Combat the confusion with the jargon buster
A lot of phrases and terms are similar across the pensions industry, and there are a few extra ones that are unique to USS.
| Industry language | What we say | What it means |
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Defined benefit (DB)
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Retirement Income Builder
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A pension based on how much you earn and how long you've worked for your employer. It means you're guaranteed an income from when you retire until you die. The Retirement Income Builder is a DB pension. |
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Defined contribution (DC)
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Investment Builder
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A DC pension arrangement is a savings pot that builds up based upon how much is paid in and how your investments perform. Your savings can be used in a variety of ways when you come to take them. The Investment Builder is a DC arrangement. |
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Income drawdown
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Flexi-access drawdown
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This is one of the flexible ways you can take your defined contribution (DC) savings (like your Investment Builder pot) from age 55*. With drawdown, you may be able to take up to 25% of your pension savings (up to a limit set by HMRC) tax-free upfront. The rest can remain invested and then be taken as income when it suits you. This income may vary depending on investment performance and it isn't guaranteed for life. *The government has announced they’ll raise this to age 57 in 2028. Depending on where you are in your retirement journey, this could impact how early you can access your USS benefits. |
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Managed investment funds
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Do It For Me Option
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An investment option for members with Investment Builder (defined contribution) savings. If you choose this option (or don’t make a choice), we’ll manage your investments for you. We invest your savings into a mix of funds. As you get closer to your Target Retirement Age, we gradually move your investments from funds with higher potential for growth but higher risk into funds that have less risk but less potential for growth. This aims to protect the value of your savings as you get close to taking them. |
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Self-managed investment funds
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Let Me Do It Option
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An investment option for members with Investment Builder (defined contribution) savings. This option puts you in control of all your investment decisions, so you’re in charge of keeping track of how your funds are doing. There are 10 funds for you to choose from and you can invest in one or more of them. They range from lower risk funds with possible lower returns, to higher risk funds, with potential higher returns. |
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Leaver
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Deferred member
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This is a member who's stopped paying in to USS, but has not yet retired.
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Common pension jargon:
Accrual rate
This is the rate a member builds up benefits in a defined benefit (DB) scheme. For example at USS the accrual rate is 1/85th, the pension is calculated as 1/85 x pensionable salary x time they’re a member at USS.
Adjusted income
This is your taxable income, plus the Annual Allowance amount you have used in the tax year, less your pension contributions.
Annual Allowance (AA)
The maximum amount of tax-free pension savings that can be made in a tax year. The standard AA is £60,000. If your savings exceed this amount, a tax charge may be payable which is designed to off-set the tax saving you will have received on your pension contributions.
Annuity
Purchasing an annuity with your defined contribution (DC) savings (like the Investment Builder) means you’ll buy a regular income for life when you retire. The rate received will depend on a number of things, like the amount of money in your DC pot, market conditions, your age and health, whether or not the income will increase once in payment, and whether a pension will be provided to your dependants when you die.
Money Purchase Annual Allowance (MPAA)
The MPAA applies when you start taking defined contribution savings (like the Investment Builder) in certain ways. The limit is £10,000 per year.
Once triggered, it limits how much you can pay into defined contribution arrangements (like the Investment Builder) before you need to pay tax. It will apply for all future tax years as well as the year in which you triggered it. It’s a HMRC limit designed to stop individuals taking tax-free pension savings out of one scheme and then claiming more tax relief by reinvesting them back into other pension schemes.
Salary sacrifice
If your employer offers salary sacrifice, you can agree to give up the part of your salary that you would pay towards your pension, and your employer will pay your contributions for you. Then, you (and your employer) could pay lower National Insurance contributions.
Uncrystallised funds pension lump sum (UFPLS)
This is one of the flexible ways you can take your defined contribution (DC) savings (like your Investment Builder pot) from age 55*. With UFPLS you can take several cash payments from your DC savings to suit you. The first 25% of each is usually tax-free (subject to HMRC limits).
These are usually called cash payments at USS. You can take up to four cash payments each year from your Investment Builder pot (minimum £2,000 each, unless you are taking your entire pot). There is no charge for cash payments with USS, though there may be tax charges.
*The government has announced they’ll raise this to age 57 in 2028. Depending on where you are in your retirement journey, this could impact how early you can access your USS benefits.
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