Sipps Glossary

Sipps Glossary

Accrual Rate

The amount by which your pension increases annually

Annuity

A contract that is taken out with an insurance company stating that they will pay you a regular income for the remainder of your life in exchange for all or part of your pension.

Additional Voluntary Contributions  AVCs

This is where you can make extra contributions to your occupational pension scheme in order to increase the size of your fund.

Basic State Pension

This is the pension that you receive from the Government at the official retirement age. This amount is also linked to the National Insurance contributions that you have made over the course of your working life.

Contracting-Out

Where you leave the State Second Pension and set up your own personal pension scheme with a life assurance company or fund management company. Or join a company that has an occupational pension scheme. The pension that is formed by contracting-out is sometimes called a 'rebate-only personal pension'. The Government will pay the minimum contribution into your opt-out personal pension for you (a rebate on your National Insurance Contributions.

Defined Contribution

Another type of occupational pension scheme, also called a Money Purchase Plan. You and/or your employer make contributions to a scheme, the scheme then invests the money. The value of your pension is not guaranteed as it is directly linked to the performance of your investments.

FSA

The FSA is the Financial Services Authority. The FSA has been formed by the Government as an Independent body who regulates the financial services industry and protects the rights of those investing money in the UK.

Group Personal Pension Plan

This is where a number of employees from one company each have a Personal Pension Plan that is held with the same pension provider. Although there may be other benefits attached each employee has their own pension plan.

Income Drawdown

Also known as a pension fund withdrawal. This enables you to take a taxable income from your own pension; it also allows you to delay purchasing an annuity until the maximum upper age limit of 75.

Minimum Income Guarantee - MIG

A guaranteed minimum benefit that is means tested. The MIG is meant for those who have little or no retirement income apart from the State Pension.

National Association of Pension Funds

The National Association of Pension Funds campaign the various Government Departments and Regulators such as the FSA in order to achieve greater clarity in the Pension market. They main aim is to protect the rights of those people who have occupational pension schemes.

Occupational Pension Scheme

An Employer organized pension plan that is set up to provide retirement benefits for the employees. These types of schemes very often offer other benefits such as life insurance and sickness insurance.

Occupational Pensions Advisory Service

A voluntary organization that provides independent help and advice for people who have any issues to do with their Personal or Occupational Pension Scheme.

Occupational Pensions Regulatory Authority

Established as a consequence of the 1995 Pensions Act, OPRA is the official UK regulator of Employer offered pension schemes.

Pension Fund

This is the fund that you pay into that in turn invests its funds into a wide range of products. You can normally either specify what type of investment funds you want to be involved in or choose to have the fund completely managed by the pension company.

Personal Pension Plan

A personal pension scheme that is usually managed by a financial services company. Although the plans are called personal pension plans your employer can also contribute to the plan.

Self-Invested Personal Pension

Set for wholesale changes in April 2006; Sipps are the most talked about pension product at the moment. Essentially Sipps are designed to let individuals take control of their own pension funds and of course the investments it makes.

Stakeholder Pension

Introduced in April 2001 Stakeholder pensions have not been as successful as first hoped for. The pensions were designed to encourage low-income earners to start saving for their retirement. You can pay in from as little as £20 per month and the charges are to kept to a maximum of 1%

State Pension Age

The subject of much debate at the moment this is the date at which you are entitled to draw your state pension. As people live longer now than ever before there is talk of the retirement age increasing to 67 for men but we are not sure how this will effect the age from which you can receive your state pension.

Unit Linked

You can pay your pension fund into a selection of Unit Linked funds. The value of the funds will either increase or decrease according to the performance of the investments held within the Unit Link fund.

With-Profits Fund

Not so popular now with profit funds were designed to smooth out the good and bad years. This type of fund can often incur heavy penalties should you decide to retire or take your pension early.