Pension Jargon buster
Pension terms and jargon explained.
An annuity is a policy that you buy with your pension fund. It gives you a pension which is an income for the rest of your life. There are a range of different annuities available, so you can purchase one to suit your own personal circumstances.
If your health or lifestyle (smoking, drinking, obesity) is expected to lead to a reduced life expectancy, you could qualify for an enhanced annuity. This is because an enhanced annuity is based on your personal circumstances, rather than
just an average.
An illustration shows you how much you can expect to receive as an income from an annuity. The amounts quoted are not guaranteed due to possible changes in annuity rates and the fund values used to buy the annuity.
A joint annuity will provide you and your spouse or registered civil partner or dependant with an income. Taking out a joint annuity will ensure that in the event of your death, your spouse or registered civil partner or dependant will still receive an income for the rest of their life.
Open Market Option
You can buy your annuity from any annuity provider and this is called using the Open Market Option. Different providers offer different annuity rates, so you can shop around to find the best annuity rate for your own personal circumstances.
Small Lump Sum Payment
A Small Lump Sum Payment is where the pension provider is able to pay a pension fund not exceeding £10,000 to you as a lump sum rather than as an annuity. There are certain rules which can affect you being able to take a Small Lump Sum Payment.
Trivial Lump Sum Payment
A Trivial Lump Sum Payment is where the pension provider is able to pay your entire pension fund (not exceeding £30,000) to you as a lump sum rather than as an annuity. There are certain rules which can affect you being able to take a Trivial Lump Sum Payment.