PENSION GLOSSARY

A – Z Glossary

The Pensions Regulator offers a comprehensive glossary. You can access this invaluable resource here.

For ease of reference, these are common pension terms that we refer to in our F.R.E.S.H. newsletters, blog posts on this site, and that our investment brokers may use in conversation.

…and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. An annuity which provides for payments for the remainder of a person’s lifetime is a life annuity.

Pension freedoms introduced in April 2015 has removed the automatic link between pension savings and buying an annuity at retirement. This new flexibility has opened up exciting opportunities for many millions of people.

Many Avantis Wealth Clients begin their investment journey through a complimentary pension review, and is a key benefit of membership to the Astute Investor Club. For details of the club and how to join click here.

…offered by occupational pensions and is therefore generally only available to those who own, or transfer to, a Personal Pension.

Pension freedoms introduced in April 2015 has transformed the pensions landscape and has opened up exciting opportunities for many millions of people.

Many Avantis Wealth Clients begin their investment journey through a complimentary pension review, and is a key benefit of membership to the Astute Investor Club. For details of the club and how to join click here.

…contribution fund tax free from the age of 55. They do not have to start taking income while the rest of the fund remains invested. The State Pension does not allow pension release.

Between April 2014 and April 2015, the entirety of a fund can be removed if it is not higher than £30,000. From April 6, 2015, there will be no limits on how much money can be removed, but all withdrawals outside of the 25% tax-free cash will be treated as taxable income.

With the exception of pension recycling (adding released money back into a pension to enjoy tax relief for a second time), there are no restrictions on how the money can be used by the individual. A popular use is to tackle debts before entering retirement.

Pension release is only available from a defined contribution pension fund that allows income drawdown, which is the mechanism that allows tax-free cash to be removed while keeping the rest invested. Members of a defined benefit, or final salary, scheme must transfer to a defined contribution scheme to have the option of pension release, but advice should be sought before doing so as it can mean relinquishing a number of benefits. The government has announced that only funded defined benefit schemes will be able to transfer out after April 2015, which will exclude most public sector pensions.

Pension freedoms introduced in April 2015 has transformed the pensions landscape and has opened up exciting opportunities for many millions of people.

Many Avantis Wealth Clients begin their investment journey through a complimentary pension review, and is a key benefit of membership to the Astute Investor Club. For details of the club and how to join click here.

…Pension review is a component of retirement planning, where a pension is examined to determine how well it is performing. This may include what the annual fees amount to, if the pension is growing at a reasonable level, how it is invested, if it could perform better with different investments, and if the fund will be able to provide the desired retirement. Pension reviews may be conducted by the company holding the pension, or by independent companies.

A 55-year-old person may have a pension review to determine whether they could access their 25% tax-free cash. This person’s review may show that they have paid high fees for decades and their fund has not grown at the levels hoped for, so removing a chunk of cash is not advisable, or they could find out that they would be able to withdraw enough tax-free cash to clear some outstanding debt and still have a suitable income either from an annuity or income drawdown. Pension reviews should only be conducted when the pension fund owner contacts a company to do one, as the Financial Conduct Authority (FCA) warns against cold-calling scams, where a company will contact a person out of the blue and offer to review their pension.

Many Avantis Wealth Clients begin their investment journey through a complimentary pension review, and is a key benefit of membership to the Astute Investor Club. For details of the club and how to join click here.