Compare Drawdown

Pension drawdown glossary

The 85 terms you will meet when comparing drawdown plans, in plain English, each with its official source. Rules and allowances are for the 2026/27 tax year and can change. Last updated 24 September 2026.

Accumulation and income units: Two versions of the same fund. Income units pay out dividends and interest as cash; accumulation units reinvest them automatically. In drawdown, some people hold income units so that the payouts build up as cash to fund withdrawals. Source: MoneyHelper: pensions glossary.
Ad-hoc withdrawal: A one-off payment from a drawdown pot, as opposed to a regular income. Most platforms pay these free, but some charge per withdrawal — our comparison shows the charge where it is published. Source: MoneyHelper: flexi-access drawdown explained.
Annual allowance: The most that can be paid into your pensions in a tax year, by you and anyone else, before a tax charge applies: £60,000 for most people. Tax relief on your own contributions is also limited to your UK earnings for the year. The allowance is lower if you have flexibly accessed a pension or have a very high income. Source: GOV.UK: annual allowance.
Annuity: An insurance product that turns some or all of your pension into a guaranteed income, usually for life. Unlike drawdown, the income cannot run out, but you give up flexibility and the pot is normally no longer yours to pass on. Source: MoneyHelper: annuities explained.
Beneficiary drawdown: When someone who inherits your pension keeps it invested and takes money from it as and when they need to, rather than taking it all as a lump sum. Not every provider offers it, so it is worth checking if leaving your pension to family matters to you. Source: HMRC Pensions Tax Manual PTM072430: beneficiary's flexi-access drawdown.
Capped drawdown: An older form of drawdown with a limit on how much income you can take each year. No new capped drawdown plans could be started after 5 April 2015; existing ones can continue or be converted to flexi-access drawdown. Source: MoneyHelper: capped drawdown.
Carry forward: Using annual allowance you did not use in the previous three tax years, on top of this year's allowance, if you were a member of a registered pension scheme in those years. This year's allowance is used first. It cannot be used to increase the Money Purchase Annual Allowance. Source: GOV.UK: annual allowance.
Cash buffer: Money kept in cash inside or alongside a drawdown pot to cover the next one to three years of withdrawals, so that investments do not have to be sold after a fall. It reduces sequence of returns risk but cash can lose value to inflation. Source: MoneyHelper: flexi-access drawdown explained.
Cash interest (retained interest): Interest earned on uninvested cash in your pension. Some platforms pass on most of it; others keep part of it as income. The FCA has been looking at this practice, sometimes called double-dipping. Source: MoneyHelper: pensions glossary.
Cash transfer: Moving a pension to a new provider by selling the investments, sending the money as cash and buying new investments at the other end. It is widely accepted, but the money is out of the market for the days or weeks the transfer takes. Source: MoneyHelper: transfer or combine defined contribution pensions.
Consumer Duty: FCA rules that require regulated firms, including pension and platform providers, to act to deliver good outcomes for retail customers — covering price and value, how well customers understand what they are told, and the support they get. Source: FCA: Consumer Duty.
Crystallisation: The point at which you start taking benefits from part or all of your pension — for example by moving it into drawdown or buying an annuity. It is usually when tax-free cash is taken. Source: MoneyHelper: pensions glossary.
Dealing charge: A fee each time you buy or sell an investment on a platform. Many platforms deal in funds free but charge for shares, ETFs and investment trusts. Source: MoneyHelper: pensions glossary.
Defined benefit (DB) pension: A workplace pension that pays an income based on your salary and years of membership, such as a final salary or career average scheme. The scheme, not you, carries the investment risk. It cannot be used for drawdown unless it is transferred, which usually means giving up valuable guarantees. Source: MoneyHelper: transferring your defined benefit pension.
Defined contribution (DC) pension: A pension where you build up a pot from contributions and investment growth, such as a SIPP, personal pension or most modern workplace pensions. What you get depends on how much goes in, how the investments perform and the charges. These are the pensions that can be used for drawdown. Source: MoneyHelper: pensions glossary.
Dependant's drawdown: Drawdown taken by a dependant — for example a spouse, civil partner or child under 23 — from pension funds they inherit. They can take income flexibly from it, buy an annuity or, depending on the scheme, take a lump sum. Source: HMRC Pensions Tax Manual PTM072430: beneficiary's flexi-access drawdown.
