a flexi-access drawdown account that we set up for you. Then each time you take money out of that account you may pay tax on the full amount of each lump sum.
  • As long as your money remains invested, the value might rise and fall, depending on how your investments perform. Any money taken is added to your income for the year and taxed in the normal way.
  • Once you’ve received the first flexi-access drawdown income payment from your flexi-access drawdown account, this can trigger a lower annual allowance of £10,000. This is known as a money purchase annual allowance (MPAA).
  • There’s a risk you could run out of money to live on in your retirement, if you take too much money out early on. But you could use any remaining money to transfer to a guaranteed income (an annuity) later on.

More about your different options for taking your pension savings »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Flexible lump sums

These are lump sums you can take to cash in your whole pension pot – or just some of it, leaving the rest invested.

HMRC calls them ‘uncrystallised funds pension lump sums’ (or UFPLS). This term is meant to highlight that the lump sum still needs to be taxed… but we’ll stick with ‘flexible lump sum’.

How do they work?

  • You can normally take up to 25% of a flexible lump sum tax-free (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount). The rest of the lump sum is taxable at the highest rate you pay.
  • With The People’s Pension your pot needs to be worth over £10,000 to take this option. If your pension pot is £10,000 or less, check out Small pot lump sums.
  • With The People’s Pension you’re allowed 1 lump sum a tax month and it has to be at least £2,000. Then each time you take another one, you need to still have over £2,000 in your pot on the date we process your claim.

Here’s an example of a tax calculation:

Say you take £30,000 as a flexible lump sum (and you haven’t yet reached the lifetime cap of £268,275 for tax-free payments).

  • If HMRC has not supplied us with your tax code for the current tax year, your flexible lump sum will be taxed using a temporary (emergency) rate. In most cases this will mean that too much tax will be deducted and you’ll have to reclaim the overpayment from HMRC.
  • £22,500 is taxable, meaning you’d pay £8,399.61 in tax.
  • So, you’d get £21,600.39.

There’s also a range of rules and tax concerns you need to think about, so make sure you do your research.

More about your different options for taking your pension savings »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

 

Funds

We package groups of investments into what are known as funds. Each fund gives you a choice for how you may want to invest your pension savings.

With us you can decide where your money goes, or you can simply choose a cautious, balanced or adventurous investment profile.

  • Just select one of those and we’ll do the rest.
  • For any of our members that don’t select an investment profile, we’ll put you in the balanced investment profile.

General Data Protection Regulation (GDPR)

It’s a European Union regulation which came into force on 25 May 2018. The regulation (which is supported in the UK through the Data Protection Act 2018) aims to give people more control over how their personal data is collected, used, stored and shared. It’s designed to strengthen and unify the data security measures of businesses.

People’s Partnership, provider of The People’s Pension, already makes sure that data protection is central to our business. Under UK GDPR and the Data Protection Act 2018, we’re more transparent about how we collect, use, share and store our customers’ (and employees’) data.

Gilt

A kind of asset we can invest your pension savings in. It’s a bond issued by the UK government with a rate of interest – which basically means it’s a way of loaning money to the government.

Glidepath

A glidepath is a feature of The People’s Pension that aims to safeguard your pension savings in the lead up to your retirement.

It doesn’t take any effort on your part – what it means is that your money gradually and automatically moves into more secure investments the closer you get to retiring. Investment funds can go up and down at any time, but with a glidepath it’s less likely there’ll be any major drops in value before you want to start spending your money.

You might also come across the term equity fund (which invests your money in the ownership of a public company) – that’s the main way your money’s invested – and pre-retirement fund.

Find out more about investing your pension

Guaranteed annuity rate (GAR)

A GAR is a valuable guaranteed income sometimes offered by a pension scheme or provider if you take a lifetime annuity with them. If your pension scheme provides a GAR, this could provide you with a higher level of annuity income by purchasing your annuity from your pension provider than you may be offered on the open market.

You can find out if your scheme offers a guaranteed annuity rate by looking at the information you were given when you joined the scheme, or by asking your pension provider. Most schemes that offer a guaranteed annuity rate were marketed in the 1980s and 1990s, when annuity rates were higher. GARs do not apply to The People’s Pension.

Find out about your options at retirement

HM Revenue & Customs (HMRC)

You pay tax to HMRC, but you’ll normally get tax relief on your pension contributions. Then when you access your pension pot you can usually get 25% as tax-free cash (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount), but from then on, your pension savings will be taxed as income.

Don’t forget, the standard personal allowance you get each year though – which for the current tax year is £12,570 tax free on income from earnings, investments, property etc, and your pension.

Ill health

If you’re suffering from ill health you may be able to get more from your pension savings.

If you smoke or you’re in poor health, make sure you tell the annuity provider – you might be able to get an enhanced/impaired life annuity that gives you more income.

You may be able to access your pension savings earlier than the current minimum age of 55 (rising to age 57 for some members from 6 April 2028), if you’ve become physically or mentally incapable of continuing your job, and so you’ve stopped working.

As well as meeting HMRC’s rules, we’ll need a report confirming that you are medically incapable of continuing your job as result of injury, sickness, disease or disability. Please get in touch with us if you’d like to claim.

Contact us »

If you’re aged under 75 and you’re suffering from serious ill health – with a life expectancy of less than 12 months – you may be able to get your whole pension pot, as a tax-free lump sum.

Get in touch with us to check how it works and what medical evidence you’ll need to provide.

Contact us »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Illustration

This term just means an estimate of how much you might get when you take your pension savings – based on how and when you’re intending to access your money.

Income drawdown

See flexi-access drawdown.

Inflation

It reflects increases in the general price of goods and services. When you hear that the inflation rate is high, that means that you can buy less for the same amount of money compared to the previous year.

 

Inflation-proofing

When you see this term in conjunction with your pension, it refers to income you can get from your pension savings. Annuities for example – some of them are inflation-proofed so your income increases in line with inflation.

Investment

Rather than putting your money into a bank account, your pension savings are used to buy investments like bonds, gilts, stocks and shares – which over the longer term have a better chance of growing your pension pot.

Growth is not guaranteed and you may get back less than you put in.

Investment funds

An investment fund is a way of pooling money together with other investors. The fund invests your money in ‘assets’ – professionally managed by a fund manager. Investment funds are normally classified by risk – so that members can see which of them have the potential for higher returns, and which of them may remain more stable.

Investment profiles

The simplest way to invest your pension savings with The People’s Pension. You may also hear to them referred to as lifestyle profiles.

