CTC Pensions Tech Glossary
A
Abridged Advice
Abridged advice is a service for members who have defined benefits pensions and are looking to transfer. With abridged advice service in place, members are able to get a ‘no’ at a lower cost. This process will filter out members who are unable to transfer their DB pension at an earlier stage. This is a good low-cost alternative to full advice.
Actuary
Actuaries are responsible for compiling and analysing statistics, which are then used to calculate insurance risks and premiums.
Annual Allowance
The most you can save into a pension and get tax relief. This includes money paid in by you, your employer, or anyone else. This tax year (2019-2020) the Annual Allowance matches your earned income up to a maximum of £40,000.
If your ‘adjusted income’ is above £150,000 the Annual Allowance is reduced by £1 for every £2 you earn over this amount until you hit £10,000.
Annuity
An annuity is bought at retirement. It gives you a regular income, for life or a fixed period.
Annuity rate
Usually determined by insurance companies, an annuity rate is a percentage by which an annuity grows each year.
Assets
Property owned by a person or a company that has value and is available to meet debts, commitments, or legacies.
Asset allocation
An asset allocation is a process that divides the money in your investment portfolio. These can range from stocks, bonds and cash.
Asset classes
This is a name for a grouping of investments that are similar and are subject to the same laws and regulations.
B
Basic state pension
A basic state pension is based on the number of qualifying years you achieved during your working life. For example, according to gov.uk website, to get the basic state pension, you must have paid or been credited with National Insurance contributions.
Beneficiary
The person who is named in a will, a trust, a life insurance policy, or death benefits from a pension or annuity and will receive the money allocated in these documents.
C
D
Defined Benefit Pension
Often referred to as a 'final salary pension'. This provides a guaranteed income for your whole retirement.
Defined Contribution Pension
Now the most common form of pension. All money paid into your pension is built up to produce a fund that you can use in retirement.
Dependant
Someone who relies on another for support.
Drawdown Pension
Drawdown allows you to access your money flexibly in retirement. This is not guaranteed and is invested for you. This means you can benefit from investment gains but must be aware of the risk of poor investment performance.
E
Employer Pension
It is a legal requirement for employers to arrange a pension plan for their employees, this is called an employer pension. The employer pension is usually deducted from the employee’s salary into their pot and the employer will contribute an agreed amount.
Enhancement-Annuity
This option could be for you if you are in ill health. Because your life expectancy will be lower, you will be offered a higher guaranteed income.
Escalation and Inflation Linking
This is an option for you to choose when buying an annuity.
For a reduction in your starting annual payment, you can link your annuity to a set amount or an index (like RPI). This will offer protection against inflation.
F
Final Salary Scheme
Final Salary Scheme are usually workplace pensions arranged by employers. Final Salary Scheme is also known as ‘defined benefit’ or ‘career average’ pension schemes.
Financial adviser
Financial advisers are trained to give legal financial advice and are regulated by the FCAs.
Fixed interest
An interest rate that doesn’t change during the duration of the loan.
Fixed Term Annuity
As annuity above, where you pay a lump sum for a guaranteed income, but instead of for life, you choose a set number of years. Usually 5 or 10.
Flexible Retirement Income Product
Please see 'Pensions Drawdown'
G
Guarantee Period
This is an option when you buy an annuity.
You can choose to reduce your annual payment amount in exchange for ensuring that if you pass away, your loved ones will receive the payment for an agreed period.
H
I
Illustration
The illustration is a personalised quote, projection, based on the information you have provided. Its format is mandated by the FCA and it shows the effects of charges, investments, contributions, inflation, and withdrawals.
Impaired Annuity
See 'Enhanced Annuity'
J
K
L
Lifetime Allowance
This is the most you can take out from a pension and still benefit from the tax relief offered.
M
Money Purchase Annual Allowance (MPAA)
See 'Annual Allowance'
Money Purchase Pension
N
O
Open Market Option
At retirement, it's important to shop around to make sure you get the best product for your needs. You do not have to stay with your existing pension provider.
P
Pension Commencement Lump Sum
At retirement, you can take up to 25% of your pension fund as a cash lump sum, on which you will pay no tax.
This is called a Pension Commencement Lump Sum (PCLS), but may also be known as a tax-free lump sum or tax-free cash.
Pension Protection
Certain pensions have special features that give extra benefits. If your pensions have any of these types including enhanced protection, Primary or fixed protection then it is worth speaking to an adviser to fully understand your options.
Q
R
S
SIPP
Self Invested Personal Pension. A type of pension that generally allows for a lot of investment options.
SIPP Value
The total amount of money in your pension including any money in cash or any investments
Simpler Annual Benefit Statement
If your members hold a defined contribution (DC) pension scheme, they will be getting a statement annually, this is the Simpler Annual Benefit Statement. A Simpler Annual Benefit Statement is a chance to educate members and ensure they’re more aware of their choices and options available to them; while keeping it all simple.
T
Tapered Annual Allowance
See 'Annual Allowance'. If you earn above £150,000 per year the amount you can save into your pension and get tax relief will be reduced by £1 for every £2 above this threshold to a maximum of £10,000.
The Pensions Regulator
Also known as TPR, is a public body that protects workplace pensions in the UK.
Triage
Triage is the process where you find out what is important to the client and direct them towards the process that is most suitable to their needs. DB Transfer advice has a very specific place with very specific rules. Advisers can only give educational information about DB Transfers and none of the content can be personalised to the client. The customer must then decide for themselves if they want to proceed to full advice.
U
Uncrystallised Pension Fund
A pension that has had no withdrawals yet.
Uncrystallised Funds Pension Lump Sum (UFPLS)
One of your options at retirement is to take lump sums of cash. This is called UFPLS. You can take this all in one go or as a series of lump sums. 25% will be tax-free and 75% will be taxed at your standard income tax rate.