Emergency tax: When you first take taxable money from a pension, the provider often has no up-to-date tax code and applies an emergency code on a Month 1 basis, which can mean paying too much tax at first. You can reclaim it from HMRC with form P55, P53Z or P50Z, or it is corrected later in the tax year. Source: HMRC PAYE Manual PAYE94055: flexibly accessed pension payments.
Enhanced annuity: An annuity that pays a higher income because a health condition or lifestyle factor, such as smoking or high blood pressure, is expected to shorten life expectancy. It is worth declaring any condition when getting annuity quotes. Source: MoneyHelper: annuities explained.
ETF (exchange-traded fund): A fund that trades on a stock exchange like a share, usually tracking an index. ETFs are often low cost, but some platforms charge a dealing fee each time you buy or sell them. Source: MoneyHelper: pensions glossary.
Exit fee: A charge for transferring your whole pension to another provider. Most platforms in our comparison do not charge one; check the provider's charges schedule before transferring in. Source: MoneyHelper: transfer or combine defined contribution pensions.
Expression of wish (nomination): A form telling your pension scheme who you would like to receive your pension when you die. It is usually not binding, so the scheme keeps the final say, but schemes normally follow it. Keep it up to date after marriage, divorce or a death in the family, and check it when you switch provider. Source: MoneyHelper: pensions glossary.
FCA Register: The public record of firms and individuals the Financial Conduct Authority authorises. Checking it before dealing with any pension provider, adviser or transfer firm is one of the simplest protections against scams. Source: FCA Financial Services Register.
Financial Ombudsman Service: A free, independent service that settles complaints between consumers and financial businesses, including platforms and advisers, when the firm has not resolved the complaint itself. Complain to the firm first. Source: Financial Ombudsman Service.
Fixed-term annuity: An annuity that pays a guaranteed income for a set number of years rather than for life, and may pay a lump sum at the end that can be used to buy another product. It keeps options open at the cost of no lifetime guarantee. Source: MoneyHelper: annuities explained.
Flat fee: A platform charge set in pounds rather than as a percentage of your pot, so it does not grow as your pot does. Flat fees tend to work out cheaper on larger pots and dearer on small ones. Source: MoneyHelper: pensions glossary.
Flexi-access drawdown (FAD): The standard way to take a flexible income from a defined contribution pension: the pot stays invested and you withdraw as much or as little as you choose. Every platform in our comparison offers it. Source: MoneyHelper: flexi-access drawdown explained.
FSCS: The Financial Services Compensation Scheme, which can pay compensation if an authorised financial firm fails. For eligible investment claims the limit is £85,000 per person per firm. It does not protect against investments falling in value. Source: FSCS: investments.
Guaranteed annuity rate (GAR): A promise in some older pension policies to convert your pot into an annuity at a fixed rate, often far higher than rates available today. It is usually lost if you transfer or take the pot another way, and a GAR worth more than £30,000 generally means you must take regulated advice before transferring. Source: FCA Handbook glossary: guaranteed annuity rate.
Inflation risk: The risk that rising prices reduce what your money can buy. A level income or cash savings lose buying power over time, which matters over a retirement that can last 30 years or more. Source: MoneyHelper: annuities explained.
Inheritance tax on pensions: Under Finance Act 2026, for deaths on or after 6 April 2027, most unused pension funds and death benefits count towards the value of an estate for inheritance tax. Death benefits paid to a surviving spouse or civil partner, or to a charity, stay exempt, and death-in-service benefits from a registered pension scheme are excluded. The personal representatives are responsible for reporting and paying any inheritance tax due. This changes how some people plan to use or pass on their pension. Source: GOV.UK: Inheritance Tax on unused pension funds and death benefits.
Investment fund: A pooled investment, such as a unit trust or OEIC, that spreads your money across many shares, bonds or other assets and is run by a fund manager or tracks an index. Each fund has its own ongoing charge on top of the platform fee. Source: MoneyHelper: pensions glossary.
Investment pathways: Four ready-made investment options that drawdown providers must offer to people who move into drawdown without advice, each linked to a plan for the money — for example, taking it all within five years or using it for a long-term income. Source: FCA: strategic priorities for the pensions sector (investment pathways).
Investment trust: A company listed on the stock exchange that invests in other assets. You buy and sell its shares, so platforms usually apply their share dealing charge, and the share price can differ from the value of what the trust owns. Source: MoneyHelper: pensions glossary.
Joint life annuity: An annuity that keeps paying, often at a reduced rate, to your spouse or partner after you die. It pays less at the start than a single life annuity for the same pot. Source: MoneyHelper: annuities explained.
