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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

Ordering

The Eighth edition of Pensions Terminology is available at £20 per copy or £15 per copy when ordering ten or more. It can also be bought as a pdf file for individual or company intranet use. For further details and to download a copy of the order form please contact qualifications@pensions-pmi.org.uk

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

Willis Towers

Copyright

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.

Liability

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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CABINET OFFICE STATEMENT OF PRACTICE (COSOP)

These statements prescribe practice to be followed by Government departments.

The Cabinet Office issued the COSOP "Staff Transfers in the Public Sector" in January 2000.

CALL OPTION

An [option] that gives the right (but not the obligation) to buy a specific quantity of the underlying security at a fixed price, on or before a specified date.

See also [option].

CANCELLATION NOTICE

A document issued to an individual by the pension provider outlining the individual's legal right to cancel the contract within a specified period of receiving the notice.

CAREER AVERAGE REVALUED EARNINGS SCHEME (CARE)

A [career average scheme] where [benefits] are revalued by reference to an appropriate index during and after [pensionable service].

CAREER AVERAGE SCHEME

A scheme where the [benefit] for each year of membership is related to the [pensionable earnings] for that year.

CARRYING VALUE

An accounting measure of value, which is based on the original cost of the [asset] less any depreciation, amortisation or impairment costs made against the asset. This may differ from the assetÆ’??s [market value].

See also [Book Value].

CASH BALANCE ARRANGEMENT

A [defined benefit scheme] in which a guaranteed cash sum is built up for each employee on the basis of a known formula and which is directly related to that employee's [pensionable earnings] in each year of membership. The resulting "cash balance" can be used either to purchase an [annuity] or to make other arrangements for retirement.

Such plans are common in the USA but are now being introduced more widely in the UK.

CASH BASIS

A method of accounting under which the transactions are accounted for only at the time money is received or paid. This is in contrast to the [accruals concept].

CASH EQUIVALENT

The value of [benefits] accrued by a [member] of a [pension scheme].

Cash equivalents are used in [cash equivalent transfer values], and for other purposes, for example when a [pension sharing order] is made.

The relevant statutory provision is s94 PSA93.

CASH EQUIVALENT TRANSFER VALUE (CETV)

The value which a [member] of a [pension scheme] may require to be paid as a [transfer payment] to another registered pension arrangement.

See [Reduced Cash Equivalent Transfer Value].

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