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Pensions Jargon Buster

Annuity – The built up funds of a pension scheme are used to purchase an annuity, which will guarantee an income for retirement.

Defined benefit plan – A workplace pension scheme in which the payments an employee will receive when they retire are determined according to certain calculations, often make by an underwriter or actuary. These calculations take into account factors such as how long the employee has been with the company, their age and their earnings history.

Lifetime Allowance – HMRC sets a limit on the combined total of all the pension schemes a person can hold before tax obligations apply. This limit is known as a Lifetime Allowance.

Superannuation – Another word for a workplace pension, set up by a company to help secure the financial future of their employees following retirement.

Workplace pension – A pension scheme in which both the employer and employee will make regular contributions to a fund, with the aim of ensuring an employee will be financially secure when they retire.

Trustee – A representative of a pension schemes’ members.