The pension glossary

Navigating the world of pensions can feel like learning a new language. Here's a quick glossary to help you understand some common terms you might encounter.

Annuity

An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as a means of securing a steady income for retirees.

Pension Beneficiary

The person who receives your pension benefits after your death.

Pension Contribution

The amount of money that you or your employer deposits into your pension account.

Defined Benefit Pension (DB)

This type of pension promises a specified pension payment, lump-sum (or combination) on retirement that is predetermined by a formula based on your earnings, length of service and age.

Defined Contribution Pension (DC)

With this type of pension, the amount you receive on retirement depends on how much was paid in and how well the investment fund performs.

Drawdown

This is a way of taking money out of your pension pot to provide you with a regular retirement income by reinvesting it in funds specifically designed and managed for this purpose.

National Retirement Age

The age at which a person is eligible to start receiving state pension benefits.

Opt Out

Choosing not to participate in a pension scheme offered to you by your employer.

Pension Investment Fund

The fund that your pension savings are invested in with the goal of long term growth.

Pension Lump Sum

A one-time, lump sum payment drawn from a pension pot.

Pension Pot

The total amount of money saved up in your pension plans which you draw on for your retirement.

Pension Tax Relief

The tax benefit you get on your pension contributions, where some of the money that would have gone to the government as tax goes into your pension pot instead.

Pension Tracing

The process of finding lost pensions from previous employers that you may have forgotten about.

Pension Transfer

Moving your pension from one scheme to another.

Pension Withdrawal

Taking money out of your pension scheme, either as a regular income or as a lump sum.

Private Pension

Any pension scheme arranged yourself or by your employer that is not part of the state pension provision.

Self Invest Personal Pension (SIPP)

A type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs.

State Pension

The regular payment people receive from the government once they reach the national retirement age.

Uncrystallised Pension

Pension money that has not yet been touched or drawn as benefits after reaching retirement.