CIIN Certificate CF6 key terms

An annual projection sent to members of defined contribution schemes showing the retirement income their fund might buy, expressed in today's money after allowing for assumed inflation and annuity rates.

The former cap on total pension savings that could be built up before an extra tax charge applied on excess benefits; replaced by lump sum and income allowances from April 2024.

The maximum total of tax-free cash that can be taken across all registered pension schemes, set at 25% of the standard lifetime allowance equivalent from April 2024.

The tax-free cash normally available when pension benefits are first crystallised, usually capped at 25% of the fund within the individual's remaining lump sum allowance.

A point at which pension benefits are tested against allowances, such as taking tax-free cash, designating funds to drawdown, or reaching age 75 with uncrystallised savings.

An arrangement where a crystallised pension fund stays invested and the member takes adjustable income withdrawals, bearing the investment risk rather than buying a guaranteed annuity.

The factor determining how much guaranteed annual income a given pension fund purchases, driven mainly by age, interest rates, mortality assumptions and any escalation or survivor benefits chosen.

The regime allowing members of defined contribution schemes flexible access to their funds from age 55, with most withdrawals taxed at the member's marginal income tax rate.

A reduced annual allowance applying once someone has flexibly accessed a defined contribution pension, restricting further tax-relieved contributions to that lower limit.

The maximum tax-relieved pension contribution an individual can make in a tax year across all arrangements, with tapering for high earners and carry-forward of unused relief.

The ability to use unused annual allowance from the previous three tax years, subject to having sufficient relevant UK earnings in the current year and scheme membership in those years.

The legal duty on employers to enrol eligible jobholders into a qualifying workplace pension and pay minimum contributions, with the employee able to opt out.

A pension arrangement meeting statutory minimum standards for auto-enrolment, including contribution levels, investment options and charges, so employers can discharge their duties through it.

An occupational pension promising a retirement income based on a formula linked to salary and service, with the employer carrying investment and longevity risk.

A pension where contributions are invested and the final fund depends on investment performance and charges, leaving the member to bear the risk of poor returns.

The capital sum offered by a defined benefit scheme to release a member from its promise, which must be assessed for fairness and suitability before any transfer proceeds.

Pension rights containing a guaranteed income or other promise, requiring a pension transfer specialist to give advice before they can be exchanged for flexible benefits.

A statement from the government showing the retirement income currently built up and the amount payable at state pension age, used to check National Insurance record gaps.

Years of National Insurance contributions or credits that count towards entitlement to the state pension, with a minimum number needed for any payment and more for the full amount.

A projection of assets, income and expenditure across the client's remaining life, used to test whether a plan is sustainable under stated assumptions.

Readily accessible savings set aside to cover unexpected expenses or loss of income, typically holding several months of essential outgoings in cash or near-cash.

The amount by which a client's income exceeds expenditure over a period, providing the capacity for saving, debt repayment or additional protection cover.

A schedule listing assets and liabilities at a point in time to show overall financial position, forming the starting point for personal financial analysis.

The danger that rising prices erode the real value of savings and fixed income, reducing purchasing power over the client's planning horizon.

The return on an investment after deducting inflation, showing the actual growth in purchasing power rather than the headline nominal figure.

A client's willingness to accept investment volatility and potential loss, shaped by personality, experience and goals, and distinct from the capacity to bear risk.

The financial ability of a client to absorb a fall in investment value without undermining essential spending or long-term goals, regardless of their attitude to risk.

The division of a portfolio between asset classes such as equities, bonds and cash, which is the main driver of both long-term return and volatility.

Spreading money across assets, sectors and regions so that no single loss dominates the portfolio, reducing unsystematic risk without necessarily lowering expected return.

A measure from minus one to plus one of how closely two investments move together, used to judge whether combining them genuinely reduces portfolio risk.

A written explanation given to a client setting out the advice recommended, why it meets their objectives and circumstances, and the disadvantages and costs involved.

The process of gathering and recording a client's circumstances, objectives, attitude to risk and financial position before giving advice, and keeping it up to date.

The structured record of a client's personal and financial details collected at the start of the relationship, providing the evidence base for later recommendations.

Situations where the adviser's or firm's interests could improperly influence advice, which must be identified, disclosed and managed so the client is not disadvantaged.

An advice status requiring the firm to consider the whole market and charge clients directly rather than receiving commission, avoiding product-provider bias.

The regulatory principle that firms must deliver fair outcomes for customers across product design, advice, disclosure and after-sales service, not merely follow process.

A regulatory standard requiring firms to act to deliver good outcomes for retail customers in products, price and value, understanding, and consumer support.

A client whose circumstances, such as health, bereavement, low literacy or financial strain, make them less able to make decisions or more susceptible to harm.

The structured learning and reflective activity an adviser must record each year to maintain competence and meet the regulator's ongoing knowledge requirements.