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A

Advance payments

This means that we will start paying you your income on the date that your annuity is set up.

Annuity

An annuity is an income that will be paid to you for the rest of your life. You use money in your pension fund to buy a pension annuity. You can't generally change or cash in your annuity even if your personal circumstances change.

Annuity rates

This determines the level of income you will receive from your annuity. Annuity rates fluctuate, but, once you buy your annuity, the rate you receive is fixed.

Arrears payments

This means your income will start to be paid one month, quarter, half-year or year from the date your annuity is set up and will be paid at the end of each payment period.

Aviva

Aviva includes any former companies that are now part of the Aviva group, such as Norwich Union and Provident Mutual.

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B

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C

Company pension

This is a pension scheme set-up by your employer. Your employer may make payments into the scheme on your behalf and may ask you to contribute too.

Current Smoker

Someone who smokes ten or more cigarettes a day (including hand rolled) and has done so for at least 10 years. This does not include anyone who smokes cigars or pipes or uses tobacco replacement products.

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D

Defined benefits

A pension scheme where the level of benefits that the members are entitled to is known in advance. The value of the benefits is linked to the member's salary, either throughout their career or at the time of leaving. A final salary scheme is a common type of defined benefit pension scheme.

Dependant

This could be your spouse, civil partner or a financially dependent adult.

Dependant's income

The income paid to your dependant when you die.

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E

Enhanced benefit

Enhanced benefits can offer a higher income to people with certain medical and lifestyle conditions that affect their life expectancy.

Escalating annuities / inflation-linked annuities

An escalating annuity is one where your income rises by a set amount, usually between 3% and 5% each year. An inflation-linked annuity tracks the UK Retail Prices Index and will rise if the index rises.

Estate

All of your possessions, including all the property, assets and debts left when you die.

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F

Financial adviser

A financial specialist who can help you make a decision about the best financial solution for you. Some advisers can only advise on one life insurance company's products, others can advise on a range of companies' products. Independent financial advisers can advise you on the products offered by all companies. Advisers have to tell you what product range they cover before they offer you any advice.

Fixed Term Retirement Plan

A retirement income plan from Aviva, that doesn’t lock you in for life. It lets you take tax-free cash (if you haven't already), an income or both from your pension fund. It also gives you two investment options, each with a guarantee around what your plan will be worth when it matures. Depending on which investment option you choose, you can hold the plan for a minimum of five and a maximum of 10 years. You make all your choices at the start of the plan. There is no cash-in value at any time and you cannot make any changes during the term of the plan, even if your circumstances change. When the plan matures, you must use your remaining pension fund to buy another retirement product. Find out more about our Fixed Term Retirement Plan.

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G

Government Actuary's Department (GAD) maximum

This is the maximum amount of income allowed under Government rules. It’s a specified percentage of the GAD limit. The GAD maximum amounts allowed under HMRC rules may change.

Growth fund

An investment fund which aims to increase your money by investing in assets offering the potential for growth. Assets are the underlying investments, such as equities, government bonds (gilts), corporate bonds and property.

Guaranteed fund

An investment option from Aviva available through our Fixed Term Retirement Plan. This option provides a guarantee that your plan will be worth at least what you originally invested plus any growth the fund has experienced at the plan maturity date.

Guaranteed maturity value

An investment option from Aviva available through our Fixed Term Retirement Plan. This option provides a guaranteed value at the plan maturity date.

Guaranteed payments

We will continue to pay your income for a set period of time even if you die.

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I

Income drawdown

Income drawdown is a way of taking income from your pension fund while leaving the remainder of your fund invested for further potential growth. Even if you have a large pension fund and other assets or income, income drawdown may still be unsuitable for you. It depends very much on the risks you’re prepared to take and how actively you want to manage your retirement fund and income.

Income fund

An investment fund which aims to provide you with a regular income.

Increasing payments

Your payment increases by a fixed percentage or in line with the UK Retail Prices Index.

Inflation

This is the increase in the cost of living over time. Inflation means that the value of money reduces over the years. So, if you choose a level annuity, over time it will gradually buy you less and less, as the price of everything else increases.

Inflation-linked annuities

An escalating annuity is one where your income rises by a set amount, usually between 3% and 5% each year. An inflation-linked annuity tracks the UK Retail Prices Index and will rise if the index rises.

Investment-linked or with profits annuity

This type of annuity invests in funds, which may hold assets such as equities, property, government bonds (gilts), corporate bonds and cash. The level of income from an investment-linked or with profits annuity depends on the performance of the investment funds chosen. This means that the level of income can go down as well as up and isn't guaranteed and may be less than the amount invested.

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J

Joint life annuity

An annuity which makes sure your spouse, civil partner or dependant will continue to receive an income after you die. This could be at the same or a reduced level. If you choose this type of annuity, the other person may still be entitled to it even if you divorce or dissolve your civil partnership.

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L

Level annuity

An annuity where the level of income stays the same for life.

Lifetime allowance

The lifetime allowance is a limit on the total amount of pension fund you can use for retirement benefits before extra tax applies. It is set by the government. The limit for 2011/2012 is £1.80 million. From 6 April 2012 this will reduce to £1.50 million. The vast majority of pension scheme members will not be affected by this limit.

