In the next part of our pensions jargon buster, we cover terms from letters F – P. We are publishing these guides to help those new to the world of pensions to have a better understanding of the terminology IFAs use when discussing pensions with their existing, and prospective clients.
If you missed part one, you can read it by clicking the link below.:
Let’s get started with part two of our pensions jargon buster.
Financial Conduct Authority (FCA)
An independent organisation regulating the conduct of over 50,000 businesses.
Find out more about the Financial Conduct Authority
Financial Ombudsman Service (FOS)
This is where you can complain about a bank, an insurer, or a finance company.
Find out more about the Financial Ombudsman Service.
Financial Services Authority (FSA)
This is what the Financial Conduct Authority (FCA) used to be called. In 2013 the FSA split into the FCA and the Prudential Regulation Authority (PRA).
Flexi-access drawdown offers you flexible access to your pension savings.
You can take money out as and when you need it.
Related reading: Pensions & retirement guides from Sterling & Law – Hampshire
Flexible lump sums
Flexible lump sums are amounts of money you can take to cash in your whole pension pot. Alternatively, you can just take some of it, leaving the rest invested.
A casual, slang term the pensions industry has come up with to describe what HMRC calls ‘uncrystallised funds pension lump sums’.
General Data Protection Regulation (GDPR)
GDPR is data protection legislation that replaced the old Data Protection Act from1998.
GDPR came into force on 25 May 2018.
A gilt is a bond issued by the UK government with a rate of interest
Essentially this means it’s a way of loaning money to the government, in return for interest.
HM Revenue & Customs (HMRC)
HMRC collects taxes on behalf of Her Majesty’s government.
You pay tax to HMRC.
In the next edition of this jargon buster, you will find out how you get tax relief on your pension contributions.
Ill health pension benefits
If you’re suffering from ill health, and it is having a serious impact on your life, you may be able to access your pension early. Here are a couple of scenarios.
Had to stop work?
You could be allowed access to your pension savings before you reach 55 if you’ve become physically or mentally unable of continuing your job.
Suffering from serious ill-health?
If you are under 75 years old, with a life expectancy of fewer than 12 months, due to serious ill health, you may be able to get access to your whole pension pot, tax-free.
Income is any money you have coming in.
- Income from pension savings
- Interest from some savings products
- Rental income
- State benefits
When working with a pensions adviser or retirement planning specialist, conversations around your current and potential future income, will help determine:
- How much you can invest in your pension monthly
- The income you would like to have in later life
Is the gradual increase in prices over the years.
The impact of inflation is simple.
Looking to learn more about inflation? Read our article: What is inflation, what causes it, and how is it measured?
Prefer to learn via video?
Watch our video: Inflation Is In The News – What Does It Actually Mean?
As mentioned in part one of this pensions glossary and jargon buster there are three main investment profiles.
You can choose a cautious, balanced or adventurous investment profile. These are reflective of your attitude to risk.
A joint annuity provides an income for you and your husband / wife, civil partner, or dependant.
Should you pass away, they could receive an income for the remainder of their life.
Your lifetime allowance is the amount of money you can build up in your pension pots.
Currently, the standard lifetime allowance is £1,073,100.
Interested to learn more about the Lifetime Allowance for Pensions?
Related reading: What is the Lifetime Allowance for Pensions?
Watch our video: What is the lifetime allowance and how can I plan for it?
You can usually take up to 25% of a pension pot as a tax-free lump sum.
Marginal rate of tax
HMRC split income tax is split into bands. The different rates you pay are:
Visit HMRC website for more information on income tax bands.
National Insurance (NI) payments contribute towards your state pension.
NI contributions are made if you’re aged 16 or over and you earn more than £184 a week for the current tax year.
National Minimum Pension Age
This is the age at which you can take your pension. The National Minimum Pension Age differs dependent on when you were born and has recently (this article was published in 12/2021) been the subject of much media interest.
Do you know how the National Minimum Pension Age effects you?
Watch our video: Pensions: Changes to the National Minimum Pension Age explained
Net pay arrangement
Net pay arrangement is one of the means to receive tax relief on the money you invest in your pension.
Pension contributions are taken from your pay before tax is deducted from your salary / wages.
An alternative to this is ‘relief at source’.
Another expression for a pension scheme.
Pension commencement lump sum (PCLS)
When you take an income from your pension you can often take a tax-free lump sum too.
The percentage of your pension pot you can take is 25%.
A pension fund is where you invest your pension savings.
If you are working with an independent financial adviser, they will recommend a pension fund aligned to your attitude to risk.
If you have a specific pension, a pension plan is what it is usually referred to as.
This can also refer to the plan you have set with your independent financial adviser on how much and how often you will be paying into your pension.
Do you understand your pension plan and the benefits your scheme offers?
Read our article: Pensions Advice: Are You At Risk by Not Understanding Your Pension?
Prefer to learn by watching as opposed to reading?
Watch our video: Pensions Advice: Are You At Risk by Not Understanding Your Pension?
This refers to activity undertaken by an individual, couple, or family that plans and decides:
- How often they will pay into their pension
- How much they will pay in
- Who their beneficiaries will be
- What happens to their pension when they, their wife, husband, civil partner, or co-dependent dies
Often couples miss out on maximising each other’s individual allowances by not taking a combined approach to tax-efficient pension planning.
If you are reading this, and are one half of a couple, you and your partner, wife, husband, or civil partner could be missing out on a whole host of tax-efficient benefits.
Watch our video, Pensions Advice: Pension Planning for Couples in 90 Seconds below:
A pension pot is where you save money into.
Your pension provider then invests this money for you.
Pension Tracing Service
The pension tracing service is a free government facility that can help you find any workplace or personal pension
If you have paid into various pensions throughout your career, you may have lost track of one or a few.
You can find out more here: Pension Tracing Service
Pension Wise is a government service offering advice on what to do with your pension savings when you are over 50.
You can find out more here: Pension Wise
Each year you get a personal allowance of tax-free income – £12,570.
This includes money you earn through:
About Sterling & Law – Hampshire
Sterling & Law – Hampshire, part of the Sterling and Law Group, has one clear goal; to help you plan for and realise the financial future you desire.
Typically, we work with:
- Families & individuals
- Business owners
Sterling & Law Hampshire’s independent financial advisers (IFAs) provide specialist financial planning & wealth management services to a range of people across Hampshire.
With offices in Fareham & Lee-on-the-Solent, we are well placed to cover Southampton, , Portsmouth, Gosport, Chichester, and The Meon Valley.
The full range of services we offer covers:
- Independent Financial Advice
- Financial planning
- Estate Planning & IHT Advice
- Pensions Advice and Management
- Mortgages and Equity Release
- Wealth Management
- Business Protection
Related services to this article
Planning for your retirement?
Looking for pensions advice?
Here are links to two of Sterling & Law’s relevant services: