We know pensions can be complex. Our aim is to make life easier for you, so we’ve written this glossary to explain some of the terminology that you may hear.


A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T    U   V   W   X    Y   Z




A Day. 6 April 2006: this was when a single tax regime was introduced for all UK pension schemes. This is often referred to as 'Simplification'.


Adjusted Income. This adds back in any pension contributions to stop individuals exchanging salary for employer contributions when determining if the tapered annual allowance applies. This includes: 

  • Pension contributions paid gross (before tax relief) such as those paid through a ‘salary sacrifice’ agreement. 

  • Pension contributions where your pension provider has already claimed tax relief at the basic rate. 

Adviser. An FCA-regulated financial adviser who can advise you on your pension.  We are not an adviser and we cannot offer you advice about your pension.  If you intend to consult an adviser about transferring occupational pensions you should check that the adviser has the correct FCA permission to give this advice.


AIM (Alternative investment market). The AIM is a UK stockmarket mainly for smaller companies.  Investing in AIM-listed shares is generally high risk. This is because you may not be able to sell large shareholdings at the price quoted on the AIM. (The price may fall as buyers realise you are selling.) Also, small companies are less likely to be able to cope with bad news like a temporary drop in sales. Because of this, the value of their shares may drop quickly.


Annual allowance. This is the maximum amount of new money eligible for tax relief in a single tax year. The level of annual allowance is set by HMT (Her Majesty’s Treasury).


Annuity. An annuity is an income paid for the rest of your life. You can buy annuities from an insurance company. An annuity can be a fixed amount.  Alternatively, it can increase by either a fixed amount or in line with inflation or decrease. Your husband, wife, civil partner or other dependants can continue to receive the annuity after you die. The annuity may also have a guarantee period such as 5 or 10 years. See also income withdrawal and short term annuity.


[ Back to top ]


Beneficiary. An individual who is eligible to receive benefits from the SIPP or SSAS.


Benefit Crystallisation Event. There are various times when part of the lifetime allowance will be used, for example: when benefits become payable such as drawing pension commencement lump sum and moving into drawdown or taking an Uncrystallised Funds Pension Lump Sum (UFPLS). These are referred to as benefit crystallisation events and, at each event, a lifetime allowance test will be carried out.


Benefits in kind. When your employer gives you something valuable (for example, a company car), you may be taxed on its value as if you had received cash. If this happens, the item given to you is referred to as a ‘benefit in kind’ and you need to pay income tax on it. Employer contributions are not treated as benefits in kind.

[ Back to top ]


Capped drawdown. A form of income withdrawal.  There’s an annual maximum for capped drawdown, which is reviewed every three years (and every year after age 75). Capped drawdown ceased for new drawdown entrants from 6th April 2015 however for those who are already in capped drawdown before this date it can continue so long as all the conditions continue to be met.


CFDs (Contracts for Difference). These are high-risk investments. They consist of an agreement between a seller and a buyer. The seller agrees to pay the buyer the difference between the current value of an asset and its value at a future date. If the asset's value falls, the buyer pays the difference to the seller. Contracts for difference allow you to bet on movements in share prices without owning the shares themselves. Contracts for difference can sometimes be suitable investments for SIPPs for investors who are able to take high risks.


Connected party. Examples of a connected party would be: A member or spouse or relative of a member; a partnership where one of the partners is a member or a relative of the member; a company controlled by either of the previous parties.  For SSAS this will also be the any company that participates in the scheme.


Contracted-out. This refers to contracting out of the State Second Pension or the State Earnings Related Pension Scheme.  This was abolished for most pension schemes from 6th April 2012.  Any contracted out funds that were previously built up can be transferred to a SIPP or SSAS.  These funds will be treated no differently to any other funds.


Controlling Director. A director who owns or controls, either in his or her own rights or with one or more associates, at least 20% of a company, this includes 20% of any SSAS participating employers.

[ Back to top ]


Drawdown.  This is another term for income withdrawal.

