Retirement Jargon Buster
Don’t know your occupational pensions from your annuities? We explain it all in our retirement jargon buster.
Annual allowance – You don’t have to pay income tax on any money that you pay into your pension. But there is a limit (currently £40,000) on how much tax-free money you can pay into your pension in a year, which is set by the Government and is called the ‘annual allowance’. You can also go back 3 years and invest unused allowances for that period.
Annuity – An amount paid every year to someone from their insurance or pension policy.
Assets – Things you own, like buildings, cars, stock and money in the bank.
Automatic enrolment – The Government has introduced a new law designed to help people save more for their retirement. All employers must enroll their employees into a workplace pension scheme by 2018.
Occupational pension – This is another word for a workplace pension scheme. It is organised by an employer to provide pension benefits for their employees, sometimes called a company scheme.
Personal pension – A pension you set up directly with a pension provider. You can either pay regular monthly amounts or a lump sum to the pension provider who will invest it on your behalf. It can also mean a retirement annuity set up before July 1988.
Pension – A pension is a way of saving for your retirement. If you put money into your pension regularly, you’ll get a regular income when you retire. You don’t have to pay tax on your pension contributions up to the annual allowance.
Workplace pension – A way of saving for your retirement that’s arranged by your employer. A change to law means that all employers must enroll their employees into a workplace scheme by 2018. Sometimes called an occupational pension.