Jargon Busters

The percentage of the money left which can be invested after the charges have been taken off. Generally applies to pension, savings or investment policies.

An Annuity is a retirement payment option that guarantees to pay you a particular amount every month throughout your life in retirement.

The level of risk you are prepared to take with your money and assets in a particular timeframe.

A new retirement savings system for employees, due to be introduced in the second half of 2024. People who do not have a pension scheme, earn more than €20,000 per year and are aged between 23 and 60 will be automatically enrolled into the new system.

Financial Brokers are experts in financial planning and work on your behalf to give you a choice of products and providers from across the market.

Also known as a Retirement Bond. A personal policy, set up in your own name, into which you can transfer pension plans from previous employments. Essentially, rather than trying to keep track of an old workplace policies, you can transfer them into an individual policy that’s easier to monitor.

Occurs when you sell an asset for more than what you originally paid for it.

A way of calculating an employees pension benefits whereby the amount of pension you receive is based on your pensionable earnings
each year you are in employment, rather than your final salary.

In a contributory pension schemes, the amount of pension you receive in retirement is directly related to how much you contributed to the scheme during your employment. A non-contributory pension schemes benefits can be calculated differently depending on the scheme. For example, the non-contributory state pension is means tested.

The practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce your moneys exposure to volatility over time.

Another term for escalation or indexation. It is used to describe the increase of earnings in line with inflation, either for calculating scheme benefits or Revenue limitations.

An equity investment is money that is invested in a company by purchasing shares of that company in the stock market.

A type of fee charged by a life company or pension provider early withdrawal from a policy.

Exit Tax is a tax you pay on any profit you make on a plan with a life insurance company.

A process where a Financial Advisor gathers information from an individual to understand their financial circumstances and requirements before making a recommendation.

A gross amount is the full value before any deductions or additions are taken into account. For example, gross income is full earnings before tax or other deductions. Net income is the ‘take-home’ pay that you receive after tax, deductions etc are applied.

Income Protection, also known as Permanent Health Insurance, pays out a regular payment that replaces part of your lost income if you can’t work due to a medium to long-term illness, injury or disability.

Inflation is the rate of increase in prices over a given period of time.

An investment fund that includes and switches between assets with varying risk levels. These funds determine the best assets for investors based on their risk tolerance, age, and investment goals. As the investor nears retirement, the fund reduces in risk.

Contributions are taken from an employees pay before their wages are taxed. Tax is only paid on whats left, therefore full tax relief is applied straight away and there is no need for the individual to claim tax relief from Revenue.

Part of your income which is not taken into account in calculating your pension benefits. Typically this would be income such as overtime, bonuses or allowances.

The regular payment you make to a life company in exchange for a pension or insurance policy.

A benefit provided by Public Sector Superannuation schemes which makes provisions for survivor’s in the event of the employees’s death.

A limit or cap on the total capital value of pension benefits that an individual can draw from pensions which they have received tax relief on.

A pension program designed to benefit employees in an organisation after retirement.

A fee charged for withdrawing funds from an insurance, investment or pension policy early or canceling the contract.

When you retire, you can usually take part of your pension fund as a once off tax-free payment. The amount you can take depends on the type of pension plan you have and how much you have taken in tax-free lump sums from other pension plans.

Tax reliefs reduce the amount of tax that you have to pay. Tax relief on regular pension cotributions is given at source by your payroll. Your payroll will deduct your pension contribution before applying income tax, reducing the amount of tax you pay.

Covers you for a specific length of time (the term) and pays a lump sum to your next of kin if you die during that term.

Pension scheme trustees have responsibility for the administration and compliance of pension schemes. Historically, there could be different trustees for each pension scheme. Master Trusts were implemented in 2023 to encorperate multiple employers schemes under one trustee umbrella.

Each investment fund is made up of ‘units’. The value of a unit is called the unit price and represents the value of the assets (e.g. shares, property, bonds etc) in each investment fund. Because the value of these assets can go up or down on a daily basis, the values of the unit will also move daily.

The level of risk of an investment fund value to increase or decrease over time.

Whole of life insurance cover is a life insurance plan that lasts for a whole lifetime, and is not limited to a specific term. If you pass away this policy will provide a lump sum payment to your family.