  • You can choose a cautious, balanced or adventurous investment profile – which is a collection of investments grouped together.
  • From there we’ll invest your pension savings in a suitable mix of shares, bonds and gilts.
  • You’ll also get a glidepath, which helps to safeguard your pension savings as you move closer to retirement. This glidepath process normally begins 15 years from your selected retirement age. It automatically switches your investments to less volatile funds, which aims to reduce the risk of a sharp fall in markets reducing the value of your pension pot when you reach your retirement date.

Want to take more of an interest in where your money is invested? You can – we have investment funds you can choose between instead.

Joiner information

All new members of The People’s Pension receive joiner information which contains details about the Scheme, how much will be contributed each pay reference period, how they can ask to leave (opting out or ceasing active membership) and other member information.

The joiner information also includes login details for the member’s Online Account, where they can check the value of their pension pot and manage their choice of investment funds.

Joint annuity

These will pay an income to your spouse, registered civil partner or dependant after your death, usually at a lower rate.

You decide at the start how much they’ll get – eg half or all of your pension. What percentage you select will affect how much income you get.

More about your different options for taking your pension savings »

Know your customer

We’re required to find out about the companies we conduct business with to satisfy anti-money laundering requirements. This includes finding out about the source of a company’s funds which is why we request bank account evidence. The financial services industry refers to this as ‘know your customer’ or KYC.

Employers can send evidence of the bank account (copy of bank statement, void cheque or paying in slip) to  kyc@peoplespartnership.co.uk

Lifestyle investment programmes

We call these investment profiles. The simplest way to invest your pension savings with The People’s Pension. See Investment profiles for more information.

Lifetime allowance

Between 2006 and 2024 there was a maximum amount an individual could save in their pensions in a tax efficient way, known as the ‘lifetime allowance’ or ‘LTA’.

The LTA was abolished on 6 April 2024 when 3 new allowances came into effect:

  • Lump sum allowance
  • Lump sum and death benefit allowance
  • Overseas transfer allowance

Find out more

Lifetime allowance protection

Between 2006 and 2024, the lifetime allowance (LTA) limited the amount you could save into your pension scheme(s) and receive full tax benefits.

Prior to the 2023/24 tax year, any amount over the LTA was subject to a tax charge. Between 2012 and 2015, the LTA was cut several times. When it was introduced in 2006 and every time it’s been reduced, the government has allowed savers to ‘protect’ their pension at the level of the previous higher allowance if their pension savings were more than the new lower allowance. You may see this referred to as ‘LTA protection’ in general, or ‘enhanced protection’, ‘fixed protection’, or ‘primary protection’ in relation to specific LTA changes.

From 6 April 2023, the tax charge was removed, and from 6 April 2024 the LTA was abolished and new allowances came into effect. However, individuals can still keep entitlements to a higher allowance if they’ve previously obtained LTA protection. A financial adviser could help you understand your options with this, and you can find out more on our Lump sum allowance page.

Lump sum allowance (LSA)

The LSA is the maximum amount you can normally take as a tax-free lump sum from all your pensions. The LSA is currently £268,275. Any lump sums paid over the limit will be taxed at your marginal rate.

Find out more

Lump sum death benefit allowance (LSDBA)

The LSDBA is the maximum amount of tax-free lump sums that can normally be paid to you and your beneficiaries when you die, or when you’re suffering from a terminal illness. The LSDBA is currently £1,073,100. Any lump sums paid over the limit in these situations will be taxed at you or your beneficiaries marginal rate.

Find out more

Lump sum payment

You’re usually able to take up to 25% of a pension pot as a tax-free cash (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount).

There are some rules, but often you’re able to take the whole pot as cash, with 25% tax free (up to the lifetime cap).

You could take your pension savings as what’s known as a small pot lump sum.

  • You can take as many occupational pension pots in this way as you like (although each payment must extinguish – fully pay out – your benefits in the Scheme).
  • For personal pension pots though, you’re limited to three – of up to £30,000 across three different pension pots (max £10,000 each).
There are plenty of ways to take money out of your pension pot as a full lump sum or partial lump sums. More about your different options for taking your pension savings »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Lump Sum Retirement Benefit (LSRB)

This is an old pension scheme our parent company B&CE offered to people working in the construction industry.

  • It’s a one-off tax-free payment when you’re 65.
  • It’s not available to join anymore, but still relevant for anyone who had LSRB in the past.
  • If you worked in construction between 1982 and 2001, you might have an entitlement even if you don’t remember paying in.

More about Lump Sum Retirement Benefit »

Marginal rate of tax

Income tax is split into bands and you pay different rates on earnings that fall into each band. The bands and the level of earnings related to each varies depending on where in the UK you live. Visit HMRC’s website for more information.

Master trust

The People’s Pension is one of these. It’s basically a pension scheme that multiple employers can use – with independent Trustees who look after pension savings on behalf of all the employees who are members.

Also known as a ‘multi-employer scheme’.

In August 2019, The People’s Pension was granted master trust authorisation. All master trusts must meet the authorisation requirements (and meet ongoing supervision) to continue operating.  The Pensions Regulator (TPR) oversees both authorisation and supervision. Having master trust authorisation means The People’s Pension is recognised and approved by TPR as a master trust that’s properly run and governed in the best interest of its members.

Money purchase annual allowance (MPAA)

If you start to take money from your pension savings, the amount that can be contributed to your pension while still getting tax relief on might reduce. This is known as the Money Purchase Annual Allowance or MPAA. For most people, the total amount that can be contributed to their pensions each tax year which they’ll receive tax-relief on is £60,000. This includes any contributions from your employer. You’ll trigger the MPAA if you take cash from your flexi-access drawdown account or take a flexible lump sum, this will reduce the amount you can pay into a defined contribution scheme – like The People’s Pension – to £10,000 a year.

MoneyHelper

This is an impartial organisation provided by the government who you can speak to for free information and guidance on money and pensions. They can help with answers to any questions you might have about your finances.

They also have an online tool to help you understand and compare annuities. You can add your own details and get an illustration of how much you might receive as an annuity.

MoneyHelper info on annuities »

MoneyHelper

This is an impartial organisation provided by the government who you can speak to for free information and guidance on money and pensions. They can help with answers to any questions you might have about your finances.

They also have an online tool to help you understand and compare annuities. You can add your own details and get an illustration of how much you might receive as an annuity.

