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.

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 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 you can claim your State Pension is gradually increasing, depending on when you were born.)

If you get the full amount, it’s currently only a bit above the £8,000 mark a year – which is 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

By 2018 many employees will get a workplace pension – like The People’s Pension – that has to meet the government’s automatic 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 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 55th birthday (or your 57th from 2028 onwards). Ready to enjoy as an income or cash (or both!).

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. 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 automatic enrolment regulations, while many employers have swapped to workplace solutions like The People’s Pension.

The pensions 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.

More about paying more into The People’s Pension »

Or they may refer to an old kind of pension scheme our parent company B&CE used to offer in the construction industry.

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 taxed lump sums or death benefits you’ve received.

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

More about adjusted income from HMRC »

Adventurous investment profile

One of the three investment profiles you can choose for your pension savings with The People’s Pension.

This one means we’ll be more adventurous with how much of your money we invest in certain ways.

There’s more potential to make gains than 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 higher risk. As the idea is to make larger gains over the years, but it’s possible there’ll be significant reductions 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.

  • If you don’t want to pick an investment profile we’ll automatically put you into the balanced investment profile.
  • Or you can choose from the different funds we group investments into.

More about investing your pension »

Annual allowance

You can get tax relief on the money you save into your pension pot – as long as the amount of money you save isn’t above the annual allowance in any tax year.

The annual allowance doesn’t affect many people, though it might do if you’re saving a lot into your pension. It’s basically a limit on the amount of money you can save into your pension pot and still get tax relief on. (That amount of money includes the money you contribute from your wages, as well as the money your employer contributes and the tax relief you’ve gained so far.)

The standard limit is £40,000, but may be lower depending on how much you earn. High earners may get a lower annual allowance, and if you earn less than £40,000, the tax relief you can get is based on how much you earn. The limit also depends on whether 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, you could pay in £24,000 and get £6,000 in tax relief. (Though you may well have other things you want to spend that money on!)

You can still get tax relief however much you earn up to £3,600. Even if you don’t work all year, you may still be able to save up to £2,880 into your pension (from savings or other payees perhaps) and get 20% in tax relief – adding up to £3,600.

This might mean you get a lower annual allowance. Based on your adjusted income:

  • if you earn £150,000 or less this tax year, your annual allowance limit is £40,000
  • if you earn over £150,000 this tax year, your annual allowance will reduce on a tapered basis.

So for every £2 you earn above £150,000, your annual allowance will reduce by £1. The maximum reduction is £30,000 – so anyone with an income of £210,000 or more will have an annual allowance of £10,000.

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

If so, your annual allowance reduces to £4,000 each tax year from then on. So you can only get tax relief on the first £4,000 you save into a pension pot. This reduced money purchase annual allowance will only relate to you, if you have a defined contribution pension. It won’t affect final salary pensions.

Your pension provider will let you know if this applies 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 – there are a couple of solutions.

  1. One option is to ‘carry forward’ any leftover annual allowance you didn’t use in the past three years (though this isn’t possible if you’ve taken a
    flexible lump sum or income from flexi-access drawdown – or if you haven’t been a member of a registered pension scheme in the past three years).
  2. Or you just pay tax on the money that’s above the limit.

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 in your tax return, or if it’s over £2,000 you can ask your pension provider to pay it out of your pension savings.

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 have this handy tool you can use:

HMRC’s annual allowance calculator »

The People’s Pension isn’t a final salary pension (also known as a defined benefit pension), but if you do have one of these, the annual allowance applies to that too.

But rather than relating to how much money you’re saving, here the annual allowance applies to the increase in value to your benefits during the tax year – eg if you’ve had a pay rise and that increase in benefits has exceeded the annual allowance.

 

If you have a few pensions or if this is all getting confusing (because it is!) it might be worth talking to an independent financial adviser. Try Unbiased or the Money Advice Service.

Annual management charge (AMC)

This is how much you’re charged to have a workplace pension each year.

With The People’s Pension it’s 0.5% of the value of your pension each year. To put it another way you’re charged just 50 pence a year for every £100 of the value of your account. This annual charge comes automatically from your pension savings.

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

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 on 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 one ourselves, we can help you transfer to a provider that does when the time comes.

