Struggling with Pensions Jargon? We don't blame you...

But a little self-learning could make all the difference, allowing you to understand your pension, bust through the jargon and ensure your retirement is on the right tracks...

Understanding and explaining your pension – A jargon buster glossary

Understanding and having the ability to explain your pension is one of the greatest tools you can have for keeping your long-term finances on track, allowing you to better identify scams, ensure the likelihood that you take suitable advice, and help you uncover a mis-sold pension if you have one.

One of the biggest problems that faces the UK pension industry and it’s users is that not only is it complex, but it’s also stuffed with jargon that makes it difficult to understand.

This complexity makes it both easy for negligent financial advice to occur as client's don't understand what they're being sol, and then harder for it to be undone with compensation as pension savers struggle to understand their own pensions, how they were sold and how they work.

In an increasingly complex financial services industry, a little self-education can go a long way, so here’s a little jargon buster, helping you understand your pension better.

About the author

Get Claims Advice is an experienced CMC based in Manchester
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**Disclaimer**

This information is intended for use as a introductory insight into the pensions industry, and is provided by a CMC with knowledge and experience within that industry – not a financial adviser and is not to be constituted as financial advice. Always seek independent financial advice.
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Types of UK Pension

Pension (Basic)

A pension is a savings account, made available on retirement or at a certain age and usually paid in installments.

Frozen Pension

Also know as a "Preserved Pension", a frozen pension is one that is no longer being paid into, or is now longer increasing in value.

There are some situations where this has been forced, or because of mis-management or through choice. Eg. An occupational pension where the employee has left the business.

State Pension

The State Pension is available to be claimed once an individual reaches State Pension Age.

The amount received depends on various factors, such as the time you reach state pension age, or how many years you have paid contributions.

Occupational Pension

Or "Workplace pension". Occupational Pensions are set up by your employer and generally take a percentage from your wages in order to save for a pension. There are many different types of occupational pension, and it is now law for all employers to provide them.

Defined Contribution

Defined contribution or "money purchase" pensions can be through work or created by you. How much you receive in retirement depends on how much money you paid into the scheme, and how much money it has made in interest or returns.

Defined Benefit

Defined benefit pensions are generally either "Final Salary" or "Career Average" pensions. Generally a form of occupational pension, what you receive in retirement depends on how much your EARNED during your career, as opposed to defined contribution where it depends on how much you contributed.

More on Defined Benefit Pensions

Defined Benefits pensions tend to keep pace with inflation and are paid in proportion to your career salary.

Final Salary Pension

Now quite rare, Final Salary Pensions are a type of defined benefit pension. How much you receive in retirement is determined by how much you were earning in your last few years of work, granting those with high-achieving careers a generally healthy pension-pot in retirement.

Career Average

A career average pension is a type of defined benefit, often occupational pension. How much you receive in retirement depends on the average salary your received throughout your career. Now more common than Final Salary pensions.

AVCs

Added Voluntary Contributions - AVCs are a way to top up your final salary or career average salary pension. Rather than settling for the normal amount, pension holders are allowed to make extra contributions to the pot for a greater amount in retirement.

NOTES:
Defined Benefit pensions are generally regarded as some of the best. 
They are usually held by:

  • Teachers
  • Doctors and NHS staff
  • Government employees
  • Other high-earning professionals backed by the government

More on Defined Contribution Pensions

These pensions are a little more common and feature a wider variety. They are also some of the more commonly mis-sold pensions!

SIPP

A SIPP is a Self-Invested Personal Pension. In short, it's a tax efficient vehicle for investments. These investments can be either Regulated or Unregulated by the FCA. Transferring to a SIPP effectively makes you your own pension fund manager. Get Claims Advice specialize in compensation for mis-sold SIPPs.

SSAS

A Small Self-Administrated Scheme. Similar to a SIPP, a SSAS puts you in control of your pension investments. Often SSAS's are taken up by the self employed with both Regulated and Unregulated Investments Involved.