MoneyHelper »

Multi-employer scheme

The People’s Pension is one of these. It’s basically a pension scheme that multiple employers can use – with independent Trustees who look after pension savings on behalf of all the employees who are members.

The People’s Pension is a master trust, which is a type of multi-employer scheme.

National Insurance contributions

You have to pay National Insurance contributions if you’re employed, aged 16 or over and you earn more than £242 a week for the current tax year.

The good news is every year you do so counts towards how much money you’ll get from your State Pension in later life.

Net pay arrangement

One of the two ways you can get tax relief on the money you add to your pension pot.

Net pay arrangement means your contributions are taken from your pay before your wages are taxed. So, you only pay tax on what’s left – therefore you get your full tax relief straightaway. We also call this method the ‘gross tax basis’ as your contributions are taken from your gross pay.

  • This method means anyone who doesn’t pay tax won’t get tax relief.
  • The alternative is relief at source.

More about tax relief »

Non-eligible jobholder

A person who doesn’t have to be auto-enrolled into a workplace pension.

They can ask to opt into an employer’s pension scheme, and their employer will have to pay into their pension pots on a regular basis. They are aged:

  • aged between 16 and 21 or aged between State Pension age (SPA) and 74 and
  • earns above £10,000 a year / £833 a month / £192 a week for the current tax year – known as the earnings trigger
    or
  • are aged between 16 and 74 and
  • have qualifying earnings between £6,240 a year (the lower earnings threshold) and £10,000 a year (earnings trigger for auto-enrolment) for the current tax year.

If you’ve been described as a ‘non-eligible’ jobholder before, you may hear yourself classed as ‘type 2’ (‘entitled’ workers are also type 2, and ‘eligible’ jobholders are known as ‘type 1’). It’s just one of the ways The Pensions Regulator is simplifying jargon to make it less complicated.

Normal minimum pension age

This is the earliest you can usually access your pension savings and is set by the government. It is currently age 55 – however this is rising to age 57 from 6 April 2028. This change will not affect your ability to take money earlier than these ages due to ill health or if you qualified for an earlier protected pension.

If you joined The People’s Pension before 4 November 2021, your right to take benefits at age 55 is protected. For more information see Normal minimum pension age.

Occupational pension

Nowadays, this is more commonly called a workplace pension – though it is sometimes also known as employer, company, works or work-based pension schemes.

  • You might still see ‘occupational pensions’ mentioned as a broader term to describe older pensions that were offered in the workplace before the automatic enrolment regulations came in.
  • The People’s Pension is a master trust, which is a type of occupational pension scheme that meets additional regulations, including those required for auto-enrolment.
  • Previously, many employers offered stakeholder pensions, defined benefit pensions and other solutions. But since the government’s automatic enrolment law, employers are either offering an auto-enrolment pension scheme like The People’s Pension or they may have adjusted their old pension scheme to make sure it meets the government’s regulations.

Online Services

The web-based system where the day-to-day administration of the employer admin account(s) takes place. This includes submitting employee data, paying pension contributions to the scheme and managing employees who’ve asked to leave (‘opted out’ if within the 1 month window, or ‘ceasing active membership’ if after).

Open market option

This describes the freedom you have to shop around for a retirement income product that suits you. For example, taking a guaranteed regular income by using your pension savings to buy an annuity.

Different providers offer different rates, so you can shop around to find the one that’s right for you – like you do for your car or home insurance. You can also ask for estimates of how much income you’ll get from any company that offers annuities.

Also, MoneyHelper has an online tool to help you understand and compare annuities. You can input your own details and receive an illustration of the amount you might receive as an annuity.

More about your different options for taking your pension savings »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Opting in

This is just asking to join a workplace pension scheme under the auto-enrolment rules.

Depending on your age and earnings, you might not be put into your employer’s workplace pension scheme automatically, but you can still ask to join if you’d like to.

And if you’ve previously asked to leave (opted out or ceased active membership), you can ask to join again. (Though if it’s within the same year you asked to leave, you’ll have to get your employer to agree first.)

Opting out

You can find out even more about the benefits of being enrolled in a workplace pension scheme, why you’ve been enrolled, and how to opt out through our dedicated opt-out webpage.

This is when you ask to leave your workplace pension scheme within the 1 month opt-out period. You’ll be entitled to a refund of what you contributed to your workplace pension scheme.

You can still leave the scheme after your opt-out period. This is known as “ceasing active membership”—you won’t be entitled to a refund, and the contributions you’ve made will remain invested in your pension pot.

Origo Options

An electronic platform which enables organisations across the industry to carry out pension and asset transfers. Transfers can take place in a streamlined and efficient manner without the need for lots of paperwork saving time.

Overseas transfer allowance (OTA)

The OTA is the maximum amount that you can normally transfer to a non-UK pension scheme before incurring a tax charge on the excess. The OTA is currently £1,073,100. Any transfer amounts paid over the OTA will be taxed at 25% through the overseas transfer charge (OTC).

Find out more

Participating employer

Any subsidiary or associated company of a principal employer, participating in the Scheme. In the case of an employer with no subsidiaries or associated companies, there is only the principal employer.

Pay frequency

How often an employer pays their employees (eg weekly or monthly).

Pay period

This is just how regularly your employer pays you, and therefore how regularly you add money into your pension pot. Also known as pay reference period.

Pay reference period

Under auto-enrolment rules, this is the period of time over which earnings are to be measured. For example, if an employee is paid weekly, the pay period would be 1 week and if they are paid monthly, the pay period would be 1 month. The minimum pay period is 1 week.

To align with the pay frequency used to calculate PAYE and National Insurance contributions, the pay period can be a tax week, or a tax month. The following scenarios apply:

  • Calendar-week payrolls
  • Calendar-fortnightly payrolls
  • Four-weekly payrolls
  • Tax-week payrolls
  • Calendar-month payrolls – paying in arrears

For more information, read The Pensions Regulator’s ‘guidance on pay reference periods’.

Payroll package

The payroll software used to manage an employer’s payroll.

Payroll software provider

The name of the company providing the employer with their payroll software and payroll technical support.

Pension arrangement

This is sometimes what a specific pension is referred to – like The People’s Pension.

We just call it a pension scheme, but you might also come across ‘pension plans’ or ‘pension funds’ (which gets confused with investment funds). It’s basically all the same thing.

Pension commencement lump sum (PCLS)

When you access your pension savings and start drawing an income, such as with an annuity or via flexi-access drawdown, you can often take some of your savings tax free. This lump sum is normally up to 25% of your pension pot (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount) and is also known as tax-free cash.

