Explaining pensions key terms

30 January 2024

We understand that pensions can be complex and full of jargon. We’re here to simplify things and help you make the most of your retirement savings.

Over the next few newsletters, we’ll be bringing you a series of articles to break down some key pension-related terms, so you can navigate your pension journey with confidence.

In this edition we’ll be focusing on retirement options.

Defined Contribution (DC) pension – A pension based on how much you and your employer pay in, plus any investment returns on those contributions.

Annuity – A guaranteed regular income in retirement, normally bought from an insurer.

Drawdown – You keep your pension savings invested and withdraw money when needed during retirement, giving you a flexible income.

Cash lump sum – A one-time payment from your pension savings. Some of it will be tax free, but you’ll pay tax on the rest.

Money Purchase Annual Allowance – How much you can pay into your DC pension if you’ve started taking your benefits. This only applies if you take DC benefits as drawdown or a taxed cash lump sum.

Target Retirement Age – This is the age at which you plan to retire. You can change this at any time on your online account.

For answers to common questions and more detailed information, take a look at our FAQs page.

Don’t hesitate to contact us with any topics you’d like to know more about! We’re here to help and provide information tailored to you.