Light smoker

Someone who smokes between one and nine cigarettes a day (including hand rolled), one or more cigars/pipes a day and has done so for at least 10 years. This does not include anyone who uses tobacco replacement products.

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M

Market value reduction

A market value reduction may be applied to unitised with-profits investments. A market value reduction is a way of protecting investors during periods when investment returns are below the level we would normally expect or following a large or sustained fall in the stock market. We apply a market value reduction to make sure that all investors receive their fair share of the returns earned over the period of their investment. This means you could get back less than you invested. We will tell you if a market value reduction is applying when taking your money out of the fund.

Mortality

Mortality refers to the number of deaths within a known group, within a given period. Some planholders will die earlier than expected and others will live longer than expected.

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N

Nominated retirement date

The date you told your pension provider that you would like to retire. This may be a set date for a company pension.

Non-protected rights

The total value from all payments into your pension fund apart from any protected rights monies.

Non-smoker

Anyone who has never smoked, given up or doesn't come under the current or light smoker categories.

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P

Pay As You Earn (PAYE)

This is a method of paying tax. Income tax and National Insurance contributions (when appropriate) are deducted from your salary and/or pension income before you receive it and are paid directly to HM Revenue & Customs.

Pension Annuity

An annuity bought with money invested in a pension fund. It pays you an income for the rest of your life.

Pension fund

You and/or your employer invest into your pension fund during your working life and you use it to buy an income when you retire.

Personal pension

This is a pension plan you personally hold and invest in. With a personal pension, you pay a regular amount (usually every month) or a lump sum to the pension provider, who will invest it on your behalf. Your employer may also contribute to your pension plan. The aim is for the fund to grow, so you will have more money to buy an annuity or another product to provide you with an income through your retirement. The value of your fund may go down as well as up and isn't guaranteed and may be less than the amount invested.

Pension provider

A company which runs a pension scheme.

Protected rights (PR)

Payments by the government to your pension arrangement, that must also provide an income for your spouse/civil partner after you die.

Purchased Life Annuity

We refer to this product as our Immediate Life Annuity. This is an annuity bought with money from other sources (such as savings, investments, an inheritance or tax-free cash from your pension fund).

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R

Retail Prices Index

The UK Retail Prices Index (RPI) is an official measure of inflation.

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S

Serious medical condition

Serious medical conditions include illnesses like diabetes, cancer, stroke and heart disease.

Single life annuity

An annuity which is paid only to you and stops when you die, unless you choose guaranteed payments.

Smoothing

Smoothing is a type of investment budgeting unique to with-profits. It is a method of reducing ups and downs in the value of your investment by paying out the returns through a system of bonuses. It works by keeping back some of the gains earned in good years and using them to help pay bonuses in poor investment years. Equally losses in poor investment years may also reduce gains in good investment years. In a with-profits fund, instead of simply sharing out what the fund makes – or loses – each year, the fund aims to even out some of these variations in performance. There may be times in extremely poor market conditions when smoothing cannot fully protect your investment. This can happen following a large or sustained fall in the stock markets or when investment returns are below the level we normally expect. In these circumstances, we will apply a market value reduction.

State benefits

You may be able to claim benefits from the State during your retirement. These include the winter fuel payment, cold weather payment and pension credit. Visit www.direct.gov.uk to find out more.

State pension

There are two types of State pension. The basic State pension is paid by the government. It is based on the number of qualifying years gained through National Insurance contributions you've paid or are treated as having paid. The additional State pension is paid by the government if you were contracted into it. If you contracted out, the government will have paid into your pension arrangement instead. These are the protected rights in a money purchase pension and generally Guaranteed Minimum Pension (GMP) rights in a defined benefit scheme or any personal policy that has replaced defined benefit scheme benefits. You build up the additional State pension or protected rights payments through National Insurance contributions.

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T

Tax-free cash

You can normally take up to 25% of your pension fund as tax-free cash. This reduces the income you have during your retirement.

Terminal illness

A terminal illness is one where the individual is diagnosed as suffering from an advanced or rapidly progressing and incurable condition which is, in the opinion of our Chief Medical Officer, likely to lead to the individual's death within 12 months.

Triviality

If your pension fund is small, you may be able to take it all as a cash sum rather than having to use it to buy an annuity. This is known as the triviality or commutation option. You have to be over the age of 60 and Aviva will only pay Triviality up to the age of 75. The total value of all your pensions, including those already being paid has to be below and amount set by HM Revenue & Customs. Currently this is £18,000. The first 25% of this amount can usually be taken tax-free and the remainder will be subject to income tax. Read our 'Can I retire after I'm 75?' FAQ for more information.

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W

With-profit fund

A with-profit fund is a fund where your money will be pooled with other planholders’ money and invested in a range of different assets, like shares, property and corporate bonds. By investing in a wide range of assets the fund aims to achieve balanced returns over the medium to long term. The profits and losses of the fund are shared out to planholders using a system of bonuses. These bonuses ensure that you get a fair share of the returns earned over the period of your investment.

With-profits Annuity

This type of annuity invests in funds, which may hold assets such as equities, property, government bonds (gilts), corporate bonds and cash. The level of income from an investment-linked or with profits annuity depends on the performance of the investment funds chosen. This means that the level of income can go down as well as up and isn't guaranteed and may be less than the amount invested.

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WC04025 06/2011