(And if you had an entitlement to more than 25% as of 5 April 2006, this might still be the case now.)

Pension contribution level

The basis of the contributions that will be paid to The People’s Pension by the employer and, if applicable, the employee. This is usually expressed as a percentage (%) of the employee’s earnings or a fixed amount (£).

Pension credit

This has 2 possible meanings.

  • It could refer to an additional payment into your pension from an ex-spouse or an ex-civil partner’s pension following a pension sharing order.
  • It’s also a State tax credit you may be able to use to top up low earnings when you’re retired.

More about pension credit »

Pension debit

It is the amount by which the value of a member’s rights under the scheme is reduced. A pension debit usually applies to a member of a pension scheme who is subject to a pension sharing order after divorce or dissolution of a civil partnership. The amount is usually transferred to the ex-spouse or ex civil partner’s pension scheme as a pension credit.

Pension fund

This term has 2 meanings.

  • It’s now more common to see this term referring to the investment funds you invest your pension savings in.
  • But in the past, it was used to describe your pension savings too – and still gets used this way here and there.

In The People’s Pension, your money will be talked about as your pension savings or your pension pot.

Pension input periods (PIPs)

This is the formal term for the start and end dates for each period your pension contributions are measured against the annual allowance, MPAA and Tapered AA (the limit to how much you can save into your pension per year and get tax relief on).

They may be referred to on your annual pension statements, (or with The People’s Pension you can just check your monthly contributions in your Online Account).

Since April 2016, the pension input period must run with the tax year – 6 April to 5 April.

Pension plan

This is occasionally what a specific pension is referred to – like The People’s Pension.

We just call it a pension scheme, but you might also come across ‘pension arrangements’ or ‘pension funds’ (which gets confused with investment funds). It’s basically all the same thing.

Pension pot

This is where you save money for your pension. Your pension provider then invests it for you – aiming to increase your pension savings over time so you have enough for later life.

  • With The People’s Pension, you can choose how your money is invested and at what level of risk.
  • If you’d rather not get involved though, we’ll automatically put you into the balanced investment profile.

You may have several pension pots – some with other employers and some personal pensions. It may save you money and effort to have all your pension savings in one place. If you’re a member of The People’s Pension, you can transfer your pension pots into your pension with us.

More about transferring your pension pots »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Pension savings statement

A statement sent to you by your pension provider to let you know if you’ve exceeded your annual allowance for the pension scheme(s) you have with them in any particular tax year. (But remember they can’t factor in any other pensions you might have.) You’ll get this statement no later than 6 October after the end of the tax year in which you exceeded your annual allowance.

Pension Scams

Pension scams are on the increase. If you’re offered a deal that seems too good to be true, chances are it is. Anyone can be the victim of a pension scam, no matter how financially savvy they think they are.

We’re taking action to protect our members by answering The Pensions Regulator’s call for all trustees, pension providers and administrators to take the pledge to combat pension scams.

What’s the pledge?

It’s a promise that we’ll do all we can to try and protect our members from pension scams. This includes giving them the information they need to identify and avoid a scam at key stages of their pension journey.

The Pensions Regulator website has very useful information on how to avoid pension scams, or visit www.thepeoplespension.co.uk/how-to-avoid-pension-scams/. We also strongly recommend downloading the ‘Don’t let a scammer enjoy your retirement’ ScamSmart leaflet, which shows you how to avoid pension scams in 4 easy steps.

Pension scheme

This is what The People’s Pension is – a pension scheme that different employers can offer to their employees.

You might also come across ‘pension arrangements’, ‘pension plans’ or ‘pension funds’ (which gets confused with investment funds). They basically all mean the same thing.

Pension Tracing Service

A government service that can help you find any workplace or personal pensions you’ve lost track of.

They can’t tell you how much the pension pot is worth, but they can get you back in touch with your pension provider.

Pension Tracing Service »

Pension Wise

A free, impartial service backed by the government, offering guidance about what to do with your pension savings when you’re 50 or older.

Pension Wise »

To help you make informed choices about your future when you come to retire, from June 2022, pension schemes are required to offer you an appointment with Pension Wise to talk through your options. Once you’ve decided what you want to do, you’ll need to let us know if you’ve attended your appointment or if you’ve chosen to opt out of receiving guidance from Pension Wise before we can proceed with your claim.

Pensionable earnings

Your pension contributions are usually based on your qualifying earnings, but some employers base them on pensionable earnings instead.

This should include at least your basic pay – but might not include things like overtime or commission.

People’s Partnership

People’s Partnership (formerly called B&CE) is the name of our parent company. It is the provider for The People’s Pension, our workplace pension scheme.

People’s Partnership is a profit-for-people company, so it’s important to us that The People’s Pension is a great benefit for employees and easy for employers to manage. We also want to remove as much of the complexity from the pensions industry as possible – which is one of the reasons we’ve put together this jargon buster. There’s so much jargon in pensions…it all needs busting.

Personal allowance

Each year you get a personal allowance of tax-free income; the standard amount for the current tax year is £12,570. That’s any money you earn through work, property, investments, etc, or from your pensions savings – completely free of tax!

Anything on top of that is usually taxed. The tax percentage will depend on how much you earn and where in the UK you live. It’s worth planning your retirement income to make the most of your money.

If you earn above £100,000, your Personal Allowance is reduced by £1 for every £2 you earn above it, until it reaches £0.

More about your personal allowance »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Personal pension

Similar to workplace pension schemes but available directly to individuals rather than through the workplace. Like a stakeholder pension, which allows flexible payments. This may be suitable if you’re self-employed or out of paid work.

Many employers previously offered stakeholder pensions, but now are transferring to workplace pensions like The People’s Pension.

Postponement

An employer can postpone auto-enrolment for up to 3 months from certain dates. One of the times they can postpone is from their duties start date. One of the main reasons an employer might decide to postpone is if they have temporary or short-term employees. An employer can only postpone auto-enrolment from:

  • Their duties start date
  • An employee’s first day of employment
  • The date an employee first becomes eligible for auto-enrolment

Please note: postponement is not available under our Simply Comply scheme sign-up route. If an employer chooses to use postponement, they must notify their employee of this. The employee can choose not to be postponed and if they do, they must let their employer know.

Visit The Pensions Regulator’s website  for more detailed guidance.

Power of attorney

A power of attorney is a legal document which allows someone you trust to make decisions for you or on your behalf. This can last for any length of time, before or during a period of vulnerability. Depending on the type of power of attorney you want to set up, you may need to register it with the Office of the Public Guardian (a government body) first.

