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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 person who ceases to be an [active member] of a [pension scheme], other than on death, without being granted an immediate retirement [benefit].


The immediate payment of retirement [benefits] to a member before [normal pension date].

The benefit may be reduced because of early payment.

See also [ill health early retirement].


The earliest age at which an employee can draw an age related benefit without the consent of any person and without it being reduced for early payment. This age will be set out in the scheme rules or may be otherwise determined (for example by custom and practice). Any special provision for early retirement without reduction should be disregarded e.g. early payment on the grounds of ill health or redundancy.

The relevant statutory provision is The Equality Act (Age Exceptions for Pension Schemes) Order 2010.


An [occupational pension scheme] providing [money purchase] [benefits] under which all the benefits are secured by one or more policies of insurance or [annuity] contracts, such policies or contracts being specifically allocated to the provision of benefits for individual [members] and/or their [dependants].


A policy held by a [pension scheme], where each [annuity] or sum assured is earmarked to provide [benefits] for or in respect of an individual [member] and/or their [dependants].


An order of the Court under PA95, when a [member] of an [occupational pension scheme] or [personal pension scheme] divorces, directing the trustees or managers to pay some or all of the member's [benefits] to the ex spouse at the time they become payable to the member.

See also [pension sharing order].


Limitation introduced by FA89 on the amount of remuneration on which the [benefits] and contributions of a member who was subject to the then [Inland Revenue] post 89 maximum benefit limits (i.e. a member without continued rights) might be based. The earnings cap is still retained by some [occupational pension schemes].

Also commonly referred to as the permitted maximum or allowable maximum.


A notional amount of earnings used for the purpose of calculating state scheme benefits or (formerly) [GMPs].


See [lower earnings limit] and [upper earnings limit] and u[pper accrual point].


The conditions which must be met for a person to be a [member] of a [pension scheme] or to receive a particular [benefit].

These may, for example, relate to length of service, status and type of employment.

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