[ Back to top ]


Earmarking. This is the process of allocating a specific share of the total funds to specific members. There is generally no allocation of specific assets under a SSAS.


Enhanced Protection. If applied for, the standard lifetime allowance does not apply but there could still be restrictions on the tax free cash that can be taken. You can't accrue further benefits after 6th April 2006.


Equities. These are the same as shares in a company.


Expression of wish. This is notification by a member detailing how they wish their death benefits to be paid.

[ Back to top ]


FCA (Financial Conduct Authority).  This is the financial services industry regulator.  The FCA regulates investment advice, the provision of certain investments and SIPP providers.  The FCA does not regulate SSAS providers. You should always check that your financial adviser is regulated by the FCA. The FCA register can be found at


Fixed Protection. If you have this form of protection, the normal limit on your pension fund size will be replaced by £1,800,000, if greater.


Fixed Protection 2014. If you have this form of protection, the normal limit on your pension fund size will be replaced by £1,500,000, if greater.


Fixed protection 2016. If you have this form of protection, the normal limit on your pension fund size will be replaced by £1,250,000, if greater.


Flexi-access drawdown. This is a form of income withdrawal which is not subject to minimum or maximum limits. 


Flexibly accessing benefits. From 6th April 2015 taking the following benefits from the SIPP are referred to as “flexibly accessing benefits” and will trigger the Money Purchase Annual Allowance Rules:

  • you take funds from a flexi-access drawdown fund, including receiving payments from a short-term annuity provided from a flexi-access drawdown fund

  • you receive an uncrystallised funds pension lump sum 

  • you convert your pre-6th April 2015 capped drawdown pension fund to a flexi-access drawdown fund and you subsequently take a drawdown pension from that fund

  • you take more than the permitted maximum for capped drawdown from a pre-6th April 2015 drawdown pension fund

  • you receive a stand-alone lump sum and you are entitled to primary protection with a greater than £375k protected tax free lump sum right

  • you receive a payment from a lifetime annuity where the annual rate of payment can be decreased.

Fund supermarket. This is an online shop where you can buy and sell investments including funds, unit trusts and OEICs (Open-Ended Investment Companies).


Futures. These are contracts under which the seller must sell, and the buyer must buy, an investment at a fixed price at a fixed future date. Futures carry a high risk since the market price in the future may be very different to the fixed price under the contract. Futures can produce very high profits or losses. As a simple example, I pay you £1,000 to buy your house for £100,000 in a year’s time. (Under a futures contract, I have to buy it then, and you have to sell.) If your house is worth £150,000 by then, my £1,000 has become worth £50,000. If your house is worth £80,000 by then, my £1,000 has turned into a loss of £20,000. Futures are not for the faint-hearted!

[ Back to top ]

GAD (Government Actuaries Department). This is the Government department that provides actuarial advice and guidance to the Government.


Gilts. A Gilt is a UK Government liability in sterling, issued by HM Treasury and listed on the London Stock Exchange.


Guaranteed period. At retirement, you may elect to buy an annuity.  An annuity can have a guaranteed period, usually of 5 years.  This means that even if you die within the guarantee period, these payments will be paid to your nominated beneficiary.

[ Back to top ]

Hedge funds. These are private investment firms who usually invest in high-risk investments. There are usually fewer than 100 individual investors in a hedge fund. This allows the fund to avoid many of the regulations that apply to other pooled investment schemes - for example, OEICs (Open-Ended Investment Companies).


HMRC (Her Majesty’s Revenue & Customs). HMRC is a Government department. It decides how much tax relief is available under SIPPs. It also decides what rules apply to the benefits you can take.


HMT (Her Majesty’s Treasury). HMT is a Government department. It sets the level of annual allowance.

[ Back to top ]

Illiquid assets. These are assets that can be difficult or slow to convert to cash. Property is a good example of an illiquid asset. Unquoted shares can also be illiquid because there may be only a small number of possible buyers.


Income withdrawal. Also known as income drawdown. This means using some of your pension fund to provide an income while leaving the rest of your fund untouched.  The amount you can take will depend on which type of drawdown you use: flexi-access or capped drawdown.