Read more about making a power of attorney and the different types

Pre-Retirement Fund

In The People’s Pension, this is where your invested pension savings are gradually moved when you enter the glidepath (the mechanism by which an investment fund automatically moves an investor’s assets into less risky, more secure investments as they get closer to their selected retirement age.) – which is the lead up to your retirement where we try to safeguard your pension savings from major dips in value.

More about your investment options »

Principal employer

The term used for a single employer (company, charity, LLP) registered via Online Services to participate in the Scheme. Where there are a number of employers being set up as part of the same group, (eg a ‘parent’ or ‘holding’ company with subsidiary or associated companies) the main employer must be registered first – this is the principal employer. All other employers in the group are participating employers.

Private pension

It’s quite a broad term you might come across – one that could come up as a contrast to the State Pension.

The State Pension is a benefit you can claim from the government if you’ve received credits or National Insurance contributions over the years. If you work in the public sector, such as the armed forces or the NHS, you may have a public sector pension scheme.

A private pension is any other kind of pension scheme.

Protected pension age

Available for members who, before 6 April 2006, had a right to take their pension savings at an earlier age than the minimum pension age (current rules allow payment before MPA for protected ages). Different rules apply depending on the type of registered pension scheme involved.

In addition, some schemes, such as The People’s Pension, provide protections that would allow you to continue taking your pension money at age 55 (as opposed to age 57 after 6 April 2028). However, due to changes in the rules on the normal minimum pension age, the government has confirmed that these protections cannot be provided to new joiners from 4 November 2021 onwards – find out more.

Find out more about when you can take your pension money

Prudential Regulation Authority (PRA)

Back in 2013 the Financial Services Authority (FSA) split into 2 regulatory bodies. So now we have the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

The PRA is responsible for the authorising (alongside the FCA) and supervising of financial organisations. That includes banks, building societies and credit unions, as well as insurers and some investment firms.

Public service pension

The kind of pension many people have if they work in the public sector – in the armed forces, education, local government or the civil, emergency and justice services.

Qualifying earnings

Earnings between amounts that are set each tax year by the government that have an upper and lower level. Contributions aren’t calculated on anything under the lower level or above the upper level of qualifying earnings. It’s made up of the following pay components: salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, and statutory adoption pay.

For more information, visit What are qualifying earnings?

  • However much of your qualifying earnings fall between £6,240 and £50,270, that’s where the contributions you and your employer make will be calculated from. (Those are the figures for the current tax year – they’re reviewed every year by the government.)
  • Let’s say you earn £25,000.
    £25,000 minus £6,240 leaves £18,760.
    So your contributions will then be calculated from £18,760 – either at the government’s minimum percentages or at higher percentages if your employer chooses.

Qualifying pension scheme

Some pension schemes – like The People’s Pension – are designed specifically to meet the auto-enrolment regulations. But many pension schemes existed before the regulations came in, and some of these can still be used for auto-enrolment – if they’re qualifying pension schemes that satisfy minimum quality standards.

See The Pensions Regulator’s detailed guidance if you’d like to know more about the standards that a scheme must meet to be a qualifying scheme.

Re-enrolment

You may ask to leave your employer’s workplace pension, either within 1 month of being enrolled (known as opting out) or after more than a month has passed (known as ceasing active membership).

However, if you are still working for that employer, you may be automatically re-enrolled at a later date. Every 3 years, the government requires employers to put eligible jobholders back into their pension scheme, in case you’re ready to continue adding to your pension savings.

  • It also means your employer will add money to your pension savings again, and you’ll get tax relief.
  • You might also see auto-enrolment referred to as ‘cyclical re-enrolment’, or just ‘re-enrolment’.

No worries – you can. If you’d like to re-join your employer’s workplace pension, you can ask to re-join at any time. If it’s within a year of leaving though, you’ll need to get your employer to agree first.

That’s ok – you’ll be able to ask to leave just as easily as you did before.

Find out more information on our re-enrolment page.

Rebate

We charge you for looking after your pension but to help you save more, we give you money back on your management charge.

We call this a ‘management charge rebate’ and if your savings qualify, you’ll see a management charge rebate figure in your transaction history in your Online Account.

Visit our member annual management charge webpage to find out if your savings qualify for a rebate.

Rebate period (or ‘charge period’ relating to the rebate on the management charge)

Is the number of days between rebate payments. We use it to calculate how much you should receive as a rebate.

The first rebate period ran from 17 February 2020 to 16 August 2020. From then on, each rebate period runs from the 17th to the 16th of each month.

Find out more about the rebate on the management charge

Relief at source

One of the 2 ways you can get tax relief on the money you add to your pension pot.

Relief at source means your contributions are taken from your pay after your wages are taxed. Then we automatically claim tax relief for you, adding the basic tax rate of 20% to your pension contributions. We call this method the ‘net tax basis’ as your contributions are taken from your net pay.

  • If you pay a higher rate of tax, you’ll need to complete a Self-Assessment tax return and submit it to HMRC to claim the extra tax relief.
  • The alternative is net pay arrangement.

More about tax relief »

Revaluation

This is about keeping up with inflation.

If you’re a deferred member of a defined benefit pension scheme – like a final salary scheme – your pension will increase in value to make sure you’re still in line with inflation.

Revaluation doesn’t apply to defined contribution schemes, like The People’s Pension, so it’s a good idea to think about what kind of income you think you’ll need during your retirement. You should also regularly review whether you’re contributing enough to your pension savings to give you the best chance of getting that income. You should speak to a regulated financial adviser if you need help.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Risk

Your pension pot can be invested in several different ways, and you’ll be able to choose what kind of approach you want. The more investments fluctuate in value, the more money you could end up with, but equally the decreases in value along the way could be larger.  Risk is sometime referred to as volatility.

If you’re in The People’s Pension, and you’d rather not get involved in the investment choices, we’ll put you in the ‘balanced’ investment profile.

On the other hand, if you’d like to take more of an interest, there are 2 other investment profile options (‘cautious’ and ‘adventurous’) or 8 investment funds you can select from.

More about your investment options »

Salary exchange or salary sacrifice

An arrangement employers may make available to employees where the employee agrees to reduce their earnings by an amount equivalent to the employee’s pension contributions. The employer then agrees to pay the total pension contributions on behalf of the employee, including any contributions due from the employer. Any contributions paid to the pension provider will therefore be paid only by the employer.