More about how you can take your 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 you’re 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 2018-19…

  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. And both you and they will have to contribute to your pension savings.
  2. If you’re aged 16-74 and you earn more than £6,032 a year / £503 a month / £116 a week, you’ll still be able to join if you’d like. And both you and your employer will have to contribute to your pension savings.
  3. If you’re aged 16-74 and you earn less than £6,032 a year / £503 a month / £116 a week, you’ll still be able to join. You’ll have to contribute to your pension savings, but your employer doesn’t have to unless they want to.

Asset

An asset is anything with a value you can trade for money.

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

Automatic enrolment

It’s law that by 2018 all employers have to put certain employees in a workplace pension scheme, like The People’s Pension and make contributions for them. So if you haven’t got a pension yet, you might get one soon.
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 2018-19…

  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. And both you and they will have to contribute to your pension savings.
  2. If you’re aged 16-74 and you earn more than £6,032 a year / £503 a month / £116 a week, you’ll still be able to join if you’d like. And both you and your employer will have to contribute to your pension savings.
  3. If you’re aged 16-74 and you earn less than £6,032 a year / £503 a month / £116 a week, you’ll still be able to join. You’ll have to contribute to your pension savings, but your employer doesn’t have to unless they want to.

Automatic re-enrolment

If you ask to leave your employer’s workplace pension – known as opting out – you may be automatically re-enrolled at a later date. Every 3 years, the government requires employers to put you 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 automatic 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.

B&CE

B&CE is our parent company – originally called Building & Civil Engineering Holiday Scheme Management Limited. (Easy to see why we call ourselves B&CE.)

We’re an employee benefits organisation founded in the construction industry over 70 years ago – so we have decades of experience in making financial solutions simple. As well as the largest private sector pension scheme that can be used for automatic enrolment in the UK – The People’s Pension – we also set up our Charitable Trust to help people in the construction industry.

Read more about us at the B&CE website »

Balanced investment profile

One of the three investment profiles you can choose for your pension savings with The People’s Pension.

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, but hopefully more of a return than the cautious approach.

And 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.

  • If you don’t want to pick an investment profile we’ll automatically put you into the balanced investment profile.
  • Or you can make detailed choices across the different funds we group investments into.

More about investing your pension »

Beneficiary

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

If you’re in The People’s Pension, you can nominate them as your beneficiary in your Online Account. They’ll then receive a lump sum if you don’t take all of your pension savings, or if you die before you access them.

  • 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 trustees, most beneficiary nominations are accepted.
  • And normally the payment is tax free.

Benefit crystallisation event (BCE)

Not that you can tell, but this term refers to a test that’s carried out whenever you take cash or income out of your pension pot. Or if you haven’t accessed it by the age of 75, the test will happen then.

All the test does is check whether you’ve exceeded your lifetime allowance (which is a limit to how much you can save into your pensions without triggering a tax charge – the max is currently £1.03m).

And if you’ve exceeded the lifetime allowance limit, the BCE test makes sure you get the appropriate tax charge.

Bond

(Not James 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.

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

This refers to your annual allowance of how much money you can save into your pension pot and get tax relief on.

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 three tax years, which may reduce the tax charge.

Cautious investment profile

One of the three investment profiles you can choose for your pension savings with The People’s Pension.

This one means we’ll be more cautious about how much of your money we invest in certain ways.

So you might not make as many gains 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 with The People’s Pension – you’ll get a glidepath, which helps to safeguard your pension savings as you move closer to retirement.

  • If you don’t want to pick an investment profile we’ll automatically put you in the balanced investment profile.
  • Or you can make detailed choices across the different funds we group investments into.

More about investing your pension »

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 income flexi-access drawdown, or get lump sum payments).

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 pension

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

  • 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 automatic 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.

Contractual enrolment

Contractual enrolment is an alternative to automatic enrolment.

All employers need to have a pension scheme that can be used for automatic 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 automatic enrolment pension scheme, employers can just put all of their employees in.

Each employee has to 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 automatic enrolment pension scheme
  • all employees who must be enrolled under automatic enrolment regulations, must instead be contractually enrolled into the pension scheme by their automatic 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 automatic enrolment
  • all employers must still register with The Pensions Regulator to confirm they’ve complied with the legislation.

So it’s worth noting that contractual enrolment isn’t a way for employers to avoid the automatic enrolment legislation – there are complexities and if in doubt we recommend you take legal advice.

Contributions

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

  • Usually you’ll pay a small percentage from your wages, and your employer pays some more.
  • And your employer’s payment has to meet at least the government’s minimum percentage.
  • A lot of employers set the percentages at these minimum levels, but some give you more.

