Acronyms etc..

cfw1994

Not edited for a while (haven't checked the links, & the LTA is now NO LONGER accurate!), but this was my summary some time ago....

Acronyms:

BCE - Benefit Crystallisation Event

 see https://www.aegon.co.uk/support/faq/pension-technical/Benefit-crystallisation-event3.html

DB - Defined Benefit

A pension where the amount you’re paid is based on how many years you’ve worked for your employer and the salary you’ve earned. Also known as a 'final salary' or 'career average' scheme

DC - Defined Contribution

A pension based on how much has been contributed to your pension pot and the growth of that money over time. Could be by you and/or your employer.

DFM - Discretionary Fund Manager

A form of investment management in which buy and sell decisions are made by a portfolio manager or investment counsellor for the client's account. The term "discretionary" refers to the fact that investment decisions are made at the portfolio manager's discretion. This means that the client must have the utmost trust in the investment manager's capabilities

FAD - Flexi-Access Drawdown – compare with UFPLS: https://www.moneymarketing.co.uk/ufpls-vs-drawdown 

This way of taking your pension pot a bit at a time is to take 25% tax-free cash at the start and move the remaining 75% into a separate drawdown account.

Then, each time you take money out of that account, you’ll pay tax on the full amount of each lump sum. With flexi-access drawdown your money purchase annual allowance (MPAA) isn’t triggered when you take the initial 25% tax-free cash, it’s only triggered once you take your first withdrawal. At any time, you can choose to use any remaining money in your flexi-access drawdown account to buy an annuity, or transfer it to another flexi-access drawdown provider.

LTA - Lifetime Allowance 

The overall limit of tax privileged pension funds a member can accrue during their lifetime, before a Lifetime Allowance tax charge applies. The standard LTA is currently £1,073,100 (2022-3)

A test usually has to be carried out each time benefits are taken from a registered pension scheme, to make sure the tax charge is applied if the lifetime allowance is exceeded. The occasions when this test is carried out are called benefit crystallisation events (BCE).

MPAA - Money Purchase Annual Allowance

This limits contributions to a pension scheme when certain events are triggered.

Normally you can put up to £40k pa in.   For 2022-3 tax year, the MPAA limit is £4k, and is triggered if you take any money out of your pension pot that is not purely a PCLS (TFLS) amount.

The MPAA doesn’t apply if you’ve only used some or all of your pension pot to buy a lifetime annuity or if you’re taking all your money out of your pot under the “small pots” rules. Once your annual allowance is reduced to £4,000, you won’t be able to carry forward any allowances from previous tax years.

PCLS - pension commencement lump sum (PCLS)

This is where you can currently take up to 25% of the pension fund ‘tax free’ - also known as Tax-Free Lump Sum (TFLS)

FCA - Financial Conduct Authority.   

The FCA regulates firms. Many products get a level of regulation because the firm is regulated. However, regulation does not mean you get FSCS protection.

UFPLS - Uncrystallised Funds Pension Lump Sum (also called a FLUMP)

Another way of taking pension benefits without going into drawdown or buying an annuity.  

It can be used to deplete the fund in one go, taking 25% tax free and the remaining 75% taxable (as indeed can FAD)

This way to take your pension pot a bit at a time is to take your tax-free cash gradually.

Each time you take money from your pension pot, 25% of it is tax free and you pay tax on the other 75% of each lump sum.

If you take your tax-free cash gradually your money purchase annual allowance (MPAA) is triggered by the first lump sum you take. At any time you can choose to take a different retirement option with any remaining money in your pension pot or transfer it to another provider

kimwp

What confused me at the time I was looking at what funds to invest in (and I no longer remember what they mean), was what the different bits of the fund names meant eg accumulation, r,c,d, small cap, large cap etc. I'll try to find the post where other posters explained it.

Albermarle

kimwp said:

What confused me at the time I was looking at what funds to invest in (and I no longer remember what they mean), was what the different bits of the fund names meant eg accumulation, r,c,d, small cap, large cap etc. I'll try to find the post where other posters explained it.

An ACC ( Accumulation ) Fund is where dividends from the fund are automatically reinvested in the fund. The opposite is an INC ( Income fund) where dividends are paid out of the fund.
Small Cap means the fund is invested in smaller companies, as opposed to Large Cap, where the fund is invested in the largest companies.

Pensions_matter_2

LRF - late retirement factor
ERF - early retirement factor
used by DB schemes to calculate increases or reductions to pensions if retiring post or pre NRD.

Arthurian

So many acronyms!  Wouldn't it be more comprehensible for posters to write out the meaning in full the first time they use it?  I appreciate this might be too much when a rapid discussion is taking place, but would be useful where someone plunges into using an acronym in a first post.

[Deleted User]

What does COPE mean in relation to pensions?

pinnks

COPE, or Contracted Out Pension Equivalent is an amount used in the calculation of your starting amount for the new state pension at 6 April 2016 to adjust for the fact that you were contributing to a contracted-out pension scheme rather than paying into the second, earnings-related state pension scheme.  If you were doing that then you do not have a COPE amount. 

[Deleted User]

pinnks said:

COPE, or Contracted Out Pension Equivalent.

Thank you. I didn't see that in the long list.

Eye2021

What does ACRONYM stand for ?

swindiff

A Collection of Random Obscure Notations to Yield Mystification