Pensions jargon buster


Ditch the complicated language around pensions and make them easy to understand with our jargon buster.

Communicating pensions isn’t easy. Employees are often surrounded by technical, dull language that can alienate them and leave them feeling disengaged.

We’ve simplified some common terminologies and shared tips for how to engage and empower your employees at different life stages.

The jargon explained

Pension pot

The total amount of money in your pension.

Retirement forecast

A prediction of out how much money you’ll have to live off at retirement, based on your existing pension pot.

Investment funds

Rather than putting your money into a bank account, your pension savings are used to buy investments like bonds, stocks and shares – which over the longer term have a better chance of growing your pension pot. Growth is not guaranteed, and you may get back less than you put in. Groups of investments are packaged into what are known as funds. Each fund gives you a choice for how you want to invest your pension savings.

Defined contribution pension

The is the most common type of pension. You and your employer contribute a set percentage of your earnings, which means a defined amount is paid in each month. This gets invested into a fund and over time you build up a pension pot. The value of your pension pot can go up or down depending on how the investments perform.

Defined benefit (DB) pension

This type of pension pays a guaranteed retirement income – it’s a defined amount. What you’ll receive is based on factors including your salary and how long you’ve worked for your employer. Most DB pensions are offered by public sector and government employers, but many have now been closed.

Pension tax relief

This is one of the best benefits of a workplace pension. When you pay into a pension, you don’t pay tax on contributions. Instead, the tax you would have paid is put towards your pension instead. Think of it as a bonus or top up. The amount of tax relief you receive depends on the rate of income tax you pay.

Tax free allowance

The amount of money you can put into your pension each year without paying a tax charge. Currently, this is set at £60,000 or 100% of your earnings, whichever is lower.

Income drawdown

Sometimes referred to as ‘flexi-access drawdown’ or ‘flexible income’, this option allows you to take some of your pension when you retire as and when you need it, while allowing your fund to keep on growing. The value of your pension pot can go up or down depending on how the investments perform.

Avoid the disconnect

Target employees at different life stages. Whether that’s early on in their career or close to retirement age, it’s important to touch base with your employees regularly with bitesize communications, so they understand how their pension pot is growing and what options are available to them. If you offer a matched contribution or enhanced package – shout about it!

Don’t rely on the pension provider – communications are often long, overwhelming and full of jargon. Why not introduce video or personalised messaging into your updates, or signpost digital tools that can help employees visualise their savings? Think outside the box and get creative with your approach and your communications.

In summary…

    • Communicate little and often
    • Choose video content over long-form text
    • Get to know your audience – how much awareness do they have?
    • Signpost to calculators and digital tools
    • Try personalisation – a key trend for 2024
    • Make the conversation inclusive

We’ll help you spark some creativity back into your pensions communications. Get in touch for an informal chat.

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