Jargon buster

Your retirement savings jargon buster

The new pension reforms have left many of us scratching our heads. What do all these terms mean? Do you know your UFPLS from your MPAA? Our handy jargon buster provides a plain English guide to the world of retirement savings.


A product you can buy with your retirement savings that will provide a lifelong regular income.

Capped drawdown

A drawdown product available before 6 April 2015. The amount of income you can take is restricted.

Defined benefit schemes/pensions

Or final salary schemes. A retirement savings plan where an income is paid out based on the amount you were earning when you retired. This amount doesn't depend on the investment growth of your payments and is paid directly to you.

Defined contribution

Also known as a money purchase plan. Many people have this type of retirement savings. The money you and your employer pay in, is invested to provide an income and/or a cash sum to live on when you decide to retire. The amount you get depends on the amount of your retirement savings.


A flexible income you can change. Drawdown lets you take some or all of your tax-free cash, leaving the rest of your retirement savings invested to take an income from if you want to. You don't need to take an income at all but if and when you do, you can take a regular flexible income, one-off withdrawals or both – but only until the money runs out.

Enhanced annuity

This kind of annuity offers a higher income to people with a certain lifestyle or medical condition which may reduce their life expectancy, eg smoking or heart disease.

Escalating annuities / inflation-linked annuities

These annuities will pay you an income that rises either with inflation or a fixed amount each year, usually 3 to 5%.

Flexi-access drawdown

Or drawdown. This is a new type of drawdown product introduced by the government in April 2015. There are no limits on the income you can take – but only until the money runs out.

Joint-life annuities

This allows some or all of your regular income to be paid to your partner for the rest of their life when you die.

Level annuity

A fixed income which is paid to you for life and won't change with inflation. This can mean the value of the income could reduce over time.

Lifetime allowance

The amount of money you're allowed to build up in your retirement savings before triggering an extra tax charge when you use it to provide for your retirement.

Money purchase plan

Also known as defined contribution plan. Many people have this type of retirement savings. The money you and your employer pay in, is invested to provide an income and/or lump sum to live on when you decide to retire. The amount you get depends on the amount of your retirement savings.

Money purchase annual allowance (MPAA)

When you start taking money from your retirement savings pot, a limit applies to the amount of money you can continue to put into your retirement savings each year without it triggering a tax charge. It is there to prevent a higher-rate tax payer putting large amounts into their retirement savings, benefitting from the tax relief and then just pulling the money back out. If you just took the tax-free cash, and no further income or withdrawals, this tax charge would not apply.

Occupational pension scheme

This is a retirement savings plan set up by your employer and is usually restricted to employees. They can be defined benefit schemes/pensions or money purchase plans.

Open market option (OMO)

This is a legal requirement to let people who are coming up to retirement to 'shop around' for a number of options to convert their retirement savings into an annuity, rather than simply taking the annuity offered by their retirement savings provider.

PAYE (Pay As You Earn)

Through PAYE, income tax is taken straight from your wages or deducted from your retirement income before you receive it. How much you pay depends on your personal allowance and the amount you earn.

Personal Allowance

The rates of Income Tax you pay depend on how much of your taxable income is above your Personal Allowance in the tax year. Most people's Personal Allowance is £10,600 (as at April 2015).

Retirement savings

The pot or pots of money saved for your retirement which you can access from 55 or over. This includes money paid in from you and your employer to defined contribution or money purchase plans.

Selected retirement age (SRA)

This is the age you expect to retire if different from your plan's standard retirement age.


A Self Invested Personal Pension. This plan lets you choose and manage where your money is invested. SIPPs generally offer a wide range of investments for you to choose from and a wider range of retirement options.

Stakeholder pension

Stakeholder pensions are a form of defined-contribution personal pension. They have low and flexible minimum payments, capped charges and a default investment strategy if you don't want too much choice. Some employers offer them, but you can also start one yourself.

State benefits

These are allowances the government gives you when you retire. As well as the state pension, these extras include: Winter Fuel Payments, Pension Credits and Cold Weather Payments.

State pension

The State Pension is a regular payment from the government you can get when you reach State Pension age. To get it you must have paid or been credited with National Insurance contributions. You'll get your State Pension under the current scheme if you reach State Pension age before 6 April 2016. If you reach State Pension age after this date, you'll get your State Pension under the new scheme.

Tax-free cash

Money taken from your retirement savings as cash when you use your plan to buy an annuity or for drawdown. From the age of 55 you can usually take up to 25% of your retirement savings as tax-free cash.

Transfer value

If you decide to transfer your retirement savings to another scheme, this is the amount a scheme would pay into another plan in lieu of any benefits you've built up.

UFPLS (uncrystallised funds pension lump sum)

This is a cash lump sum which is paid straight from your retirement savings without moving into drawdown or by buying an annuity. 25% of the money taken as 'uncrystallised funds' will normally be tax-free, and the rest will be taxable.

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