Individual protection. If you have this form of protection the normal limit on your pension fund is replaced by an amount equal to your total pension savings on 5th April 2014 over £1,250,000, up to a maximum of £1,500,000.  


Individual protection 2016. If you have this form of protection the normal limit on your pension fund is replaced by an amount equal to your total pension savings on 5th April 2016, over £1,000,000, up to a maximum of £1,250,000, if greater.


In specie contribution. This is a way of moving existing assets into a SIPP or SSAS without selling those assets. The advantage of an in specie contribution is that it avoids the costs associated with selling and repurchasing the asset.


Investment return. The difference between the money that you originally invested and the total amount that you have received from that investment at the time when you cash it in. Investment returns can either be positive or negative (in other words, a profit or a loss).


Investment trust. An investment trust is a form of pooled investment which has a limited number of shares. Investment trusts may specialise in particular types of investment (for example, UK shares).

[ Back to top ]

Joint commercial property purchase. This can be when SIPP members pool their funds to purchase a commercial property (buildings or land intended to generate a profit, either through an increase in value or rental income). It can also be a purchase between a SSAS or SIPP member(s) and a third party.

[ Back to top ]


[ Back to top ]

LTA (Lifetime Allowance).
The maximum fund a member can accumulate without incurring a tax charge.  Tax charges are incurred when you exceed the level of Lifetime Allowance.

Loans. SSASs can loan a participating employer up to 50% of the net value their assets. A 1st charge security is required.  This is the only connected party a SSAS can loan to.  SIPP schemes cannot loan to any connected party.  There is no limit for loans to unconnected parties for either SIPP or SSAS.

[ Back to top ]


Money Purchase Annual Allowance Rules. These rules apply when benefits are flexibly accessed.  This reduces the Annual Allowance available for savings under money purchase pensions (but not final salary pensions).  The amount of the reduced Annual Allowance is subject to change by HMT and you can find the current amounts on our website.  These rules are triggered when you flexibly access your benefits (see ‘flexibly accessing benefits’). 


Money Purchase Scheme. This is a pension scheme where your money is invested and the size of your fund is determined by how those investments perform.  SSAS and SIPP are both Money Purchase Schemes.

[ Back to top ]


Non Standard Investments. Typically these are complex high risk investments marketed to the sophisticated investor. Examples of these would be Hedge Funds, CFDs (Contracts for Difference) and UCIS (Unregulated Collective Investment Schemes).

[ Back to top ]


Occupational Pension Scheme. This is a scheme set up by an employer to provide pension benefits for their employees. A SSAS is an Occupational Pension Scheme.

OEIC (Open-Ended Investment Company). An OEIC is a form of pooled investment, similar to an investment trust. OEICs are companies that issue shares on the London Stock Exchange. They then use the money raised from shareholders to invest in other companies. If an OEIC does well, it can issue more shares. This is why OEICs are referred to as being open-ended.

Options. These are similar to futures. The difference is that an options contract creates a right to buy or sell, rather than making it compulsory.

[ Back to top ]

Participating Employer. Means the Principal Employer and any other company that participates in an occupational scheme.


PCLS (Pension Commencement Lump Sum). PCLS is the tax free lump sum that can be paid to a member when their benefits are crystallised. Where Protection does not apply, typically this will be 25% of the member’s fund.

Pension input periods. These are part of the technical method used to calculate what contribution amounts can be paid to a pension scheme.

Pension Simplification. See “A Day”.

Primary Protection. Applied to pension benefits at April 2006 which were equal to or over £1,500,000. This replaces the normal limit on your pension fund by a higher personal lifetime allowance which increases in line with the standard lifetime allowance, if applied for. This can be affected if you flexibly access your benefits (see ‘flexibly accessing benefits’).

Principal Employer. This is the company that establishes an occupational scheme.