The other thing to note is that an employer’s contributions are often only based on the part of your salary that’s between £6,032 and £46,350 – although some employers do go above the upper limit.

More about contributions »

Cyclical re-enrolment

Just another term for automatic re-enrolment.

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).

Deferred member

If you’ve left a pension scheme (or it’s closed), and you haven’t accessed 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 to access your pension savings after you turn 55 (the government proposes to increase this to age 57 from 2028).

Defined benefit pension

A type of pension employers offered regularly not so long ago – giving you a guaranteed income every year from your retirement.

  • How much you get is based on your salary and the number 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).

Defined contribution pension

With this type of pension scheme, you get a pension pot and you and/or your employer add money into 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 – personal, workplace occupational (like The People’s Pension) and stakeholder.

Dividend

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

Duties start date

This is the date the automatic enrolment duties start to apply to an employer who employs their first member of staff after 1 October 2017. The duties apply immediately from the first day the first employee starts working for you.

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

EasyBuild

EasyBuild is a stakeholder pension our parent company B&CE launched for construction employees back in 2001.

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

Eligible employees

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

Employer pension

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

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

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

More about how you can take your pension savings »

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.

Equities

Another name for shares.

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.

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!

Financial Conduct Authority (FCA)

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

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.

Check their website to see why the Vikings are to blame for the word ‘ombudsman’. They’re also responsible for ‘cake’, ‘steak’ and ‘happy’.

Financial Ombudsman Service »

There are lots of ombudsmen. The Pensions Ombudsman (TPO) for example! (The FOS doesn’t cover workplace pension schemes, but TPO does.)

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 as and when you need it.
It’s one of the ways you can access your pension savings after you’ve reached 55 (the government proposes to increase this to age 57 from 2028).

It’s possible to take up to 25% of your pension savings as a tax-free lump sum with the balance going into flexi-access drawdown. Once you’ve money set aside in flexi-access drawdown, if you’d like to you can take a partial income 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.

  • As your money remains invested, the amount of income you get might rise and fall, depending on how your investments perform. Any income 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 £4,000. 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 how you can take your pension savings »

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.

Some people call these ‘flumps’… and 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’.

  • 25% of a flexible lump sum comes tax free, with the other 75% taxed at the highest rate you pay.
  • With The People’s Pension, if you have over £10,000 in your pension pot, you may be able to take flexible lump sums. (If your pension pot is £10,000 or less, check out Small pot lump sums.)
  • You’re allowed 1 payment each tax month and it has to be at least £2,000. Then each time you take another one, you need to still have over £10,000 in your pot on the date we process your claim.

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

More about how you can take your pension savings »

Flumps

A casual term the pensions industry has come up with to describe what HMRC calls ‘uncrystallised funds pension lump sums’. (We call them flexible lump sums.)

Easy to see why they wanted a simpler term. ‘Flumps’ just makes us hungry though – or reminds us of old children’s TV shows.

We’ll stick with flexible lump sums.

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 take a balanced investment profile.

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 which 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 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 terms equity fund – that’s the main way your money’s invested – and pre-retirement fund – that’s when you’re gliding…

HM Revenue & Customs (HMRC)

The taxman.

You pay tax to HMRC but you get tax relief on your pension contributions. Then when you access your pension pot you can get 25% as tax-free cash, 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 2018-19 tax year is £11,850 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 annuity that gives you more income.
You may be able to access your pension savings earlier than age 55 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 – so please get in touch with us if you’d like to claim.

Contact us »

And 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 tax-free cash.

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

Contact us »

Illustration

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

Income

Income is any money you have coming in. That includes your earnings, income from pension savings, interest from some savings products, rental income, some state benefits and pretty much anything else really.

It’s worth remembering you can take up to 25% of your workplace pension savings as a tax-free lump sum, but anything after that is classed as income, which may be taxable. You’ll still have your personal allowance of tax-free income though – the standard personal allowance is £11,850 a year – so you might be able to plot a course that maximises your pension savings.

You might come across the terms adjusted income and threshold income, which interpret what counts as your income in slightly different ways.

Income drawdown

See flexi-access drawdown.

Inflation

Is the gradual increase in prices over the years. It’s why you can’t get penny sweets anymore – or a Freddo for 10p.

Inflation-proofing

This 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 making you more money.

