The financial world is a maze of jargon investors and savers must cut a path through to find the information they want.
In this confusing mass of acronyms and technical terms, here’s a guide to some of the more common financial phrases you may need to unravel:
Defined benefit pension – A pension which typically relates your earnings and time spent in a job when you stop working to the income paid in retirement. Also called a final salary pension. Index-linked public sector and workplace pensions are defined benefit schemes
Defined contribution pension – A pension where the retirement income paid relates to the value of an investment fund. Returns are based on how much you have paid in and fund growth rather than salary and service. Also called a money purchase scheme, most private pensions are defined contribution schemes
Flexi access drawdown – Flexi access lets a retirement saver decide how they want to take their money from a pension once they reach 55-years-old – as a lump sum, regular income or lump sums as and when they like
Income drawdown – This allows a retirement saver to take pension money under flexi access rules while leaving the rest of the fund intact.
Annuity – An investment typically bought with a pension pot that offers a guaranteed retirement income for life. Annuities can come in various forms that pay different amounts of money – for instance enhanced annuities pay more to someone in ill health.
State Pension – Regular payments from the government to an individual once they have reached state retirement age.
State Retirement Age – The birthday when someone starts receiving the state pension, which rises to 66 years old for everyone by October 2020.
Workplace pension – A pension scheme provided by an employer. Typically, a defined contribution scheme now, but the standard was a defined benefit scheme until recently.
SIPP – A self-invested personal pension controlled by a retirement saver which has a wide range of investment opportunities
QROPS – The expat version of a SIPP. A QROPS and SIPP are similar except a SIPP is subject to UK tax rules and a QROPS is not
Overseas transfer charge – A tax based on 25% of a pension fund value charged to expats moving money to a QROPS that is not exempt from the rules