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Pensions Terminology

Pensions Terminology is a glossary of terms which is produced in conjunction with the Pensions Research Accountants Group (PRAG).

Its purpose is to encourage all pensions professionals to speak the same language. It is revised and updated periodically and the current (eighth) edition was launched in June 2011.  It is now recognised as a standard reference work.

If you have any comments regarding Pensions Terminology contact the Qualifications Department at qualifications@pensions-pmi.org.uk


The Eighth edition of Pensions Terminology is now available for free as a pdf only. You can download it here.

Pensions Terminology (Eighth Edition) is sponsored by Willis Towers Watson.

Willis Towers


Copyright to Pensions Terminology has been ceded by PRAG to The Pensions Management Institute in recognition of our educational role. Attention of users is drawn to the existence of this copyright, but as both organisations are anxious to encourage standardisation of terminology for all those associated with pensions, the use of definitions of individual terms is encouraged.

Reproduction of larger sections will normally be permitted on application, provided that such use is acknowledged.


Neither PRAG, nor the members of any working party or committee thereof, can accept any responsibility or liability whatsoever (whether in respect of negligence or otherwise) to any pension scheme trustee or member or third party, wherever situate, as a result of anything contained in or omitted from this publication nor the consequences of reliance or otherwise on the content of this publication.

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A [funding method] in which the [actuarial liability] at the [valuation date] relates to:

(a) the benefits for [pensioner]s and [deferred member]s and their [dependant]s, allowing where appropriate for future increases, and

(b) the [accrued benefits] for [member]s in service on the valuation date.

Allowance may be made for earnings and service to be projected to the end of the [control period] and for [revaluation] thereafter, in which case allowance may also be made for replacing members assumed to leave during that period.

See [GN26] published by the Institute of Actuaries and Faculty of Actuaries (and adopted by the Board for Actuarial Standards (BAS) in 2007) for the exact definition.


The benefits to which a [member] is entitled, as of right, under an [occupational pension scheme]. These include [accrued benefits].

The term is given various specific definitions in PSA93 for the purposes of [preservation], contracting out and the [Disclosure Regulations]. It is also given a specific meaning in PA95 e.g. in relation to scheme amendments.


The total of contributions paid by a [member] of a [pension scheme] during a given period, enhanced, where appropriate, by interest. In a [defined contribution scheme] the term may also include the employer's contributions.


A style of investment management where the fund manager aims to outperform a [benchmark] by superior asset allocation, market timing or stock selection (or a combination of these). Compare with [passive investment management].


A [member] of an [occupational pension scheme] who is accruing benefits and/or paying contributions under that scheme in respect of current service.


A measure of [volatility] of fund performance compared with that of the [benchmark] return. In technical terms, it is defined as the forecast standard deviation of annual returns versus the [benchmark].

Active risk is usually quoted [ex-ante], the [ex-post] measure of [volatility] of actual returns more usually being referred to as realised tracking error.


The set of assumptions as to [rate of return], inflation, increase in earnings, and mortality etc, used by the [actuary] in an [actuarial valuation] or other actuarial calculations.

See also [actuarial valuation assumptions].


Commonly used to mean the [funding method] and/or [actuarial assumptions].


A certificate given by an [actuary] arising out of actuarial work.

Actuarial certificates include:

(a) the [reference scheme test] certificate

(b) the [certificate of technical provisions]

(c) the [schedule of contributions] certificate

(d) the [bulk transfer] certificate

(e) the [deficit reduction contributions certificate].


The excess of the [actuarial liability] over the value of the [assets], on the basis of the [funding method] and [actuarial assumptions] used.

If an [actuarial report] refers to an [actuarial surplus] or [deficiency], it must be studied to ascertain precisely how the [assets] and [liabilities] have been assessed.

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