The additional rate tax is the highest rate of Income Tax in the UK.

The Additional State Pension is extra money you could get on top of your basic State Pension, based on your earnings. It's also called State Earnings Related Pension (SERPS). It was first replaced by the State Second Pension (S2P) and now has been replaced by the new State Pension.

Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs, like pension contributions made by you and your employer.

An adviser, also called a financial adviser, is a regulated specialist who can recommend financial products and provide advice on what to do with your money.

Your annual allowance is the total amount of money you can save into your pension each tax year with the benefit of tax relief. It includes pension savings that you make plus any made by someone else on behalf of you - for example, your employer.

Your pension provider will usually send you an annual statement each year, often called an annual pension statement. It shows you how much has been paid in (including tax relief) and how much your pension is currently worth, including any investment growth.

An annuity gives you a regular income, either for the rest of your life or a fixed period – depending on the type you choose. You can buy an annuity with the money you’ve saved into your pension.

An attachment order gives your ex-spouse or ex-civil partner a pension from your pension pot after you get divorced or end your civil partnership. How much they get is included in the details of a court order. This is called earmarking if you divorce in Scotland.

Automatic enrolment, or auto-enrolment, means your employer must set up a workplace pension for you if are working in the UK, over 22 (and under State Pension age) and earn over £10,000 a year. You can tell your employer if you want to leave the pension. It does not apply if you’re self-employed.

The basic State Pension was the first part of the old State Pension. It was replaced by the new State Pension in April 2016. You might still get the basic State Pension if you’re a woman born before 6 April 1953 or a man born before 6 April 1951.

A beneficiary is anyone who will inherit your pension after you die. You can usually nominate who they are by completing an ‘expression of wish form’.

See ‘investment risk’.

Capped drawdown is a way of taking an income from your pension pot. There’s an income limit, or cap, on the amount you can take out each year. It’s no longer available, but if you’re already in capped drawdown, you can continue to use it.

A career average scheme is a type of defined benefit pension scheme where your pension income is calculated using your average salary from an employer. Your pension will be revalued to take inflation into account.

Carry forward allows you to make use of any annual allowance that you might not have used during the three previous tax years, provided that you were a member of a registered pension scheme during the relevant time period.

Charges are paid to your pension provider to cover the costs of investing your money. You can check what charges you might need to pay by contacting your pension scheme or checking your annual statement.

See 'transfer’.

Contracting out gave you or your employer the option not to build up entitlement for the Additional State Pension. Instead, you built up extra entitlement within your private pension.  This means you might only qualify for the Basic State Pension, or a lower new State Pension. Contracting out is no longer available.

Contracted out pension equivalent (COPE) represents an amount that you could have received as part of your State Pension if you hadn't been contracted out.

Contributions is the money you and your employer put into your pension, together with tax relief up to certain limits.

Contribution matching is when employers pay extra into your workplace pension when you increase your contributions.

Crystallisation of your pension is the process of obtaining access to your pension savings.

Death benefits are payments from your pension that are paid after you die. This might be a regular income and/or a lump sum to your beneficiaries or dependants.

A deferred State Pension is when you do not claim your State Pension when you reach State Pension age – or you ask for your payments to be paused. Your weekly payments are usually higher when you later claim or resume it.

Defined benefit pensions are workplace pensions that pay you a retirement income based on your salary and how long you worked for that employer.

A defined contribution pension is a ‘pot’ of money that you (and often your employer) pay into. It’s an investment, so your income depends on how much is paid in, how well the investments perform, the charges you’ll pay and how you choose to take your pension at retirement.

A dependant is a person who relies financially on your pension savings – typically a partner or child.

Drawdown, also called income drawdown and Flexi-Access drawdown, flexible retirement income or pension drawdown, is when you take money from your pension pot as and when you need it. The rest is left invested in your pension scheme or plan.

See ‘attachment order’.

An emergency tax code is a tax rate that’s higher than usual. It can be applied temporarily if HMRC doesn’t have details of your current income.

This might happen when you start taking your pension. You’ll need to claim back any overpaid tax by contacting HMRC.

An enhanced annuity takes your health and lifestyle into account when working out how much money you will get from your annuity. For example, if you smoke or have a chronic illness like diabetes.

An expression of wish form lets you nominate who you’d like to get your pension when you die.

Each pension provider will usually ask you to complete one when you sign up. Remember to keep this updated, especially if your circumstances change.

See ‘defined benefit’.

