Annual Allowance

This is the maximum amount you can save towards your pension in any tax year across all pension plans. The limit for the tax year (2017/18) is £40,000 or 100% of your taxable salary, whichever is lower. This applies to most people. For more information visit


It’s an insurance product that provides a guaranteed income at retirement, either for life, or a set period. For more on annuities visit

Defined Contribution Pension

This pension is made up of money paid in by you and/or employer, which is placed in a variety of investments, including shares. The value and size of your pension is based on the amount of money saved and the performance of the investments. Pensions include company, personal and stakeholder pensions. It’s also known as a ‘money purchase’ scheme.

Enhanced Annuity

This is an annuity that pays a higher income for people who may have a reduced life expectancy due to medical conditions or because they smoke, are overweight or drink alcohol regularly.

Financial Conduct Authority

The Financial Conduct Authority (FCA) regulates the UK financial services industry. It protects consumers, keeps the industry stable and promotes healthy competition between financial service providers.

Flexi-access Drawdown

It’s a method of creating a retirement income that offers an alternative to an annuity. It means you can keep your money invested while taking an income from it. It works by investing your retirement savings in funds designed to generate an income for you. But unlike the annuity, the income is not guaranteed. What it does offer, as its name suggests, is the flexibility to make changes to your income levels and/or switch to alternative income options in the future.

Freedom and Choice Reforms

On 6 April 2015, the government announced the ‘freedom and choice’ pension reforms. This gave millions of people unprecedented control over their pension savings by giving them the choice over how they access their money in retirement. So, now if you are 55 or over, you can take the whole amount as a lump sum, paying no tax on the first 25% with the rest taxed as if it were a salary at your income tax rate.

Guaranteed Minimum Pension

This is a benefit that guarantees a minimum pension at retirement, provided the plan remains untouched until the selected retirement date. If not, the guarantee will no longer apply. This is a valuable benefit and we strongly recommend you get guidance or financial advice if you are thinking about transferring your plan to another provider, or accessing your pension before your agreed retirement date.


The rate of Inflation reflects changes in the prices of goods and services. There are two key measures of inflation: The Consumer Prices Index (CPI) and the Retail Prices Index (RPI). The rates are often expressed as a percentage. So, if for example, the CPI is 3% today, it means the cost of goods and services were 3% cheaper this time last year.

Lifetime Annual Allowance

This is the total amount you can build up in pension plans over your lifetime while still benefiting from tax relief. The allowance is £1.03 million for the tax year 2018/19. If you save more than that limit, you’ll have to pay a tax charge known as the ‘Lifetime Allowance Charge’. This charge is only applied to the amount of pension savings that exceeds the Lifetime allowance. Currently the charge is 55% if you take your money as a lump sum, or 25% if you choose an income option. Bear in mind that you’ll have to pay income tax too on any income or lump sums taken from your pension(s) that fall outside of the 25% tax-free money. For more information visit

Money Purchase Annual Allowance

This relates to a ‘defined contribution pension’ see the definition above. Once you access your defined contribution pension, it could reduce your Annual Allowance from £40,000 to £4,000 (2017/18). It’s this lower allowance of £4,000 that is known as the ‘Money Purchase Annual Allowance’ (MPAA). It means that you’ll benefit from tax relief on the money you put into your pension of up to 100% of your taxable earnings or £4,000, whichever is lower. But for this to happen, you will need to access your defined contribution pension in a particular way, known as ‘flexible access’. Examples are taking a lump sum of £10,000, or more, or by flexi-access drawdown. For more information visit

Occupational Pension

This is a pension scheme provided for the members of a particular occupation or by an employer.

Stakeholder Pension

This is a type of defined contribution personal pension that offers a relatively low level of choice. For example, it accepts low and flexible levels of regular savings, limited charges and if you don’t want to choose the investment funds, they offer a ‘default’ fund option.