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Consumer > How a pension works > H to O
H to O
| Term | Definition |
|---|---|
| Income Drawdown | The withdrawal of income directly from a pension. Allows the purchase of an annuity to be deferred. Also known as income withdrawal or unsecured pension. |
| Increment | An increase in regular payments or an additional one-off payment to an existing plan. |
| Independent Financial Adviser (IFA) | A professional financial expert qualified to offer impartial advice on financial products. IFAs are independent of any product provider and can recommend any product available. However, they must provide 'best advice' to clients meaning that only the most suitable products for a particular client can be recommended. |
| Investment Fund | Professionally managed investment options. Different funds invest in different types of asset, including company shares (equities), property and cash deposits. The name of the fund will usually correspond to the assets making up the fund. Different funds have different levels of risk and potential returns. |
| Lifetime Allowance | The lifetime allowance is an overall maximum on the amount of pension savings that any one individual can accumulate without being subject to additional tax charges. The Standard Lifetime Allowance (SLA) is currently £1.65 million (2008/09 tax year). If an individual has registered for Primary or Enhanced Protection it may be possible to protect pension benefits in excess of the SLA from some or all of the additional tax charges. |
| Lifetime Annuity | An annuity that pays an income for the rest of an individual's life. |
| Market Value Reduction | A reduction in the value of with profits investments which may be applied on early retirement or transfers out of with profits funds. This is applied to preserve the equity between all members of the fund, both those leaving and those staying (i.e. ensures everyone receives a fair share of the fund). |
| Money Purchase Pension | A type of pension where a pot of money is built up over time and then used at retirement to buy an annuity. Also known as defined contribution pension. |
| National Average Earnings Index (NAEI) | An index of average earnings issued by the Government. Shows the average increase in earnings each year. |
| Normal Retirement Age | The age at which members of an occupational pension normally retire. Also known as normal pension age. |
| Occupational Pension | A pension organised by an employer for their employees. These can be defined benefit, defined contribution or a mixture of both. They must meet certain criteria, such as requiring trustees to be appointed and the employer having to make payments on behalf of members. Also known as a company pension. |
| Offer Price | The price at which units in a particular investment fund are bought. |
| Open Market Option (OMO) | The option to purchase an annuity with the proceeds of a pension from any insurance company and not just the existing pension provider. |
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