Read our ‘Salary sacrifice – Workplace pensions’ webpage for more information.

Scheme

This is what The People’s Pension is – a pension scheme.

You might also come across ‘pension arrangements’, ‘pension plans’ or ‘pension funds’ (which gets confused with investment funds). They basically all mean the same thing.

Scheme rules

The legal documents by which The People’s Pension is governed.

Selected retirement age

Simply the age you choose to retire, but not necessarily the earliest you can access your pension pot.

You can use your pension savings to get a lump sum or an income once you’ve reached your minimum pension age – whether you’ve retired, you’re working part-time or you’re not planning to retire at all. Nowadays your pension is all about supporting you in later life, whatever you’re up to.

With The People’s Pension you can choose whatever retirement age you’d like (from your normal minimum pension age) – just log in to your Online Account to let us know. That way we can manage how your pension savings are invested appropriately.

Don’t forget though, if you do want to properly retire before you get your State Pension, then your other pensions, savings or income will have to be enough to live on. So, you may need to hold off for a few years, or start to claim your pension savings while continuing to work part-time.

With The People’s Pension you can choose whatever retirement age you’d like (from 55 onwards, or age 57 from 2028) – just log in to your Online Account.

And you don’t have to be actually retiring. The age you choose is just to let us know roughly when you’re thinking of accessing your pension, so we can manage how your pension savings are invested appropriately.

If so, you may be able to access your pension before you reach your normal minimum pension age – for ill health.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Self-select

An option which allows you to self-select your own funds. There are 8 investment funds to choose from:

  • Global Investments (up to 60% shares) Fund
  • Global Investments (up to 85% shares) Fund
  • Global Investments (up to 100% shares) Fund
  • Annuity Fund
  • Pre-Retirement Fund
  • Cash Fund
  • Ethical Fund
  • Shariah Fund

If you choose more than 1 of the self-select funds, you’ll be responsible for managing how much is invested in each of the selected funds. The self-select option doesn’t include a glidepath into lower-risk investments as you approach retirement. So, you may want to regularly review your fund selection – and your attitude to risk – the closer you are to your selected retirement age.

You can switch to an investment profile at any time, which will put you on an automatic glidepath.

Please note: if you choose to invest in the Shariah Fund, you’ll only be able to invest in this particular fund.

Set up

The process of creating a new account for an employer with The People’s Pension.

Shares, stocks and equities

When someone buys a share in a company, they become a part owner. If you own all the shares of a company, you’ll own the entire company. (Equities and stocks are simply other names for a share.)

If a company has a million shares and each share is worth £1, the company will be valued at £1m.

So, when you own a share in a company, you become entitled to a share in the profits that company makes. These payments of profits are called dividend payments. Let’s say the company makes £100,000 in profit and decides to pay this out to shareholders as a dividend payment – the share owners would receive 10p for each share they own.

The value of each share will go up and down with how well the company performs and how well other investors think the company may perform in the future.

Simply Comply

The fast-track sign-up route to The People’s Pension. If an employer has simple requirements and they’d like to comply with the legislation as quickly and with as little hassle as possible, they can choose the Simply Comply route with The People’s Pension.

Simply Tailor

If an employer is looking for a tailored pension scheme and they’re confident dealing with the various flexibilities, they can choose the Simply Tailor route from The People’s Pension.

Small pot lump sum

If you have £10,000 or less in your pension pot, you may be able to cash in the whole lot from your normal minimum pension age.

The first 25% of cash you take is tax-free (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount). The remaining amount is taxable, as if it were income, at the highest marginal rate you pay.

  • For each occupational pension pot you own (like The People’s Pension), you can cash in the proceeds as a small pot lump sum once you’ve stopped paying in. You can do this once for each pot, and you must take the entire pot at once.
  • You can cash in up to 3 personal pension pots during your lifetime.
  • Unlike flexible lump sums or flexi-access drawdown, a small pot lump sum won’t reduce your annual allowance (the limit on the amount you can save and receive tax relief on).
  • HMRC has complex rules on whether you can or can’t take a small pot lump sum. This can include different criteria for transferring pension schemes, so make sure you get guidance and advice.
  • If you’re claiming a small pot lump sum with The People’s Pension, you can start the process over the phone, requesting a printed claim form, or through your Online Account. We’ll then let you know if there’s any reason you can’t go ahead.

More about your different options for taking your pension savings

Staging date

The date employers had to meet their auto-enrolment duties. Employers who employed their first member of staff after 1 October 2017 will have a duties start date instead of a staging date.

Stakeholder pension

A type of personal pension scheme that works flexibly – handy for freelancers, people out of work, and even children.

In the past, stakeholder pensions were a popular offering at work. But since the automatic enrolment law came in, companies are switching to solutions like The People’s Pension.

You can still continue with your stakeholder pension if you’d prefer, or if your employer uses The People’s Pension, you can transfer your stakeholder pension into your pension pot with us.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

State Pension

If you receive credits or pay National Insurance contributions over the years, you’ll be able to claim weekly payments from the government at some point in your 60s. (The age at which you can claim your State Pension is gradually increasing, depending on when you were born.)

If you get the full amount, it’s currently £11,502.40 a year – which is unlikely to be enough to retire on, but it’s a good start.

More about the State Pension »

State Pension age

Because we’re living longer, the age at which we get our State Pensions is gradually increasing, depending on when you were born. Your State Pension age could currently be anywhere between the ages of 65 and 68. The government also periodically reviews the State Pension age so these ages may change in the future.

If you retire before you get your State Pension, it’s worth checking that your other pension savings or income can cover your living costs until then.

Take a look at the government’s State Pension calculator to find out when you’ll get it »

Statement of Investment Principles (SIP)

This statement sets out how the Trustee makes investment decisions and the responsibilities of the Trustee in investing your pension savings.

Download The People’s Pension Statement of Investment Principles »

Stocks

Another name for shares.

Subsidiary company

The official definition is that a subsidiary is a company whose voting stock is more than 50% controlled by another company, usually referred to as the parent company or holding company. A subsidiary is a company that is partly or completely owned by another company that holds a controlling interest in the subsidiary company. For the purposes of liability, taxation and regulation, subsidiaries are distinct legal entities.

Tapered Annual Allowance

This term refers to a further limit on the amount of tax relief higher earners can claim on their pension savings.

From April 2023, the tapered annual allowance only affects those who meet both of the requirements shown below:

  • your ‘threshold income’ is above £200,000, and
  • your ‘adjusted income’ is above £260,000.