Lifestyling: An investment approach that automatically moves a pension into lower-risk assets as a set retirement date approaches. Many older strategies were designed for buying an annuity, so it is worth checking whether yours suits drawdown. Source: MoneyHelper: why has my pension pot gone down in value?.
Longevity risk: The risk of living longer than your money lasts. In drawdown you carry this risk yourself; an annuity passes it to an insurer. Source: MoneyHelper: what can I do with my pension pot?.
Lump Sum Allowance (LSA): The limit on the total tax-free cash most people can take from their pensions during their lifetime: £268,275, unless they hold a protection that gives a higher amount. Source: GOV.UK: lump sum allowance.
Lump Sum and Death Benefit Allowance (LSDBA): The limit, £1,073,100 for most people, on the total of tax-free lump sums taken in your lifetime plus certain tax-free lump sums paid on your death before 75 and serious ill-health lump sums. It is higher if you hold a protected allowance. Source: GOV.UK: individual lump sum allowances.
Marginal rate of tax: The rate of income tax you pay on the next pound of income. Taxable pension withdrawals are added to your other income for the year, so a large withdrawal can push part of it into a higher band. Source: GOV.UK: Income Tax rates and Personal Allowances.
Minimum pot size: The smallest pension some providers will accept before you can open a plan or start drawdown. Some set a higher minimum for drawdown than for saving; a few have no minimum at all. Source: MoneyHelper: flexi-access drawdown explained.
Money Purchase Annual Allowance (MPAA): Once you take taxable money from a defined contribution pension flexibly — such as a drawdown income or a UFPLS payment — the amount you can pay into defined contribution pensions with tax relief falls to £10,000 a year. Taking only tax-free cash does not trigger it. Source: GOV.UK: check if you have gone above the money purchase annual allowance.
Month 1 basis: A way of working out PAYE that treats each payment on its own, as if you were paid that amount every month: one-twelfth of the personal allowance and tax bands is applied. Emergency tax codes on a first pension withdrawal work this way, which is why a large one-off withdrawal is often over-taxed. Source: GOV.UK: emergency tax codes.
Natural yield: The dividends and interest your investments pay out. Taking only the natural yield as income leaves the capital invested, although the amount paid can go down as well as up. Source: MoneyHelper: flexi-access drawdown explained.
Nominee's drawdown: Drawdown taken from an inherited pension by someone who is not a dependant but was nominated by the pension holder or chosen by the scheme — for example an adult child. It lets them keep the money invested and take it over time. Source: HMRC Pensions Tax Manual PTM072430: beneficiary's flexi-access drawdown.
Normal minimum pension age: The earliest age you can usually take money from a personal pension: currently 55, rising to 57 from 6 April 2028, unless you have a protected pension age. Source: GOV.UK: increasing normal minimum pension age.
Ongoing charges figure (OCF): The yearly cost of running a fund, expressed as a percentage and taken from the fund's value. It is charged on top of the platform fee, which is why our comparison shows fund charges separately unless a provider quotes an all-in fee. Source: MoneyHelper: pensions glossary.
Open market option: Your right to shop around for an annuity with any provider rather than taking the one your pension provider offers. Rates can differ widely, especially if you qualify for an enhanced annuity. Source: MoneyHelper: annuities explained.
P45: A form showing your tax code and the pay and tax to date in the current tax year. If you give your pension provider a P45 from the same tax year before your first withdrawal, it can use that code instead of an emergency code. Providers also issue one when a pension is paid out in full. Source: HMRC PAYE Manual PAYE94055: flexibly accessed pension payments.
P50Z: The HMRC form to reclaim over-paid tax in the same tax year when you have emptied your pension pot, have stopped work and do not expect to go back, and have no other pension or taxable benefits such as Jobseeker's Allowance. Earnings earlier in the tax year, shown on a P45, do not stop you using it. Source: GOV.UK: claim a tax refund if you have stopped work and flexibly accessed all of your pension (P50Z).
P53Z: The HMRC form to reclaim over-paid tax in the same tax year when you have emptied your pension pot and have other taxable income, such as a salary or another pension. It is also used after a serious ill-health lump sum. Source: GOV.UK: claim a tax refund when you have flexibly accessed all of your pension (P53Z).
P55: The HMRC form to reclaim over-paid tax in the same tax year after a flexible pension withdrawal that did not empty your pot, when you will not take any more regular or flexible payments before the tax year ends. Source: GOV.UK: claim back tax on a flexibly accessed pension overpayment (P55).
