Understand key pension and retirement terms. Use the A–Z or search below.
The annual allowance sets the maximum you can contribute to your pension each year before tax charges. Standard limit: £60,000 (2024/25), although might be lower for high earners or those already drawing benefits from their pension pot.
A product that provides guaranteed income for life or a fixed term, purchased with pension funds.
A UK scheme requiring employers to automatically enroll eligible staff in workplace pensions and contribute. Auto-enrolment helps individuals save for retirement more effectively by making pension participation the default option for eligible employees.
The person or entity who will receive benefits from a pension if the policyholder dies.
Allows you to use unused annual allowance from the past three tax years to increase contributions in the current year. However, there are specific eligibility criteria and limits to consider.
A benefit paid as a lump sum if an employee dies while employed, usually linked to salary multiples.
See Pension Drawdown.
A workplace pension providing a guaranteed income based on salary and service length. You may also come across the term 'final salary scheme' which is a type of defined benefit scheme based on your final salary at retirement rather than an average of your career earnings.
You and your employer contribute to a pot; retirement income depends on pot size and investment performance.
An annuity offering higher income based on health or lifestyle factors, reflecting reduced life expectancy.
A document telling your pension provider who should receive benefits if you die. Not legally binding but influential.
The UK regulator overseeing financial services, ensuring firms meet standards for advice and conduct.
A type of defined benefit pension where income is based on your salary at or near retirement.
A modern form of drawdown allowing flexible withdrawals from a pension pot once eligible.
A fixed annuity rate offered by some older pension policies, often higher than current market rates.
See Pension Drawdown.
Upfront fees when setting up a pension or investment product, covering advice or arrangement costs.
A tax-efficient UK savings account. Separate from pensions but often part of retirement planning.
The historical cap on pension benefits before extra tax, abolished in 2024 but still relevant for some protections.
The new limit on tax-free cash after lifetime allowance abolition, generally £268,275 for most people.
The age from which you can usually access private pensions (currently 55, rising to 57 in 2028). Different from State Pension Age.
Access pension funds while keeping them invested, allowing flexible withdrawals instead of buying an annuity.
A pension that gives control over investments. You can start withdrawing from your SIPP once you reach the age of 55 (rising to 57 from 2028). Up to 25% of your SIPP can be taken as a tax-free lump sum, with the remaining funds subject to income tax.
A professional authorised by the FCA to provide financial advice under UK regulation.
An assessment of how much investment risk you’re willing and able to take when planning for retirement.
A regular payment from the UK government if you’ve paid enough National Insurance contributions.
The age you can claim State Pension, currently 66 and rising to 67 by 2028.
The portion (usually 25%) of your pension pot you can take as a tax-free lump sum when accessing benefits.
The amount you can move from one pension to another. Depends on age, scheme rules, and market conditions.
Pension funds not yet accessed for income or lump sums.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IMPORTANT: With investments, your capital is at risk. Pensions and investments can go down in value as well as up, so you could get back less than you invest.
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