Working out your threshold and adjusted income can be complicated. You can see how it works and some examples on HMRC’s website.

HMRC’s tapered annual allowance guidance page

In practice, the tapered annual allowance will mean that for every £2 of taxable income you earn above £260,000, your annual allowance will reduce by £1. The maximum reduction is £50,000 – so anyone with an income of £360,000 or more will have an annual allowance of £10,000.

It’s okay, you can go over your reduced annual allowance, you just won’t get tax relief on any contributions you paid that exceed the limit in that tax year.

The amount you’ve exceeded the annual allowance by will be added to the rest of your taxable income for the tax year and be subject to Income Tax at the rate(s) that apply to you.

You might be able to ‘carry forward’ any unused annual allowance from the previous 3 tax years, to either reduce your annual allowance charge or remove it completely. This isn’t possible if you’ve previously taken income from flexi-access drawdown, taken a flexible lump sum, or if you haven’t been a member of a registered pension scheme in the last 3 years.

If you still have an excess amount after carrying forward, you’ll face an Income Tax at the rate(s) that apply to you.

It either gets taken in your tax return, or you might be able to ask your pension provider to pay it out of your pension savings if certain conditions are met. This is known as ‘Scheme Pays’ and means your pension would be reduced.

Tax basis

If you’re an employer setting up your workplace pension with The People’s Pension, you can choose to deduct your employees’ contributions from their wages either before or after tax.

Tax relief can be applied in 2 very different ways (and it’s important to get it right):

  1. Net tax basis (deducting contributions after tax)

When you sign up to The People’s Pension, we’ll automatically set you up on the net tax basis. You may see HM Revenue & Customs (HMRC) referring to this as the ‘relief at source’ method.

  • Under this tax basis you’d deduct employee contributions from their pay after tax is taken. (That’s why we call this tax basis net.)
  • Then, The People’s Pension claims the tax relief – at the basic 20% rate of tax – from the government.
  • And it’s then added to your employee’s pension savings – even for any employees who don’t pay tax.
  • Employees who pay more than basic rate tax will need to claim the extra tax relief direct from HMRC, normally through their tax returns.
  1. Gross tax basis (deducting contributions before tax)

You may see HMRC referring to this as the ‘net pay arrangement’ method. If you choose this option, you’ll need to call us on 01293 58 66 66 to set this up.

  • Under this tax basis, you’d deduct employee contributions from their pay before tax is taken. (That’s why we call this tax basis gross.)
  • So, your employees will automatically get full tax relief on their contributions straightaway.
  • But unlike the alternative net tax basis, it means lower paid employees who don’t pay tax won’t receive any tax relief.

Visit our pension tax webpage for more information.

Tax efficient growth

Pension savings in the UK are more tax efficient while they’re invested. This means that as your pension pot can grow in value over time, you won’t pay tax on that growth.

Tax relief

This is one of the best benefits of a workplace pension. Your pension pot isn’t just built up with money from yourself and your employer – the government helps too. You get tax relief on the earnings you put into your pension pot – so the tax you’d normally pay goes into your pension savings instead.

It depends which of the two methods your employer uses for getting tax relief for you:

  • Net pay arrangement means your contributions are taken from your pay before your wages are taxed. So, you only pay tax on what’s left – therefore you get your full tax relief straight away.
  • Relief at source means your contributions are taken from your pay after your wages are taxed. Then we automatically claim tax relief for you, from HMRC, adding the basic rate of tax of 20% to your pension contributions.
  • If you are a non taxpayer and your employer uses the net pay arrangement, then you won’t get any tax relief.
  • If you pay more than basic rate tax and your employer uses the relief at source method, you will have to claim the extra tax relief direct from HMRC via your self-assessment tax return.

There is also a limit on how much that can be paid into your pension pot each year and still benefit from tax relief – this limit is called the annual allowance. This limit may be lower for you if you’ve taken any money out of your pension savings already – this lower limit is called the money purchase annual allowance.

Tax year

This is the 12-month calendar year running 6 April to 5 April. Tax allowances such as your personal allowance and pension tax reliefs follow the tax year, as do benefit changes like State Pension increases.

Tax-free cash

When you access your pension pot, you’re normally able to take up to 25% of it as tax-free cash (limited to a lifetime maximum of £268,275 unless you hold protection for a higher amount).

Also known as Pension commencement lump sum (PCLS).

The Pensions Ombudsman (TPO)

An ombudsman for workplace pensions. They may be able to help you if you have a complaint about how your pension provider is running your pension.

TPO covers workplace pension schemes, like The People’s Pension. There are lots of other ombudsmen. The Financial Ombudsman (FOS) for example which covers personal pension schemes, and other financial complaints.

The Pensions Ombudsman »

The People’s Pension

Our workplace pension scheme – provided by our parent company People’s Partnership – is the largest private sector pension scheme that can be used for auto-enrolment in the UK.

It’s simple to use and has more than *6 million members so far. People’s Partnership is a profit-for-people company, so it’s important to us that The People’s Pension is a great benefit for employees and easy for employers to manage. We also want to take out as much of the complication from the pensions industry as possible – which is one of the reasons we’ve put together this jargon buster. There’s so much jargon in pensions… it all needs busting.

*All figures correct as of April 2023.

Threshold income

This is your income – from employment, property, investments etc:

  • without any money you or your employer have added to your pension pot, unless your employer has done so with salary exchange/sacrifice
  • without any taxed lump sums or death benefits you’ve received.

(Alternatively, there’s your adjusted income.)

Total earnings

Your pension contributions are usually based on your qualifying earnings, but some employers base them on total earnings instead.

This includes your salary, wages, overtime, bonuses and commission, statutory sick pay, and any statutory pay received during paternity, maternity, adoption or any other kind of family leave. Other kinds of pay can be added too.

Transfers

If you’ve got more than one workplace or personal pension it’s usually possible to combine them so they’re all in one place. We don’t charge you to transfer into The People’s Pension and we do the hard work for you.

  • All you need to do is go to your Online Account and fill out some details about your old pension providers – their names, your policy numbers and the approximate values.
  • First though, it’s important that you compare the charge, features and services between the pension you want to transfer and The People’s Pension to see if it’s the best option for you. Find out about our charge.
  • And be warned, some other providers do charge you to transfer.
  • The more you save with us, the bigger the rebate you could get.
  • Our low charge means you could save more for later life.
  • We offer strong investment options – choose from our 3 profiles or self-select.
  • Even if you move jobs, you can still contribute to this pension.

