Glossary

The State Pension is a regular payment from the UK government that most people can claim when they reach State Pension age. The amount a person receives depends on their National Insurance record and it will often form only part of their retirement income.

For many people, retirement income may also include workplace pensions, personal pensions, savings, investments or earnings.

Source: GOV.UK State Pension explained

A workplace pension is a pension savings arrangement set up by an employer. It may also be described as an occupational, works, company or work-based pension.

Eligible employees are normally automatically enrolled, although the exact position depends on the worker and employer circumstances.

Source: GOV.UK Workplace pensions

A personal pension is a pension arranged by an individual rather than directly by an employer. It is usually a defined contribution or money purchase pension, where retirement benefits depend on contributions, investment performance, charges and the options chosen at retirement.

Source: GOV.UK Personal pensions

A Self-Invested Personal Pension, or SIPP, is a type of personal pension that gives the member more choice and control over the investments held within the pension wrapper than a standard personal pension.

Important: Non-UK Resident Tax Warning

If you are a Non-UK Tax Resident in addition to seeking financial or investment advice, you should take the appropriate tax advice covering your tax residency as well as the UK, before transferring your UK pension Benefits to our SIPP, to ensure you fully understand the tax treatment at the point of transfer, ongoing tax treatment and when you commence benefits.

Source: Money Helper SIPP

A stakeholder pension is a type of individual defined contribution pension. Some employers offer stakeholder pensions, but an individual can also set one up themselves.

Source: Money Helper Stakeholder pensions

A defined benefit pension is usually a workplace pensions arranged by an employer. It promises benefits based on a formula, commonly linked to salary and length of service. These schemes are often called final salary or career average schemes.

Source: GOV.UK Pension types

A defined contribution pension, also known as a money purchase pension, builds up a pension pot from contributions and investment returns. The value available at retirement depends on the amount paid in, investment performance, charges and how benefits are taken.

Source: GOV.UK Pension types

A financial adviser is a regulated adviser who provides advice or related services to clients on financial products or investments. In practice, firms and individuals carrying out regulated advisory activities must have the appropriate permissions and meet applicable conduct requirements.

Broadly, it means a person retained to provide advice about investment opportunities or related information, or to perform certain functions concerning the management of scheme property.

An investment firm is generally a business providing one or more investment services to third parties or performing one or more investment activities on a professional basis.

An individual is a relevant UK individual for a tax year if they have relevant UK earnings chargeable to income tax for that tax year; are resident in the UK at some time during that tax year; were resident in the UK at some time during the previous five tax years and were also UK resident when they joined the pension scheme; have overseas Crown employment income subject to UK tax; or are the spouse or civil partner of a person with such overseas Crown employment income.

This status is relevant to whether personal pension contributions can qualify for tax relief.

Source: HMRC PTM044100

Relevant UK earnings are the earnings used to determine the amount of tax-relievable personal pension contributions an individual may make. Examples include taxable employment income such as salary, wages, bonuses, overtime and commission; taxable benefits in kind; certain statutory payments paid by an employer; income from a trade, profession or vocation conducted by the individual or by a partnership in which they personally act; and certain patent income.

The previous reference to income from UK or EEA furnished holiday lettings should be reviewed: HMRC guidance states that furnished holiday lettings rules cease to apply for Income Tax from 6 April 2025. Pension income itself is not relevant UK earnings.

Sources:  HMRC PTM044100; HMRC FHL repeal

Historically, a benefit crystallisation event was an occasion when pension benefits were tested against a member’s available Lifetime Allowance.

Update for 2026: the Lifetime Allowance charge was removed from 6 April 2023, and the Lifetime Allowance was fully abolished from 6 April 2024. For current tax-free lump sum testing, the relevant terminology is generally “relevant benefit crystallisation event” in relation to the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance.

The historic BCE term may still be relevant for transitional calculations where benefits were taken before 6 April 2024.

Source: HMRC individual lump sum allowances

Drawdown is a way of taking retirement income from a defined contribution pension while leaving the remaining pension fund invested.

Flexi-access drawdown is an arrangement where funds in a personal pension or stakeholder pension are designated as available for unlimited income withdrawals, subject to pension scheme rules and tax legislation.

An Uncrystallised Funds Pension Lump Sum is a lump sum paid from uncrystallised money purchase pension rights, subject to statutory conditions. In general, part of the payment may be tax-free, and the balance is taxed as pension income, subject to the member’s available allowances and circumstances.