Investment profiles

The simplest way to invest your pension savings with The People’s Pension.

  • 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.

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

Joint annuity

A joint annuity provides an income for you and your spouse, registered civil partner or dependant. That way, if you die they’ll still receive an income for the rest of their life.

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 how you can take your pension savings »

Lifetime allowance

Your lifetime allowance is the total amount of all your pension savings (apart from your State Pension) that can be built up over your entire working life without triggering an extra tax charge. At the moment the standard lifetime allowance is £1.03m.

Some people may have registered for protection with HMRC in the past, but otherwise, if you think you might go over this limit you should take financial advice.

Lump sum payment

You’re usually able to take up to 25% of a pension pot as a tax-free lump sum.

There are some rules, but often you’re able to take the whole lot as cash, with 25% tax free.

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.
  • For personal pension pots though, you’re limited to three – of up to £30,000 across three different pension pots (max £10,000 each).
Take a look at flexible lump sums, or for getting cash alongside an income, take a look at annuities and flexi-access drawdown.

 

More about how you can take your pension savings »

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 »

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’.

Money Advice Service (MAS)

This is an impartial organisation you can speak to for free money advice. 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.
Money Advice Service info on annuities »

Money purchase annual allowance (MPAA)

This term refers to the reduced annual allowance for contributing to your pensions savings in a defined contribution pension scheme (like The People’s Pension).

For the 2018-19 tax year, the annual allowance is £4,000 – the MPAA – if you take payments from your pension savings. Either with flexi-access drawdown or a flexible lump sum (described by HMRC as an uncrystallised funds pension lump sums) from your pension pot.

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.

Also known as a ‘master trust’.

National Insurance contributions

You have to pay National Insurance contributions if you’re aged 16 or over and you earn more than £162 a week from 2018/19.

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.

  • Though 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 employees

If you’ve been described as a ‘non-eligible’ employee before, you’re now classed as a type 2 employee. (‘Entitled’ 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.

Occupational pension

Nowadays this is called a workplace pension – though 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.
  • 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 automatic 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.

Open market option

This describes the freedom you have to shop around for a retirement income that suits you.

  • You can get a guaranteed regular income by using your pension savings to buy an annuity.
  • Or if you’d like a variable income at the same time as leaving some of your pension pot invested, you can do so with flexi-access drawdown.

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 or flexi-access drawdown.

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

More about how you can take your pension savings »

Opting in

This is just asking to join a workplace pension scheme.

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), 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

This is just asking to leave a workplace pension scheme.

If you’ve been put into your employer’s workplace pension scheme automatically, but you’d rather not be involved, you can ask to leave. The idea of making it automatic is just to give you the chance to have a pension – so you can’t avoid being enrolled, but it’s easy to leave afterwards.

If you’d like your contributions refunded you’ll need to opt out within one month (known as the opt-out period). You can still opt out after that point though, and the contributions you’ve made so far will remain invested in your pension pot.

And in case your circumstances change over time, you’ll be given the option to restart your workplace pension later – by being re-enrolled roughly every three years. Again though, you can ask to leave if you’d rather not have one.

More about opting out »

Pay period

This is just how regularly your employer pays you, and therefore how regularly you add money into your pension pot.

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 take an income from your pension, – known as an annuity or a flexi-access drawdown you can often take a tax-free lump sum too – normally up to 25% of your pension pot.

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

Pension credit

This has two possible meanings.

  • It could refer to pension income from an ex-spouse after a divorce pension sharing order.
  • It’s also a 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 member’s rights under the scheme is reduced. A pension debit usually applies to a member of an occupational pension scheme or a personal pension scheme who is subject to a pension sharing order on divorcing their ex-spouse.

Pension fund

This term has two meanings. (Like ‘pension credit’… or ‘duck’.)

  • Ideally it should only refer to the 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.

Potentially confusing. Generally, though, 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 dates your pension contributions are measured against the annual allowance (the limit to how much you can save into your pension 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, these dates must be 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 into 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, or 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 »

Pension savings statement

A statement sent to you by your pension provider to let you know if you’ve exceeded your annual allowance in any particular tax year. (But remember they can’t factor in any other pensions you might have.)

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 »

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.

Personal allowance

Each year you get a personal allowance of tax-free income – the standard amount for the tax year 2018-19 is £11,850. 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 at 20% (or higher if it’s a lot more) so it’s worth planning your retirement income to make the most of your money.