More about transferring your old pensions »

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

If you’re thinking of transferring out from The People’s Pension to a different pension provider, make sure you compare the charges and benefits – it’s a big decision.

Click here to find out how to transfer to a different pension provider >

 

Transitional protection

Also referred to as lifetime allowance protection.

Trivial lump sum payment

Where the pension provider can pay your entire pension pot (not exceeding £30,000) to you as a lump sum rather than as an annuity. From 6 April 2015, trivial lump sums have no longer been available to members of defined contribution pension schemes (The People’s Pension is one of these) but continues to be available to those in defined benefit schemes.

Trust

A trust is an arrangement where a ‘Trustee’ takes care of assets on behalf of someone else.

For example, The People’s Pension is a trust, and has an independent Trustee that looks after the money you put into it.

More than that, The People’s Pension is suitable for multiple unconnected employers to use at the same time. The People’s Pension is a master trust pension scheme.

Trustee

The People’s Pension Scheme is governed by a Trustee company, The People’s Pension Trustee Limited, a wholly owned subsidiary of People’ Partnership. However, the Directors are independent from People’s Partnership. The Board includes some experienced, independent professional Trustee Directors.

The Trustee’s duties include looking after the best interests of members.

Read about our Trustee »

TUPE

TUPE stands for ‘Transfer of Undertakings (Protection of Employment) Regulations 2006’. These are rules designed to protect employees who find themselves being moved to a new employer when the service provision or undertaking they work in is transferred. The aim is to ensure that the employees’ terms and conditions are safeguarded and maintained under the new employer.

Type 1 employees

If you’re a type 1 employee you’ll be put into your employer’s pension scheme automatically, and both you and your employer will pay into your pension savings. (Though you can ask to leave – known as opting out – if you’d like to.)

  • You’re aged between 22 and the age you get your State Pension.
  • And you’re earning more than £10,000 a year / £833 a month / £192 a week.

Type 2 employees

If you’re a type 2 employee (because you don’t meet the type 1 criteria above), you won’t be put into your employer’s pension scheme automatically, but you can still ask to join it if you’d like to.

  • As long as you’re aged 16-74.
  • And you’re earning more than £6,240 a year / £520 a month / £120 a week.
  • You’re aged 16-74.
  • And you’re earning less than £6,240 a year / £520 month / £120 a week.
  • In which case it’ll just be you paying into your pension savings for now, but it’s still good to get started.

(If you’re younger than 16 or older than 74 then unfortunately you might not be able to get a workplace pension.)

Uncrystallised

Refers to pension savings you haven’t accessed yet in any way (so no lump sums, income etc).

It normally also means your money hasn’t been taxed yet. Whenever you take money from your pension pot, it’s worth being aware of the tax you’ll likely have to pay.

Look at the different ways you can take your pension – and make sure you understand the tax implications for each option.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Uncrystallised funds pension lump sums (UFPLS)

This is HMRC’s rather technical term for taking your pension savings in lump sums (see our definition of uncrystallised).

We just call these flexible lump sums – because you can get your pension savings either in one go, or in smaller payments over time.

We’re not authorised to give you advice, but you can read more about your guidance and advice options on our website.

Unitised funds

Each of our investment funds is divided into units. We ‘unitise’ your money by buying units in each of the funds you are invested in.

The value of the units you are invested in could rise or fall, depending on the value of the underlying assets that make up each fund. If the unit value increases, the value of your pension pot will rise. If the unit value decreases, so will the value of your pension pot.

On receipt of your pension contributions, we aim to invest your money on the next working day. However, we can’t always invest your money as soon as we receive it, (for example if you have been auto-enrolled, any contributions we receive during your opt-out period), so there may sometimes be a delay between you paying money in and it becoming ‘unitised’.

Units

Each of our investment funds is divided into units.

When you put your money into a fund, this buys units reflecting your contribution.

The fund uses the money you pay for units to invest in shares. If the shares go up in value, so will your units. And if the value of the shares drop so will the value of your units.

Volatility

Volatility refers to how stable the value of an investment is. So, if the share price of a company moves up and down a lot, it will be more volatile than the share price of a company that stays around the same value.

(Volatility is sometimes known as the risk or uncertainty in the value of an investment

Winding-up lump sum

This is what you could get if your employer ever decides to wind up (close) their workplace pension scheme.

So if you’re a member, it could take up to 18 months to get things sorted. But in that time the Trustee of the pension scheme should be able to provide you with the transfer value of your pension savings, so you can move your money into another pension scheme. (Perhaps a personal pension, or another workplace pension you may have.)

Or you may be able to just get a winding-up lump sum instead. There’s no minimum age you have to be for this, but there are HMRC limits on how much you can get. The first 25% is tax free and the rest is taxed at the highest rate you pay.

Find out more from MoneyHelper »

Worker group

A group of employees who have the same pension contribution level.

We’ll automatically set up a worker group based on the minimum contribution levels under auto-enrolment legislation, as part of the Simply Comply route.

At each pay reference period, the employer must ensure that at least 8% is being contributed to your pension (with at least 3% being paid by the employer). The employer can choose to pay more, but if not the remaining contribution will normally be made up of 4% employee and 1% tax relief. This is based on qualifying earnings.

It’s possible to set up more worker groups, using different earnings bases and/or contribution rates, for other employees once the account set-up has been completed. For example, a separate worker group could be set up for senior management staff contributing a higher percentage of their salary into their pension.

A minimum of one worker group must be included in every account and it should have a specific worker group ID and description to differentiate it from any other worker groups being used.

Worker(s)

Employees, or any individual who has a contract to perform work, or services personally and isn’t undertaking the work as part of their own business.

Workplace pension

Since 2018, many employees will have a workplace pension – like The People’s Pension – that must meet the government’s auto-enrolment regulations.

For most people this is basically a pot of money your employer helps you fill up. You pay in a small percentage of your wages and they add some more. You get tax relief on the money you save into your pension pot too – so you end up with quite a bit more than you pay in.

Then, with pensions like The People’s Pension, your pot of money gets invested to grow over time. Normally available anytime from your normal minimum pension age. Ready to enjoy as an income or cash (or both!).

Works or work-based pension

Nowadays this is commonly known as a workplace pension – though sometimes referred to as employer, occupational or company pensions.

Previously many employers offered stakeholder pensions, defined benefit pensions and other solutions, but since the auto-enrolment laws, gradually all employers are having to offer access to a workplace pension.