Pension commencement lump sum (tax-free cash): The tax-free lump sum you can normally take when you start drawing a pension — usually up to 25% of the amount you crystallise, within the Lump Sum Allowance. Source: GOV.UK: lump sum allowance.
Pension death benefits: What happens to a defined contribution pension when you die. If you die before 75, beneficiaries can usually take it tax-free, as long as it is paid within two years and within your Lump Sum and Death Benefit Allowance for lump sums. If you die at 75 or over, what they take is taxed as their income. Source: GOV.UK: tax on a private pension you inherit.
Pension freedoms: The rules in force since 6 April 2015 that let people aged 55 or over (57 from April 2028) take their defined contribution pension however they choose — as drawdown, lump sums, an annuity or a mix — rather than having to buy an annuity. Source: MoneyHelper: what can I do with my pension pot?.
Pension transfer: Moving a pension from one provider or scheme to another, for example to consolidate old pots or to get lower charges or a better drawdown service. The provider you are leaving must carry out checks for signs of a scam before it pays. Source: MoneyHelper: transfer or combine defined contribution pensions.
Pension Wise: Free, impartial guidance from MoneyHelper, backed by the government, about your options for taking a defined contribution pension. It is for people aged 50 or over, by phone or face to face. It is guidance, not advice. Source: MoneyHelper: Pension Wise.
Pensions Ombudsman: A free, independent service that deals with complaints about how a pension scheme is run, such as delays or errors in paying benefits or making a transfer. Source: The Pensions Ombudsman.
Personal allowance: The amount of income you can have each tax year before paying income tax: £12,570 for most people. It is reduced by £1 for every £2 of adjusted net income over £100,000, so it is gone entirely at £125,140. Source: GOV.UK: Income Tax rates and Personal Allowances.
Phased drawdown: Moving your pension into drawdown in stages rather than all at once, taking a slice of tax-free cash each time. It can spread tax-free cash across several years. Source: MoneyHelper: phased or partial drawdown.
Platform: An online service that holds your investments, including a SIPP, and lets you buy, sell and manage them in one place. The platform charges its own fee, separate from the charges of the funds you hold. Source: MoneyHelper: pensions glossary.
Platform fee: The yearly charge for holding your pension with a provider. It may be a percentage of your pot (often tiered or capped) or a flat £ fee. This is the main charge our comparison ranks. Source: MoneyHelper: pensions glossary.
Protected tax-free cash: A right in some older pensions to take more than 25% as tax-free cash. It can be lost if you transfer, unless the transfer meets HMRC conditions, so ask your current provider in writing before you move. Source: MoneyHelper: check for special features before taking or transferring your pension.
Ready-made portfolio: A diversified set of investments chosen and managed for you, usually matched to a level of risk. Many platforms offer them for people who do not want to pick their own funds; the portfolio has its own charge on top of the platform fee unless the price is all-in. Source: MoneyHelper: pensions glossary.
Rebalancing: Selling some of what has grown and buying more of what has fallen to bring your investments back to the mix you chose. In drawdown it can be combined with taking withdrawals from whatever is over-weight. Source: MoneyHelper: pensions glossary.
Recycling rule: An HMRC rule that can treat tax-free cash as an unauthorised payment, with heavy tax charges, if it is used as a pre-planned step to increase pension contributions significantly. It only applies above set thresholds, such as tax-free cash of more than £7,500 in 12 months, and HMRC says lump sums taken as part of normal retirement planning are not caught. Source: HMRC Pensions Tax Manual PTM133810: recycling of pension commencement lump sums.
Regular income charge: A fee some providers charge for paying you a regular drawdown income, on top of the platform fee. Many platforms charge nothing for this; our comparison includes it where it is published and says so where it is not. Source: MoneyHelper: flexi-access drawdown explained.
Robo-adviser: An online service that puts your money into a ready-made portfolio based on your answers to questions about risk and goals. Most provide guidance or discretionary management rather than personal advice, and charge an all-in or management fee. Source: MoneyHelper: pensions glossary.
Safeguarded benefits: Pension benefits other than money purchase or cash balance benefits, such as a defined benefit pension or a guaranteed annuity rate. The law requires you to take regulated independent advice before transferring or converting safeguarded benefits worth more than £30,000 into flexible benefits. Source: GOV.UK (DWP): pension benefits with a guarantee and the advice requirement.
