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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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Common name for an appendix to a [Cabinet Office Statement of Practice] published in 1999 entitled ‹¨«Fair Deal for Staff Pensions‹¨«. Revised and re-issued in 2004 with additional requirements.


The amount for which an [asset] could be exchanged or a [liability] settled at arms length between knowledgeable parties.

IFRS require some [assets], [liabilities] and equity instruments to be measured at fair value.

FAS 157

The US Financial Accounting Standards Boardƒ??s statement which deals with accounting for [fair value] measurements.

It has established a three level hierarchy for measuring [fair value]. With level one assets being the easiest to value and level three the hardest to value.

FAS 87 & FAS 88

FAS 87 is the US Financial Accounting Standards Board's statement which deals with accounting for [pension costs] in [employers]' accounts.

FAS 88 applies to employers' accounts when a scheme is wound up or if [benefits] are settled on termination of employment.

These have both been amended by Statements of Financial Accounting Standards numbers 132, 132R and 158.


See [final pensionable earnings].


See [final salary scheme].


The [earnings] on which the [benefits] are calculated in a [final salary scheme].


A [defined benefit scheme] where the [benefit] is related to the amount that the [member] is earning at the time of retirement, death or leaving [pensionable service] and to the period of pensionable service.

The earnings taken into account are often an average over the last few years of pensionable service.


A minimum [benefit] calculated on a final salary basis provided by a [hybrid scheme] (definition 2).

See also [final salary scheme].


A scheme established to assist [members] who have lost all or part of their occupational pensions [benefits] through employer insolvency but who will not be covered by the [Pension Protection Fund] as the wind up commenced before 6 April 2005 (and after 1 January 1997).

The Board of the Pension Protection Fund was appointed as the FAS Scheme manager from July 2009.

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