Sources: FCA Glossary UFPLS; HMRC individual lump sum allowances

A lifetime annuity is a product bought with pension savings that pays a guaranteed income, usually for the rest of the member’s life. The options chosen, such as indexation, guarantees or dependants’ benefits, affect the income payable.

Source: Money Helper annuities

A Pension Commencement Lump Sum is a tax-free lump sum that may be paid when a member becomes entitled to pension benefits

For many people the maximum PCLS is 25% of the relevant pension value, but this depends on scheme rules, available allowances, any protected rights and your country of residence.

Source: FCA Glossary PCLS; HMRC individual lump sum allowances

The Money Purchase Annual Allowance can restrict the amount that can be paid into defined contribution pensions with tax relief after a person has flexibly accessed pension benefits. For the 2026/27 tax year, the MPAA is £10,000.

The MPAA applies to defined contribution savings and not to defined benefit accrual. Separate alternative annual allowance rules may apply where an individual has both defined benefit and defined contribution pension savings.

Source: Money Helper MPAA; GOV.UK pension scheme rates

The Lifetime Allowance charge was removed from 6 April 2023, and the Lifetime Allowance was completely abolished from 6 April 2024. The previous standard Lifetime Allowance for 2023/24 was £1,073,100.

From 6 April 2024, tax-free lump sums are instead controlled by the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance. Amounts above the available allowance are generally subject to Income Tax rather than the former Lifetime Allowance charge.

Source: HMRC individual lump sum allowances

The annual allowance is the maximum amount of pension savings that can be built up in a tax year before an annual allowance tax charge may apply. For 2026/27, the standard annual allowance is £60,000.

The annual allowance can be lower for high-income individuals under the tapered annual allowance rules or where the Money Purchase Annual Allowance applies after flexible access. Unused annual allowance from the previous three tax years may be available for carry forward, subject to the rules.

Source: GOV.UK annual allowance; GOV.UK pension scheme rates

From 6 April 2024, the Lump Sum Allowance limits the total amount of tax-free lump sums an individual can take from all pension schemes. The standard allowance is usually £268,275, unless a protected allowance applies.

Source: HMRC individual lump sum allowances

From 6 April 2024, the Lump Sum and Death Benefit Allowance limits the total amount of tax-free lump sums and lump sum death benefits that can be paid from all pension schemes. The standard allowance is usually £1,073,100, unless a protected allowance applies.

Source: HMRC individual lump sum allowances

A Relevant Benefit Crystallisation Event is an event after 6 April 2024 that tests certain pension lump sums or lump sum death benefits against the member’s available Lump Sum Allowance and/or Lump Sum and Death Benefit Allowance.

Source: HMRC individual lump sum allowances

The tapered annual allowance can reduce the standard annual allowance for high-income individuals. For 2026/27, tapering generally applies where threshold income is over £200,000 and adjusted income is over £260,000, with a minimum tapered annual allowance of £10,000.

Source: GOV.UK pension scheme rates

Carry forward may allow an individual to use unused annual allowance from the previous three tax years, provided the conditions are met. It can help reduce or avoid an annual allowance charge where pension savings exceed the current year’s allowance.

Source: GOV.UK annual allowance

Normal Minimum Pension Age is the earliest age at which most members can usually access pension benefits without an unauthorised payment tax charge, unless an exception applies, such as ill health or a protected pension age. This term is useful because it is frequently relevant to benefit access and transfer communications.

Source: HMRC PTM044100

Investments are assets bought or held with the aim of producing income or capital growth. Common asset classes include shares, cash, property and fixed interest securities such as bonds.

Investments can fall as well as rise in value, and returns are not guaranteed.

Source: Money Helper investing guide

An investment portfolio is the collection of assets owned by an investor. Diversifying across different asset classes can help manage overall investment risk, although it does not remove risk entirely.

Source: Money Helper investing guide

A Discretionary Fund Manager manages designated investments for a client on a discretionary basis under the terms of a discretionary management agreement. This means investment decisions are made by the manager within an agreed mandate.

Source: FCA Glossary DFM

For the relevant FCA prudential rules, a Standard Asset must be capable of being accurately and fairly valued on an ongoing basis and readily realised within 30 days whenever required.

Source: FCA standard assets

A Key Features Document is a product information document prepared in accordance with FCA rules on preparing product information, including COBS 13 where applicable.

Source: FCA Glossary KFD

A Key Features Illustration provides information about projected performance and the effect of charges, prepared in accordance with FCA rules on product information where applicable.

Source: FCA Glossary KFI

A Statutory Money Purchase Illustration is an annual illustration of contributions made for a member and the potential benefits that may become payable, prepared under the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013.

Source: FCA Glossary SMPI