ScamSmart: The FCA's campaign and online tools to help people spot and avoid investment and pension scams, including a Warning List of firms to avoid. Unexpected contact about your pension, pressure to act quickly or promises of high returns are warning signs. Source: FCA ScamSmart.
Scottish income tax: If you live in Scotland, your pension income and earnings are taxed at Scottish rates. For 2026/27 there are six bands, from a 19% starter rate to a 48% top rate, applied after the same personal allowance as the rest of the UK. Source: gov.scot: Scottish Income Tax 2026 to 2027 technical factsheet.
Sequence of returns risk: The risk that poor investment returns early in retirement, while you are also taking withdrawals, cause a pot to run out much sooner than the same returns in a different order would. Source: MoneyHelper: flexi-access drawdown explained.
Serious ill-health lump sum: A payment of your whole pension as a lump sum when a doctor confirms you are expected to live less than a year. It is usually tax-free before 75, within your Lump Sum and Death Benefit Allowance, and can be paid before the normal minimum pension age. Source: GOV.UK: individual lump sum allowances.
SIPP (self-invested personal pension): A personal pension that lets you choose your own investments from a wide range, such as funds, ETFs, shares and investment trusts. Most SIPPs offer flexi-access drawdown. Source: MoneyHelper: pensions glossary.
Small pots lump sum: A way to cash in a pension worth £10,000 or less in one go. You can take up to three from personal pensions in your lifetime; different limits apply to workplace schemes. Usually 25% is tax-free, and unlike a UFPLS it does not trigger the Money Purchase Annual Allowance. Source: HMRC Pensions Tax Manual PTM063700: small pension payments.
State Pension age: The age you can start getting the State Pension. It is rising from 66 to 67 for people born on or after 6 April 1960, and the law provides for a further rise to 68 in future. It is separate from the age you can take a private pension. Source: GOV.UK: check your State Pension age.
Successor's drawdown: Drawdown taken by someone who inherits a pension that was already inherited — for example a grandchild receiving what was left in a parent's nominee drawdown. It lets pension money pass down more than one generation. Source: HMRC Pensions Tax Manual PTM072430: beneficiary's flexi-access drawdown.
Tapered annual allowance: A reduced annual allowance for people with very high incomes. It applies when threshold income is over £200,000 and adjusted income is over £260,000, and falls by £1 for every £2 over that, to a minimum of £10,000. Source: GOV.UK: annual allowance.
Targeted support: A form of help, allowed by the FCA from 6 April 2026, where authorised firms such as pension providers can suggest options designed for groups of customers with similar circumstances. It sits between general guidance and personal advice. Source: FCA PS25/22: rules for targeted support.
Tax code: The code HMRC gives your employer or pension provider to work out how much tax to take. 1257L is the most common: it gives the standard personal allowance. A code ending in W1, M1 or X is an emergency code. Source: GOV.UK: tax codes.
Tiered charge: A percentage platform fee that falls on each slice of your pot above set thresholds — for example one rate on the first £250,000 and a lower rate on the rest. Some platforms instead apply one rate to the whole pot once it passes a threshold. Source: MoneyHelper: pensions glossary.
Transaction costs: The costs a fund pays when it buys and sells investments, reported separately from the ongoing charges figure. They are not in our platform cost figures because they depend on the funds you choose. Source: MoneyHelper: pensions glossary.
Transfer in specie: Moving a pension to a new provider without selling the investments, so they are re-registered rather than cashed in and you stay invested throughout. The new provider must be able to hold the same investments; funds sometimes move into a different share class. Source: HMRC Pensions Tax Manual PTM104000: transfer of drawdown pensions.
Trivial commutation lump sum: A way to take a small defined benefit or scheme pension as a one-off lump sum when the total value of your pension savings is £30,000 or less. Where the pension has not yet started, 25% is usually tax-free. Source: HMRC Pensions Tax Manual PTM063500: trivial commutation lump sum.
UFPLS (uncrystallised funds pension lump sum): Taking a lump sum straight from a pension that has not yet been moved into drawdown. Usually 25% of each payment is tax-free and the rest is taxed as income. Some platforms charge per UFPLS payment. Source: MoneyHelper: taking your pension as multiple lump sums.
Withdrawal rate: The share of your pot you take out each year. Higher rates raise the chance of running out of money; rules of thumb such as 3–4% are only a starting point, not a guarantee. Source: MoneyHelper: flexi-access drawdown explained.

Ready to compare? See every drawdown platform ranked for your pot or read our guide to income drawdown. Information only, not personal advice.

Important: The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. This is not financial advice.