More about your personal allowance »

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

Your employer might postpone the date you’ll be put into a workplace pension scheme. It can usually only be done by up to three months – possibly to coincide with other staff benefit launches.

It’s not absolute though – if you’d like to join before the postponed date, you can do. Just speak to your employer about it.

Pre-Retirement Fund

In The People’s Pension, this is where your invested pension savings are gradually moved when you enter the glidepath – 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 »

Private pension

Quite a broad term you might come across – one that could come up as a contrast to the State Pension.

While the State Pension is a benefit you can claim from the government if you’ve paid your National Insurance contributions over the years, private pensions are any other kind of pension.

Prudential Regulation Authority (PRA)

Back in 2013 the Financial Services Authority (FSA) split into two 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 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

These are the earnings your pension contributions are usually based on if you are saving into a pension with us.

They include 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.
Some employers use a different earnings basis though – usually either pensionable earnings or total earnings.

  • However much of your qualifying earnings come between £6,032 and £46,350, that’s what the contributions you and your employer make will be calculated from. (Those are the figures for the tax year 2018/19 – they’re reviewed every year by the government.)
  • Say you earn £25,000.
    £25,000 minus £6,032 leaves £18,968.
    So your contributions will then be calculated from £18,968 – either at the minimum percentages set by the government, or your employer can set higher percentages if they want to.

Qualifying pension scheme

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

Re-enrolment

Check out automatic re-enrolment.

Relief at source

One of the two 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.

  • 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.

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. 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 (a middle ground between the other options you can choose between – ‘cautious’ and ‘adventurous’).

On the other hand if you’d like to take more an interest, we have 8 investment funds you can select from.

More about your investment options »

Salary exchange or salary sacrifice

This is something your employer might offer you – an arrangement where you agree to reduce your earnings by an amount equal to the pension contributions you’d be making from your wages.

Then your employer will make a bigger contribution to your pension savings – so you’ll end up with the same amount of pension savings – and both you and your employer will save a bit on National Insurance contributions.

Scheme

This is what The People’s Pension is – a pension scheme. We prefer to say ‘pension scheme’ in full though – a ‘scheme’ could be a rewards card, or something sinister, or funding for lollipop ladies, or pretty much anything.

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.

Selected retirement age

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

From the age of 55 (the government proposes to increase this to age 57 from 2028) you can use your pension savings to get a lump sum or an income – 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 55 onwards, or as the government proposes, age 57 from 2028) – 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 as the government proposes, 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 age 55 – for ill health.

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.

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 age 55 (or age 57 from 2028).

The first 25% of cash you take is tax free. The remaining 75% is taxable, as if it were income, at the highest rate you pay.

  • You can cash in any number of occupational pension pots in this way, (like The People’s Pension).
  • You can cash in up to three personal pension EasyBuild and EasyBuild S2P (older pension schemes provided by our parent company B&CE) count as separate pots.
  • Unlike flexible lump sums or flexi-access drawdown, a small pot lump sum won’t reduce your annual allowance (for tax relief on money you save into your pension in the future).
  • HMRC have complex rules on whether you can or can’t take a small pot lump sum. If you’re claiming a small pot lump sum with us, you can start the process in your Online Account, and we’ll let you know if there’s any reason you can’t go ahead.

More about how you can take your pension savings »

Staging date

This is the date when an employer has to be ready to launch an automatic enrolment pension scheme – like The People’s Pension – to provide their employees with a workplace pension.

A lot of companies have already ‘staged’, and many of their employees are already getting a workplace pension. If you’re not there yet though, you should be soon – as by 2018 every employer in the UK will have to meet the government’s workplace pension regulations.

Probably not on the exact day, but if you’re automatically put into their pension scheme, then you should be up and running within six weeks of their staging date, and you should get your joiner information from your pension provider. If that’s us, welcome!

  • If you’re not automatically put into their pension scheme, they’ll still have to tell you about the pension, and you can ask to join if you’d like to.
  • Another thing that might happen is your employer could send you a message to let you know they’re postponing putting you into the pension scheme for up to three months. (If they do you can ask to join sooner if you’d like to.)

More about having pension savings with The People’s Pension »

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 swapping 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.

State Pension

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 you can claim your State Pension is gradually increasing, depending on when you were born.)