The Financial Services Compensation Scheme (FSCS) is how the government protects your savings if your bank, building society or credit union goes out of business. If your pension provider or adviser goes out of business, you may be protected for the full value of your pot. There are complicated rules about what is and isn’t protected. If you’re worried about protection, you can learn more on the FSCS Pension Protection CheckerOpens in a new window

A fixed-term annuity is a product you can buy with your pension pot that gives you a guaranteed income for a set number of years.

See ‘drawdown’.

A pension fund is a financial product that takes the money you put into your retirement savings, including employer contributions and tax relief, and invests it – with the aim of making it grow.

The higher rate tax is the second highest rate of Income Tax in the UK.

A hybrid scheme, or cash balance plan, is a type of pension scheme with both defined benefit and defined contribution features. In hybrid schemes, the risk can be shared between the employer and employees.

See ‘drawdown’.

You’ll usually need to pay Income Tax on your earnings above your tax-free Personal Allowance. Income Tax rates are the same in England, Wales and Northern Ireland, but some are different in Scotland.

Individual protection means your lump sum allowances are higher than the standard amounts. This is equal to what your pension was worth on a certain date, up to a maximum limit.

Individual Savings Accounts (ISAs) let you save or invest money up to a yearly limit. Any interest or investment growth can be received tax-free. Cash ISAs are protected by the Financial Services Compensation Scheme, but stocks and shares ISAs are not.

Inflation is when prices for goods and services go up. Higher inflation means the amount of goods and services you can buy with the same amount of money goes down.

Most pension schemes use a range of investments to try and grow their members’ money. This typically includes company shares, property and bonds.

An investment-linked annuity is when you get regular payments that rise and fall depending on the investment’s performance. Check if your provider   guarantees a minimum monthly income if performance is weak.

Investment risk means you might get back less than you pay in, or potentially lose everything. There are usually different levels of risk you can choose from.

A letter of authority (LOA) gives your pension provider, or financial adviser, permission to contact your bank, building society, credit union or another pension provider. You might have to sign an LOA if you want to transfer a pension.

A Lifetime ISA (LISA) lets you save up to a certain limit each tax year, with the government adding a 25% bonus. The money must be used for your retirement or to buy your first home. You can save into a cash LISA or invest into a stocks and shares LISA. Any interest or investment growth is tax-free.

Lifetime allowance protection are measures introduced to ringfence your LTA when this was reduced or changed by the government.

Up to 25% of your pension can usually be taken as one or more tax-free payments, provided you don’t take more than the lump sum allowance (LSA). If you do, you’ll pay Income Tax on the money above the limit.

Lump sum death benefit allowance is the maximum amount that can be inherited tax-free if you die before 75. Tax-free cash taken during your lifetime reduces this amount.

Your marginal tax rate is the Income Tax rate band you’d fall into if you earned £1 more than you do now. This might be the same rate as you pay now, or higher. Money taken from your pension above your tax-free allowance is usually taxed at your marginal tax rate.

A minimum contribution is the lowest amount you must pay into some pensions to keep them active, usually each month.  A pension can become inactive or frozen when you and your employer stop paying into it.

If you pay into a workplace pension, you usually have to contribute at least 5% of your wages and your employer must pay in at least 3%.

The Money Purchase Annual Allowance (MPAA) applies if you’ve flexibly taken taxable money out of a defined contribution pension. It means you have a lower limit for tax relief if you want to continue paying into a pension.

See ‘defined contribution’.

National Insurance (NI) is a type of tax you pay to qualify for State Pension and some other types of benefits. You usually need 35 qualifying years of NI contributions to get the full amount of State Pension and 10 qualifying years to get anything.

You usually make weekly or monthly National Insurance contributions (NICs) from age 16 until you reach State Pension age – either as tax on your earnings (including self-employed profits) or by receiving National Insurance credits (like if you’re ill or unemployed).  

You need to contribute for a minimum number of years to qualify for certain benefits, including the full amount of State Pension.

You might be able to get free National Insurance credits if you’re out of work for a number of reasons, including if you have a baby, illness, disability or caring responsibilities. You often get National Insurance credits automatically if you claim certain benefits, including Universal Credit and Child Benefit. But you’ll need to claim them in other circumstances.

Your National Insurance record shows how many weekly or monthly National Insurance contributions you’ve made. If you have gaps in your record, you can choose to pay for voluntary contributions to complete a year. This can mean you qualify for a higher amount of State Pension.

