At SeventySeven Wealth Management we want to ensure you are well-informed on potentially confusing financial jargon.
The value of a pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.
Adjusted Income
A measure of total income used to determine whether the Tapered Annual Allowance applies. It includes all taxable income plus the value of employer pension contributions.
Annual Allowance
The maximum amount you can contribute to all your pensions each tax year and still receive tax relief. For most people this is up to £60,000 dependent on earnings (as of 2025), but it can be lower if tapering or the Money Purchase Annual Allowance applies.
Annual Management Charge (AMC)
A yearly fee charged by a pension or investment provider to cover the cost of managing your fund. It is usually a percentage of the fund’s value.
Annuity
A product you can buy with your pension savings that provides a guaranteed income for life or a fixed period.
Auto-enrolment
A government initiative requiring employers to automatically enrol eligible employees into a workplace pension and make contributions on their behalf.
Auto enrolment is not regulated by the Financial Conduct Authority.
Buy Out Bond (Section 32 Policy)
An individual pension policy used to transfer benefits from an old occupational pension scheme, often when leaving employment. It is governed by Section 32 of the Finance Act 1981.
Carry Forward
A rule that allows unused Annual Allowance from the previous three tax years to be used in the current year, if eligible.
Crystallised Pension
The portion of your pension that has been accessed — for example, when you take tax-free cash or start drawing an income.
Contributions
Payments made into a pension by you, your employer, or both.
UFPLS (Uncrystallised Funds Pension Lump Sum)
A lump sum taken directly from uncrystallised pension funds. Normally, 25% is tax-free and the rest is taxed as income.
Defined Benefit (DB) Pension
A pension scheme that promises a guaranteed income in retirement, based on your salary and years of service (e.g., final salary or career average schemes).
Defined Contribution (DC) Pension
A pension plan where contributions are invested to build up a pot of money used to provide retirement income. The value depends on contributions and investment performance.
Drawdown (Flexi-Access Drawdown)
A way of taking money from your pension pot flexibly. You can take tax-free cash and leave the rest invested, drawing income as needed.
Earmarked Pension
A pension arrangement where part of one person’s pension is allocated to an ex-spouse following divorce but remains within the original member’s plan.
Guaranteed Annuity Rate (GAR)
A feature of some older pension contracts that guarantees a minimum annuity rate, often much higher than those available today.
Guaranteed Minimum Pension (GMP)
A minimum pension level built up by members of certain occupational pension schemes that were contracted out of the State Earnings Related Pension Scheme (SERPS) before 1997.
Lump Sum Allowance
A limit on the total amount of tax-free lump sums (such as PCLS and certain death benefits) you can take across all your pensions, introduced in 2024.
Lump Sum Death Benefit Allowance
A limit on the total tax-free lump sums that can be paid out on death before age 75, currently £1,073,100 (as of 2025).
Marginal Tax Rate
The rate of income tax you pay on your next pound of income — it depends on your income band.
Money Purchase Annual Allowance (MPAA)
A reduced annual allowance (currently £10,000) that applies once you’ve accessed your pension flexibly, limiting future tax-relieved contributions to defined contribution pensions.
Nominated Beneficiary
The person or persons you nominate to receive your pension benefits when you die.
PCLS (Pension Commencement Lump Sum)
The tax-free cash sum (usually up to 25% of your pension pot) that you can take when you access your pension benefits.
Pension Tax Relief
A government incentive that refunds some of the income tax you’ve paid on pension contributions, making it cheaper to save for retirement.
Pension Sharing Order
A legal order made during divorce or dissolution that splits one person’s pension benefits between both parties.
Protected Rights
The part of a pension fund built up from contracting out of the State Second Pension (S2P) or SERPS before 2012. These are now treated the same as other pension rights.
Protected Retirement Age
A right under certain older pension schemes allowing benefits to be accessed before the normal minimum pension age (currently 55, rising to 57 in 2028).
Salary Sacrifice
An arrangement where an employee gives up part of their salary in exchange for an equivalent employer pension contribution — saving National Insurance for both parties.
SIPP (Self-Invested Personal Pension)
A type of personal pension that offers a wide choice of investments, including shares, funds, and commercial property, for individuals who want more control.
State Pension Age
The age at which you can claim your State Pension, which depends on your date of birth and is set by government legislation.
Tapered Annual Allowance
A reduction in the Annual Allowance for high earners — it tapers down once Adjusted Income exceeds £260,000.
Tax-Free Lump Sum
Another term for PCLS — the portion of your pension you can take without paying tax, usually up to 25%.
UFPLS (Uncrystallised Funds Pension Lump Sum)
A flexible way of taking money directly from uncrystallised pension funds, with 25% tax-free and the remainder taxed as income.
Uncrystallised Pension
Pension funds that have not yet been accessed for any benefits or tax-free cash.