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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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Under the legislation [indirect discrimination] (and [direct discrimination] on the ground of age) will be justified if it pursues a legitimate aim and is a proportionate means of achieving that aim.


A scheme established by an [employer], or on behalf of a group of employers, to provide pensions and/or other benefits for or in respect of one or more employees on leaving [pensionable service] or on death or retirement.


A [pooled investment vehicle] structured as a limited company in which investors can buy and sell shares on an ongoing basis. The number of units (or shares) in the fund varies from day to day according to the number of investors wishing to buy or sell holdings in the fund.


The option to apply the proceeds of an insurance or investment contract to buy an [annuity] at a current market rate from the same or another insurance company.


Jobholders who are not automatically enroled (for example, because they opted out or are aged under 22) can opt in by giving their employers notice requiring the employer to arrange for them to join a [qualifying scheme]. However, they can only do this once in a 12-month period. Low earners can opt into a [pension scheme] too, but are not entitled to receive any employer contributions.

See also [Opting out] and [Automatic Enrolement].


A decision by an employee to leave or not to join an [occupational pension scheme] of the [employer]. In the context of [automatic enrolment], [jobholders] have a one month "opt-out period" after they have been automatically enrolled.

It is important that they are given all the information about automatic enrolment and the scheme, so they can make an informed decision on whether opting out is the right choice for them. If they choose to opt out, they will get a refund of any contributions they have made.

See also [Opting In].


The right but not the obligation to buy ([call option]) or sell ([put option]) a specific security at a specified price (the exercise or strike price), at or within a specified time (the expiry date). This right is purchased by payment of an amount (known as the premium) to the writer (seller) of the option, and can be exercised whatever happens to the security's market price.

Options can also be purchased on stock indices, in which case they are usually cash settled at maturity.


Denotes the annual contributions payable to a [registered occupational pension scheme] by the [employer] on a common basis e.g. a fixed amount or fixed percentage of payroll.


A security that is not listed on any formal stock exchange and that is therefore traded by buyers and sellers dealing directly with each other.

The exact meaning may vary between parts of the world financial market.


The application of statutory requirements to [pension schemes] by means of provisions which directly override [scheme rules].

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