Protection. Some members may have benefits valued in excess of the Lifetime Allowance or a Pension Commencement Lump Sum of greater than 25% and they have safeguarded them against a tax charge. That safeguarding is referred to as protection. This can be affected if you flexibly access your benefits (see ‘flexibly accessing benefits’).

[ Back to top ]

Quoted shares. These are shares in a limited company where there is a share price published on a recognised stock exchange.

[ Back to top ]


[ Back to top ]

Self Invested Personal Pension. See SIPP.

Shares. If you have a share in a company, it means you receive dividends (part of the profits paid to shareholders) from the company and a portion of any proceeds if the company is sold. You can buy and sell quoted shares on a recognised stock exchange. Unquoted shares are owned by a limited number of people and you are only likely to be able to buy and sell with those people. Shares are more risky in the short-term than some other assets because you only receive whatever is left from a company after it has paid its debts and met other commitments (for example, salaries). If a company does well, its shares can shoot up in value. If a company does badly, its shares can become worthless.


Short term annuity. A short term annuity is an income paid for up to 5 years. You can buy annuities from an insurance company. An annuity can be a fixed amount.  Alternatively, it can decrease increase by either a fixed amount or in line with inflation.

SIPP (Self Invested Personal Pension). A SIPP is a form of personal pension. SIPPs can include a very wide range of investments, accept transfers including in specie contributions, and be used for income withdrawal. Some SIPPs are fully flexible pension arrangements, while other SIPPs are not so flexible. It is important to choose a SIPP that meets your needs.

Simplification. See “A Day”.

SSAS (Small Self Administered Scheme). A SSAS is a form of occupational pension scheme. SSASs can include a very wide range of investments, can accept transfers including in specie contributions, and can be used for income withdrawal. Some SSASs are fully flexible pension arrangements, while other SSASs are not so flexible. It is important to choose a SSAS that meets your needs.

[ Back to top ]


Tapered Annual Allowance. This is the maximum amount of new money eligible for tax relief in a single tax year from 6th April 2016 for individuals who have an adjusted income of greater than £150,000 and also exceed the threshold income for the tax year. For every £2 of income over £150,000 the annual allowance is reduced by £1, subject to leaving a minimum allowance of £10,000. 


Threshold Income. This is the £150,000 less the annual allowance for the tax year.


Traded endowment policies. Endowment policies which have been sold to and traded by regulated brokers.

Transitional arrangements. These are special rules that apply to people who already had large pension funds on 5 April 2006. Transitional arrangements may reduce or remove the extra tax charge for large funds. You have to register with HMRC to benefit from transitional arrangements.

Trust. A trust is a set of assets and it is governed by rules set out in a document called a trust deed. Trustees make sure that the trust is run in line with those rules.

Trustee. A trustee is an individual or a company with responsibilities to make sure that a trust is run in line with its rules.

[ Back to top ]


UK relevant earnings. This is an earnings limit used to set the maximum contribution that you can make and get tax relief for (although your employer may be able to make a larger contribution than this).  UK relevant earnings are broadly the same as your taxed earnings, but they do not include dividends or bank interest.


Uncrystallised Funds Pension Lump Sum (‘UFPLS’). This is a lump sum that is paid from the fund instead of buying an annuity or using drawdown.  Generally, 25% of the lump sum can be taken tax free with the remaining 75% being taxed.  The portion of the lump sum that is taxable will be paid net of income tax.  Taking UFPLS is a Benefit Crystallisation Event (see ‘Benefit Crystallisation Event’).

Unquoted shares. These are shares that do not have a price quoted on a recognised stock exchange. They are not usually suitable investments for SSAS or SIPPs. They are often held by only a few individuals (for example, the founders of a company).

[ Back to top ]


VCT (Venture Capital Trust). A VCT is a form of pooled investment specialising in companies that have recently been set up (‘start-up’ companies).

[ Back to top ]


Winding Up. This is when a pension scheme is terminated, usually by transferring the members’ benefits to another pension arrangement.

[ Back to top ]


[ Back to top ]


[ Back to top ]


[ Back to top ]