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Occupational pension scheme:  A scheme set up by an employer to provide retirement and/or death benefits to employees.

Pension: An annual income, usually associated with the period after retirement, but not necessarily so. A pension fund is a general term used to describe an investment fund built up during working life and used at retirement to purchase an annuity to provide a continuing income.

Pensionable salary: Earnings used to calculate retirement benefits in a defined benefit scheme.

Pensionable service: Length of qualifying time in a defined benefit scheme used to calculate retirement benefits.

Policy: Formal document produced by an insurance company which includes all contract details, i.e., sum assured or insured, premium and payment frequency, term of contract, etc.

Protected Rights (PR): The fund built up in a defined contribution scheme from rebates paid as a result of being contracted out of the state second pension.

Qualifying Registered Overseas Pension Scheme (QROPS):  A scheme that meets the requirements set down by HMRC and can therefore receive pension transfers without any tax levied on the transfer.

Retirement: The point in life where one has given up full time work.

Self-Invested Pension Plan (SIPP): A type of personal pension plan that gives an individual more investment control.

State pension scheme: In the UK, a flat rate sum paid to all persons with qualifying National Insurance Contributions.

State second pension (S2P): From 6 April 2002, the State Second Pension replaced the State Earning Related Pension Scheme (SERPS). This pension provides a more generous additional state pension for low to middle earners.  The UK government wants you out there working and reward you for doing so by topping up your basic state pension with the S2P. The more you earn the bigger the top up (up to a limit) and so the more you will get at retirement.  S2P is funded out of your and your employers national insurance contributions.

When you contract out of S2P a fund is set up with a provider in the UK and at the end of the tax year the HMRC will calculate how much national insurance you and your employer have paid and work out how much of that should go into your S2P fund.   The process is long and takes a while before the funds show up in your account - typically 6 to 8 months after the HMRC calculate it.

While others try and confuse you with complex and fancy language we like to keep it real and simple.

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