CONTACT : Tel: 02476 472 582
A short guide to words and terms commonly used in pensions.

Active member 

An employee who is currently paying into and building up benefits in their employer's pension scheme. Includes pre-1 April 1988 joiners who are no longer paying contributions but are still building up benefits.


Professional advisers who calculate financial risks, the statistical likelihood of these risks occurring and the impact they may have. The actuary carries out regular valuations of the Scheme to see how it’s performing and whether there is enough money being paid in (assets) to cover the cost of paying pensions out (liabilities).

Additional Voluntary Contributions (AVCs)

AVCs are additional payments you can make into an arrangement to increase your overall retirement savings. You choose where to invest your money from a range of funds and the money you pay in gets tax relief in the same way as your normal Scheme contributions (subject to limits). 

Annual Allowance (AA) 

This is the maximum amount you can save into all of your pension arrangements combined each tax year before tax is charged on any excess. The Annual Allowance is currently £60,000. 

However, a lower ‘Tapered Annual Allowance’ applies to high-earning pension savers and may affect those with a taxable income of more than £200,000. 

A lower allowance of £10,000 may also apply if you’ve taken money out of your pension pot. This is known as the ‘Money Purchase Annual Allowance’.

You can find more information on the Annual Allowance at 


A series of payments made at regular intervals for an agreed period (often for the life of the person purchasing the annuity). Pension scheme members often choose to purchase an annuity by means of an insurance policy once they retire, although they’re no longer obliged to.


Someone who will receive benefits from the Scheme following your death. Your beneficiaries are likely to include a partner or children (if any). However, you can name any people or organisations to receive a lump sum payment if you die before claiming your pension (or within five years of taking it) by completing a Nomination form


Any payments made on behalf of your pension, including tax-free lump sums, pension payments and death benefits.

Benefit statement

A statement or estimate showing a member’s expected benefits from their pension scheme.

Civil partner

A person who has entered into a civil partnership with his or her same-sex partner.


The money you pay into your pension scheme or into your AVCs.

Deferred member

A person who is no longer an active member, but who still has benefits in it that they haven’t yet taken payment of.

Defined Benefit (DB) schemes

In DB schemes, the amount of income a member receives when they retire depends on the rules of the scheme and will be percentage of their salary multiplied by the number of years of service that counts towards their pension. The most common DB schemes are Final Salary Schemes. The Scheme is defined benefit arrangement.

Defined Contribution (DC) schemes

In DC schemes, the amount of contributions paid by the member and employer is set, but the amount of income received on retirement is not and depends on investment market performance. Also known as ‘money purchase’ schemes. 


Someone who relies to some extent on your income. Your partner and children are usually considered dependants, but you may have others.

Early retirement

Taking the benefits from your pension scheme before you reach your scheme's normal retirement age.


The Electricity Supply Pension Scheme.

Ill-health retirement

When a pension scheme member retires for medical reasons before reaching the scheme's normal retirement date.

Lifetime Allowance (LTA)

The Lifetime Allowance (LTA) is the maximum amount you can save into all your pensions throughout your working life before you have to pay tax. The LTA for the tax year 6 April 2023 to 5 April 2024 is £1,073,100.

You would have to pay tax on any pension savings you have that are over the LTA limit. The amount of tax you owe will depend on your income tax rate, rather than the LTA charge that was in place before 5 April 2023.

You should be aware that from 6 April 2024, there is a limit of £268,275 on the amount you can take as a lump sum when you take your pension. This limit won’t affect you if you have Lifetime Allowance protections.

You can find more information on the Lifetime Allowance at 

Lump sum

A cash payment available to pension scheme members, usually at retirement. It is currently tax-free.


A person who, having joined a pension scheme, has built up benefits under that scheme.

Money purchase pension

Another term for defined contribution schemes.

National Insurance contributions

Money taken from your pay by the government, which is used to fund the State Pension and other State benefits.

Normal pension age (NPA)

The earliest age at which a member can usually receive full pension benefits. 


A savings plan that is designed to be held until retirement age and looked after by trustees.

Pension benefits

A general term for monies paid from a pension scheme.

Pension input period (PIP)

A period of time, aligned to the tax year, over which a member's benefits built up in (or contributions to) a pension are measured against the Annual Allowance.

Pension scheme administrator

The person or company that runs a pension scheme and carries out certain legal requirements, for example paying certain tax charges to HMRC.

Pensionable earnings

The part of your earnings which qualify for the calculation of pension benefits and define the amount of contributions you pay.

Personal pension

A personal pension is a registered pension scheme that is independent of your employer.


The period that occurs after an individual has stopped working in paid employment and takes their pension benefits. May it be long and happy!

State Pension

The pension paid to UK citizens by the Government when they reach State Pension age.

State Pension age (SPA)

The age you start to receive your State Pension benefits. You can work out your State Pension age using the calculator.

Summary Funding Statement

A report that tells you the financial position of your pension scheme at the time of its actuarial valuation or annual funding update. It also provides the main reasons for any changes in funding position and, if the pension scheme is in deficit, it shows the agreed recovery plan.


An individual or group responsible for governing a pension scheme.


An assessment of a scheme’s performance over a given timeframe (every three years for defined benefit schemes) to compare funds being paid in against funds being paid out.