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Jargon Buster


Refers to the introduction of simplified pension rules on 6 April 2006, such as easier-to-understand annual pension contribution limits.



An income for life provided by an insurance company in exchange for a lump sum.



Additional Voluntary Contributions: extra contributions made by members of company pension schemes.



A facility to take a regular income from a pension fund without buying an annuity.


Open Market Option

With a money purchase pension (such as a stakeholder or SIPP) the ability to shop around at retirement for the best annuity rates.


Pension credits

Additional means-tested state benefits for pensioners on low incomes.


Pension sharing

Also known as pension splitting - an arrangement where pension benefits are divided between spouses on divorce.


Phased retirement

Gradually turning parts of your pension policy into annuities, leaving the remainder invested until required.


Tax free cash

The lump sum that can be taken from a pension at retirement in lieu of regular income. From April 6, 2006, the limit for all types of pensions will be 25 per cent of the individual’s fund.


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