The pension jargon buster.
Pensions come with a lot of acronyms. Here’s what the common ones actually mean, in normal words.
Two ways to learn the lingo.
Pick a game.
Buddy’s Run
Collect the benefits, jump the excuses. Endless, three lives, best score kept. PlayJargon Battle
A wild pension term appears. Pick the right meaning to bust the Jargon Blob. PlayPension
A long-term savings pot for your retirement. You pay in while you're working, it's invested so it can grow, and you draw on it once you stop working. The government encourages it with tax relief.
Tax relief
Money the government effectively adds to your pension by reducing the tax you pay. If you're a higher-rate taxpayer, for every €100 you put in, around €40 can come back to you as relief, so it really costs you about €60. Relief is subject to Revenue's age-related limits.
It could cost you about €60 at the higher rate of tax, or €80 at the standard rate, within Revenue’s age-related limits.
See it for your age and salaryRevenue's limit on the contributions that get tax relief, as a share of earnings.
Earnings count up to €115,000.
AVCAdditional Voluntary Contribution
Extra payments you can make into a workplace pension, on top of the standard contributions, to build your pot faster. They usually qualify for tax relief too.
ARFApproved Retirement Fund
One option at retirement. Instead of buying a guaranteed income, you keep your pot invested and draw money from it over time. It stays invested, so it can grow, but it can also fall, and it can run out if you draw too much.
Annuity
Another option at retirement. You use your pension pot to buy a guaranteed income for life from an insurer. It gives certainty, but once bought it usually can't be changed.
Drawdown
Taking money out of your pension once you've retired. The 4% figure you'll see in our calculator is a simple illustration of drawing 4% of your pot a year, not a recommendation.
Drawing 4% a year from it is about €167 a month.
Defined ContributionDC
The most common type of pension today. What you end up with depends on how much was paid in and how the investments performed. The pot is yours, but the final value isn't guaranteed.
Defined BenefitDB
An older type of workplace pension that promises a set income in retirement, usually based on your salary and years of service. These can be valuable, which is why it's worth checking before moving one.
Lump sum
At retirement you can usually take part of your pension as a tax-free lump sum, within limits set by Revenue. The rest provides your retirement income.
Fund / investment growth
Your pension is invested in funds, which can rise and fall in value. Growth is the increase over time. It's never guaranteed, and returns can be negative in some years, which is why long-term thinking matters.
State Pension
The pension paid by the government to people who've enough PRSI contributions. It may be payable on top of your own pension, but for most people it isn't enough on its own to fund the retirement they'd like.
PRSAPersonal Retirement Savings Account
A flexible, portable personal pension you own yourself. Useful if you don't have a workplace scheme, or want a pension that moves with you between jobs.
Consolidation
Bringing several old pensions together into one plan so they're easier to manage. It often makes sense, but not always, since some older pensions carry guarantees worth keeping. Worth checking each one.
Employer contribution
Money your employer pays into your pension on your behalf. It's effectively part of your pay, so not joining a scheme that offers it usually means leaving money on the table.
Corporation tax relief
For company directors, pension contributions made by the company can usually be offset against its profits, reducing its corporation tax bill, while building your retirement fund. One of the reasons director pensions are powerful.
Standard Fund ThresholdSFT
Revenue’s cap on the total pension fund that can benefit from full tax relief. Anything above it is taxed when it is drawn down, so it sets a practical ceiling on how much is worth funding. The threshold was legislated to rise in steps from 2026 to 2029, and the current figure is best confirmed in conversation.
QFAQualified Financial Adviser
A professional qualification for financial advisers in Ireland. It means the adviser has met the standard required to give regulated financial advice.
This page is information, not advice. These explanations are general and won't fit everyone's situation. For advice on what's right for you, have a free chat with Damian.
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