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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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Annual payments into [Appropriate personal pension scheme]s (including [Stakeholder Pension Scheme]s) and [Contracted Out Money Purchase Scheme (COMP)] occupational pension schemes, made by the HMRC [National Insurance Contributions Office]. These payments are based on a percentage of earnings between the [Lower and Upper Earnings Limits] (or, from 6 April 2009, the Upper Accrual Point), and generally increase with the age of the member up to a maximum. They are intended to provide benefits broadly equivalent to the [State Second Pension] benefits given up.

Rebates will not apply in respect of employment after 6 April 2012.

See also [contracted out rebate].


Under the [Pension Scheme SORP], those [assets] of an [occupational pension scheme] providing [defined contribution benefits] which have been specifically allocated for the provision of benefits to or in respect of named members.

Under the previous Pension Scheme SORP these assets were referred to as [designated assets].

See also [Not Allocated Assets].


See [earnings cap].


Represents the additional or excess return, relative to the market return ([beta]), which is derived from a portfolio selected by a skilled active [investment manager].

See also [Active Investment Management].


Investments other than the mainstream asset classes of [equities] and [bonds]. Alternatives include [hedge funds], [private equity], and commodities. Property is also sometimes described as an alternative investment although many pension funds have held property investments for many years.

It may imply a higher [risk].


Payment of income withdrawals direct from a money purchase arrangement to a member of that arrangement. This is only available to those aged 75 and over.


1. The spreading of an [actuarial surplus] or [actuarial deficiency] over an appropriate period.

2. An accountancy term for the reduction in value of an [asset], such as leasehold property, caused by the passage of time. If the cause is not solely related to time, the corresponding term is depreciation.


A written annual actuarial report (funding update) covering developments since the last [actuarial valuation] or report.

The relevant statutory provisions are The Occupational Pension Schemes (Scheme Funding) Regulations 2005 (SI 2005/3377).


The maximum amount of tax-relievable pensions that can be built up in one tax year. This is expressed as a capital value and the amount is ¶œ50,000 a year but the Government will consider options for indexing from 2015/16. Any excess is subject to the [annual allowance charge].

The relevant statutory provision is s228 FA2004.


The tax charge that is levied on an individual who exceeds the [annual allowance].

The relevant statutory provision is s227 and paragraphs 8 - 12 of schedule 34 FA2004.

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