The National Employment Savings Trust or NEST is a workplace pension scheme set up by the government.

A net pay arrangement means your pension contributions are taken from your pay before your wages are taxed.

You can claim the new State Pension when you reach your State Pension age, or if you reached it since 6 April 2016.

It pays a weekly amount based on the number of qualifying years you’ve made National Insurance contributions.

If you reached State Pension age before 6 April 2016, you can claim the basic State Pension and Additional State Pension.

The normal minimum pension age (NMPA) is the earliest you can usually access your pension. It’s currently age 55, rising to age 57 from 6 April 2028. You can usually only take your pension earlier if you're retiring early due to ill-health or your pension scheme rules lists a lower protected pension age.

A normal pension age (NPA) is the age your provider expects you to start taking your pension. For example, your estimated retirement income usually assumes you’ll start taking your pension at your NPA. It also normally affects how your pension money is invested and managed.  

You can find your NPA in the rules of your scheme. You can usually tell your provider if you’d like to retire or take your pension on a different date.

See ‘basic State Pension’.

A pension is a long-term investment to help you save for retirement.

Pension Credit is extra money you can claim if you’re over State Pension age and on a low income. You might qualify even if you own your home and have savings.

See ‘drawdown’.

A personal pension, also called a private pension, is a pension you set up yourself. This is different to a workplace pension which is set up by an employer.

Your pension pot is the money you have in a defined contribution pension scheme. The amount might be called the ‘accrued value’.

Pension Wise is a government-backed service that provides free and impartial guidance to help you understand your options for taking a defined contribution pension.

Qualifying earnings is the band of your pre-tax earnings used to find out how much you need to contribute to your pension.  Every year the amounts are reviewed. Your salary, bonuses, overtime, sick pay and statutory pay all make up your qualifying earnings.

Relief at source is used to claim tax relief if you pay into a pension you set up, or if your employer chooses to make your pension contributions after tax has been taken off your wages.

Your pension provider then claims tax relief from the government at a fixed rate of 20%. If you pay Income Tax at a higher rate, you’ll need to claim the extra tax relief yourself by contacting HMRC or completing a Self Assessment tax return.

Salary sacrifice is where you give up a portion of your salary in return for a benefit, like a company car. You can also use it to pay into your pension.

Pension contributions made using salary are treated as being made by your employer, so you don’t get tax relief. But your take home pay is often higher as you pay less Income Tax and National Insurance.

Your employer will usually pay less National Insurance contributions too, so might add some or all of this saving to your pension contribution.

A self-invested personal pension (SIPP), is a type of defined contribution  pension you set up yourself. The income you’ll get depends on how much is paid in, how well the investments perform, the charges you’ll pay and how you choose to take your pension at retirement. You can usually choose your own investments or let the provider manage your pension for you.

Small pot rules let you take a pension worth up to £10,000 in one go, without triggering the MPAA. This means it does not change how much tax relief you might qualify for. You can do this up to three times for personal pensions you set up yourself. There’s no maximum for workplace pensions.

Stakeholder pensions are a type of personal pension. Some employers offer them, but you can also start one yourself. They have limits on annual management charges and how you can make contributions.

You can claim the State Pension when you reach your State Pension age. It’s a weekly amount paid every four weeks. How much you get depends on the number of qualifying years you’ve made National Insurance contributions.

The State Pension age is the earliest age you can claim your State Pension. You can check your State Pension ageOpens in a new window on GOV.UK.

You do not have to start taking your State Pension at this age, you can also defer it.

Tax relief means you’ll either pay less tax upfront or you’re able to reclaim some you’ve already paid. You usually get tax relief on money you save into your pension. This means money that would normally have gone to the government as tax is paid into your pension instead.

A tax-free wrapper or ‘tax wrapper’ is a type of tax break applied to certain savings or investments, including pension pots and ISAs.

A pension transfer is when you move money from one pension scheme to another.

The State Pension increases in April each year. The triple lock is current government policy and means the rise will either match the rate of inflation, average earnings or 2.5% – whichever is highest.

Winding up a workplace pension means closing the scheme. It normally happens when your employer decides they no longer want to pay into the workplace pension scheme.

The scheme’s rules decide how much money you’ll get if this happens. If you haven’t taken any money yet, you’ll be given a transfer value to put it into a new pension.

A workplace pension is a pension set up by your employer. Both you and your employer will usually pay a portion of your wages into it.