If you get the full amount, it’s currently only a bit above the £8,000 mark 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 we get our State Pensions is gradually increasing, depending on when you were born. Your State Pension age could be anywhere between the ages of 62 and 68.

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)

A document published by The People’s Pension Trustee Limited to explain the responsibilities of our Trustee in investing your pension savings.

Download The People’s Pension Statement of Investment Principles »

Stocks

Another name for shares.

Tax efficient growth

Simply that your pension savings can grow largely tax free, as pension investment funds in the UK aren’t taxed on income or capital gains.

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’s all down to an annual allowance of how much money you can add into your pension pot and still get tax relief on.

The standard limit is £40,000, but your exact annual allowance will depend on how much you earn. For example, if you earn £30,000, you could pay in £24,000 and get £6,000 in tax relief. Most people probably won’t pay 80% of their earnings into their pension pot though!

The limit also depends on whether you’ve taken any money out of your pension savings already.

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

  • Net pay arrangement takes your pension contributions from your pay before your wages are taxed.
  • Relief at source takes your pension contributions after they’re taxed.

Check our webpage about tax relief »

Tax year

6 April to 5 April.

Tax-free cash

When you access your pension savings, you may be able to get some of them tax free. Most lump sum payments can be paid 25% tax free.

  • Perhaps a quarter of your pension savings in one go, tax free.
  • Or flexible lump sums over time – each one 25% tax free.

The Pensions Advisory Service (TPAS)

Here you can get free independent guidance on any pension questions you might have. You can also contact The Pensions Advisory Service with any issues you have been unable to resolve with the Trustee of the Scheme.

The Pensions Advisory Service »

The Pensions Ombudsman (TPO)

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

There are ombudsmen for lots of things – like the Financial Ombudsman Service (FOS) for other financial complaints.

The Pensions Ombudsman »

The Pensions Regulator (TPR)

It is the UK regulator of work-based pension schemes.  It makes sure pension schemes are run properly, with the power to intervene if pension scheme Trustees, employers or advisers have failed to keep up high standards.

The Pensions Regulator »

The People’s Pension

Our workplace pension scheme – provided by our parent company B&CE – is the largest private sector pension scheme that can be used for automatic enrolment in the UK.

It’s simple to use and has over 4 million members so far. B&CE is a not-for-profit 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.

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 had more than one workplace or personal pension it’s usually possible to swap them over into one place. This could make it easier to keep track of your pension savings and see how much you could get when you retire.

We don’t charge you to transfer into The People’s Pension, so get in touch if you’d like us to combine your pension pots.

  • All you need to do is go to your Online Account and fill out some details.
  • First though, check the details of your other pensions, as they may come with some good benefits that you don’t want to give up.
  • And be warned, some other providers do charge you to transfer.

More about pension transfers »

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 professional Trustee that looks after the money you put into it.

More than that, The People’s Pension is suitable for multiple employers to use at the same time, so it’s actually known as a master trust.

Trustee

The Trustee of a pension scheme is responsible for running it and looking after the pension pots within the scheme.

Read about our Trustee »

TUTMAN B&CE Contracted-out Pension Scheme (BCECOPS)

An old pension scheme contracted out from the State Earnings Related Pension Scheme (SERPS) and later the State Second Pension (S2P).

We launched this in 1988, specifically for the construction industry.

Basically it allowed employed construction workers to get some of their employer’s and their own National Insurance tax payments contributed into their pension instead.

It’s no longer taking contributions, but some employees still have a pension pot invested.

  • If that includes you, you can stay in the pension scheme until you’re ready to access your pension savings.
  • Or you could transfer into another pension scheme, including The People’s Pension if you’d like to.

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 £6,032 a year / £503 a month / £116 a week.
  • You’re aged 16-74.
  • And you’re earning less than £6,032 a year / £503 a month / £116 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).

Meaning 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.

You can take a look at the different ways you can take your pension – and how they’re taxed – in our quick guide:

Your options at retirement »

Uncrystallised funds pension lump sums (UFPLS)

This is HMRC’s rather technical term for taking your pension savings in lump sums (see above for 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. Some people in the pensions industry call them ‘flumps’… but we’re not sure we’d go that far!

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 The Pensions Advisory Service »

Workplace pension

By 2018 many employees will get a workplace pension – like The People’s Pension – that has to meet the government’s automatic 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 55th birthday (or your 57th from 2028 onwards). 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 automatic enrolment laws, gradually all employers are having to offer a workplace pension.