Frequently used terms


An insurance product that pays a guaranteed income, either for the rest of your life (a lifetime annuity) or for a fixed period of time (a temporary annuity). It is usually purchased with a defined contribution scheme pension pot. There are all sorts of options and, as it’s a ‘product’, it pays to shop around to get the best deal.

AVC scheme
Additional Voluntary Contribution. Workplace pension schemes require members to make a regular, common-to-all contribution, say 5% of their salary each month. An AVC is an additional contribution that individual members can make to increase their pension benefits: in a defined benefit scheme you buy extra years, in a defined contribution scheme you increase the value of your pension pot.

CARE scheme
Career Average Revalued Earnings. A type of defined benefit scheme which averages your salary throughout your career to determine the income you receive when you retire.

Cash Equivalent Transfer Value. The notional cash value of a defined benefits pension scheme. A series of actuarial principles and assumptions are used to calculate the capital sum which, if invested appropriately, would provide the benefits due to the member.

Contracting out (of SERPS and the Second State Pension)
Until 2012 employees could ‘contract out’ of SERPS or the Second State Pension. In exchange for lower NI contributions employees gave up part, or all, of their SERPS entitlement and received extra pension from their occupational or personal scheme.

Defined benefit pension scheme
‘DB’ schemes ‘define’ the ‘benefit’ received on retirement as a guaranteed, pre-agreed amount. It’s paid directly to you so you don’t have to buy an alternative product, eg: an annuity or drawdown contract. DB schemes were once popular with public sector organisations and large companies. The employer carries the investment risk.

Defined contribution pension scheme
‘DC’ schemes are common workplace pension scheme. As an employee you make regular contributions to a pension scheme which, along with the employer’s contribution and tax relief, is invested in the stock market. Until April 2015, when pension freedom was introduced, you received the accumulated amount and had to buy an annuity or income drawdown product. The member carries the investment risk.

Income drawdown
A method of using your pension pot to provide a regular retirement income by reinvesting it in a fund specifically designed and managed for income drawdown.

Financial Adviser
To offer financial advice an individual must represent or be an appointed representative of a firm registered with the Financial Conduct Authority (‘FCA’). The FCA requires firms to ensure that individuals acting for them have ‘appropriate qualifications’ as determined by the Financial Services Skills Council. There are two types of financial adviser: independent and restricted.

‘Financial secure and comfortable retirement’
Being able to enjoy retirement with a good standard of living and no financial worries. It’s what we all want – but we have to plan for it.

Final Salary scheme
A type of defined benefit scheme where your retirement benefit is based on your final salary. It was commonly offered by large companies and public bodies.

FSAVC scheme
Free Standing Additional Voluntary Contribution. An FSAVC is similar to an AVC but the scheme is not connected to the employer’s workplace pension scheme, it’s a separate scheme offered by an insurance company and is similar to a personal pension.

Independent Financial Adviser
A financial adviser who offers independent advice about financial matters and recommends suitable products from the whole of the market. The term has a specific meaning: IFAs are regulated by the Financial Conduct Authority (‘FCA’) and must meet strict competence and qualification requirements.

Multi-employer pension scheme
A workplace pension scheme offered by an organisation that is not your employer, ie: the entire scheme is bought in. Generally they are ‘qualified workplace pension schemes’ designed for auto enrolment use. They are sometimes referred to as ‘master trusts’.

National Employment Savings Trust. A multi-employer pension scheme set up by the government to help employers fulfil their auto enrolment duties.

NOW! Pensions
A low-cost rival to NEST set up by ATP, a Danish retirement specialist that runs the Danish National Pension.

One Financial Solutions
A firm of independent financial advisors who offer advice and practical assistance on all aspects of pensions. Please call us on 020 3714 9565 for a confidential discussion about how we may be able to help you.

Pension Commencement Lump Sum
Often referred to as the ‘PCLS’. When you retire you can take 25% of your pension pot as a tax-free lump sum.

Pension freedom
From April 2015 new pension legislation introduced fundamental reforms to the way we can access our pensions. If you are aged 55 or over and are a member of a defined contribution pension scheme, you are now free to cash it in rather than buy an annuity or income drawdown product.

Pension pot
The combined total of your and, if applicable, your employer’s contributions to your pension scheme along with any tax credits and investment growth. When you retire you use your pension pot to buy a regular income (or a Lamborghini).

People’s Pension
A multi-employer pension scheme set up by B&CE to help employers fulfil their auto enrolment duties. It is said to be the largest private sector workplace pension scheme in the UK with over 1.2 million members.

Private pension
A pension scheme designed for use by an individual away from work. Common schemes include personal pension plans, SIPPs and stakeholder pensions.

Qualifying years
Those years in which an individual has either paid National Insurance or has received a National Insurance credit. The number of qualifying years is used to calculate the value of the Basic State Pension; currently (2015-16) 30 qualifying years are needed to receive the full Basic State Pension.

Restricted Financial Adviser
A financial adviser who is restricted in the advice they give and the products and product providers they recommend. The adviser, or firm, must clearly explain the restriction and the reason for it, eg: the adviser works for a specific product provider or may have chosen to specialise in a specific market. Restricted advisers have to be approved or authorised by the FCA.

Salary sacrifice
This provides the opportunity for an employee to give up part of their gross salary for a particular benefit. It’s frequently associated with pension schemes: employees give up part of their pay and, in return, their employer makes an equivalent contribution to their pension pot. Employees save on income tax and both the employer and employee save on National Insurance contributions.

Section 32 policy
A ‘Section 32’ or ‘buyout’ policy’ is a deferred annuity contract, a policy or contract purchased using funds from a registered pension scheme. It is called a ‘Section 32 policy’ as this was the section in the Finance Act 1981 that referred to deferred annuity contracts.

Self-invested personal pension. Universally referred to by its acronym, "Sip", a SIPP is a ‘tax wrapper’ that holds investments and is designed primarily for those wanting to manage their own investments from the full range approved by HMRC.

A "Sas" is a small self-administered pension scheme and is generally set up to provide retirement benefits for a small number of a company’s directors and/or senior or key staff. The number of members is generally limited to 12.

Stakeholder pension
A type of defined contribution pension scheme regulated by the government: they must have a default investment fund, a low minimum contribution, flexible contributions, limited charges and charge-free transfers.

A tax ‘wrapper’ is a type of private pension scheme, for example personal pension plans, stakeholder pension plans and SIPPs, that ‘wrap’ the various investments together to allow benefit from tax breaks, in particular the opportunity to gain tax relief on money paid in.

How can One Financial Solutions help you?

One Financial Solutions is here to help you. We’ll work with you, assess your current circumstances, review your retirement goals and help you put in place a pension strategy to meet them, ensuring that having a ‘financially secure and comfortable retirement’ isn’t something that’s left to chance.

We’ll assess the value of your State Pension and make sure you receive everything you’re entitled to. We’ll review any workplace and private pensions you may have and recommend any changes we feel are beneficial. If you need a pension scheme we’ll find one for you and, as a truly independent firm of financial advisers, we’ll select one from the entire market and make sure it’s the best one for you.

So, if you’re looking for specific help about any aspect of your pension or just want advice on the subject, please call us on 020 3714 9565 or ask us to call you by sending an email to