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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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An annuity for an employee, ex employee or dependant purchased by the [employer] at or after the time of the employee?s retirement, death or leaving service.


A fund that has the ability to use [gearing] and to take both [long] and [short positions] with the aim of achieving an [absolute return]. A large variety of hedge fund strategies exists and the level of [risk] taken will vary.

Smaller funds or investors looking for a diversified exposure to hedge funds will often opt for a fund of hedge funds, which is a fund with underlying investments in several hedge funds covering different strategies and geographical areas.


A strategy that aims to reduce potential losses in an investment by reducing the overall level of [risk]. For example, transacting a foreign currency contract at an agreed future price to protect against currency fluctuations, which might affect the value of an overseas investment.


Formed in 2005, following the merger of the Inland Revenue and HM Customs and Excise.

It has the responsibity for the registration of [pension schemes] and taxation of contributions and [benefits].


Deals with the policy, operational and technical work relating to [pension schemes].


Protection of entitlement to the basic pension for people unable to undertake regular employment because they are caring for children or a sick or disabled person at home.

  1. An [occupational pension scheme] which has both defined benefit and [defined contribution] sections.
  2. An [occupational pension scheme] in which the [benefit] is calculated as the better of two alternatives, for example on a [final salary] and a [money purchase] basis.