Master Trust Pension

A little different again, Master Trust pensions include schemes like NEST, NOW and the People's Pension, usually set up by a provider for occupational pensions.

GPP

Group Personal Pensions are usually a type of occupational pension through your employer. Relatively standard, control of the investments involved goes to the employer and pension provider.

Pensions businesses, organisations and official bodies

Yes, more acronyms than you can shake a stick at... bare with us...

FCA

The Financial Conduct Authority is the financial services regulator in the UK. It determines the permissions and mode of operation for all regulated financial advisers, pension providers and regulated investments. 

Commissioned by the government as an independent body, they are the ultimate source of authority in the financial sector. They also keep a public register of regulated firms and individuals.

FOS

The Financial Ombudsman Service is another government commissioned independent body. Unbias, it's role is to settle disputes between retail clients and companies offering financial services. It has the power to force companies to pay compensation if it finds then in fault of the FCA's rules and regulations. Get Claims Advice takes claims to the Ombudsman when firms are still operating. 

FSCS

The Financial Services Compensation Scheme gets its powers from the FCA, but acts independently. All regulated firms pay into an FSCS Levy, which pays out compensation when things go wrong and the "guilty party" is insolvent. Get Claims Advice makes claims to the FSCS on behalf of clients who have been mis-sold.

 

IFA

An Independent Financial Adviser. This is somebody or a firm that is regulated by the FCA to provide financial advice, in this case, about your pension! It is up to your IFA to ensure that you are suitable for your new pension, and that it is in your best interests. 

CMC

A Claims Management Company. Regulated by the Claims Management Regulator from the Ministry of Justice, a CMC can make a claim on your behalf to the FSCS or FOS to help you get compensation for a mis-sold pension. Get Claims Advice is a prime example.

Pension Provider

Your pension provider is who actually holds your account and administrates it, sends you letters to let you know how its doing and more. In some cases, this is a SIPP or SSAS provider. 

Retail Client

The chances are, this is you! You're the person taking out a pension, paying into it, transferring it from provider to provider, taking advice and hoping to retire on your earnings.

Pension Advice

You've learned about the different types of pension, and who does what. Now comes the complicated bit...

Regulated Investment

A regulated investment is one that benefits from overwatch from the FCA. They are generally considered to be low to medium risk and come with matching returns. They include managed funds, conducted by experts who invest your pension in safer options. If they fail, you can get compensation from the FSCS or if they are mis-managed you can get help from the FOS.

UCIS

A UCIS is an Unregulated Collective Investment Scheme. Many invest their pensions in them through a SIPP or SSAS. They are not regulated by the FCA and therefore considered high-risk, with no compensation from the FSCS if they fail. Many UCISs are mis-sold because the retail client is not suitable and not aware they are going into an unregulated scheme. 

Non Standard Product

See UCIS and Unregulated Investment. Can include: Forestry, overseas property, carbon credits, fuels, unlisted shares, wine, parking spaces, storage pods and more.

Suitability

Suitability for a pension scheme is determined by a number of factors, including wealth, attitude to risk, capacity for loss and level of investor knowledge. Failure of an IFA to check this could result in compensation for the retail client if they receive unsuitable advice.

High Net Worth Individual

An important part of suitability - defined as somebody who earns over £100k per year or has £250k of investable assets needed to invest in a UCIS - enough to handle the risk!

A Sophisticated Investor

Either self-certified or by somebody else, a sophisticated investor has the knowledge and experience needed to manage unregulated investments - another suitability factor.

Letter of Authority

LOA stands for letter of authority - signing one of these for a company entitles them to act on your behalf regarding your pension. 

There we go! You've now learned the basic jargon needed to at least get by in the world of pensions, and can hopefully recognise your own pension situation using your new knowledge.

If you now have an inkling that any of your pension investments may have been mis-sold to you, then get in touch for FREE using the form, or follow our blog for even more pensions news!

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