Glossary of Terms
The rate at which your pension benefit is built up as pensionable service is completed in a defined benefit scheme. It is often expressed as a fraction of your pensionable salary, e.g., 1/60th for each year of service.
The retirement benefits that have built up for you, based on your membership of the Scheme to date. These benefits may be calculated in relation to current earnings or projected earnings and allowance might also be made for any increases provided for by the scheme rules or by legislation. Sometimes known as Accrued Rights.
Accrued Interest Adjustment
Made to bond prices to allow for the fact that interest is paid at set intervals but earned on a daily basis.
An approach to investment which relies on the ability of an Investment Manager to select an investment portfolio and to actively trade the portfolio so that, over time, it will outperform a particular stock market index or benchmark.
A member of a pension scheme who is in reckonable service ‐ i.e., currently in the employment to which the scheme relates, and included in the scheme for a pension benefit.
In a defined benefit scheme the set of assumptions made by the actuary as to rates of return, inflation, increase in earnings, mortality, etc. These assumptions form the basis of an actuarial valuation or other actuarial calculation.
An investigation by the actuary into the ability of a pension scheme to meet its benefit promise. This is usually done to calculate the recommended contribution rate which takes account of the actuarial values of assets and liabilities of the fund. Such an investigation is also needed so that the actuary can complete a funding certificate.
An adviser on financial matters involving the probabilities relating to mortality and other contingencies affecting pension scheme financing. The Pensions Act regulates who may function as actuary to a scheme. In the context of PRSAs, the Act also defines a PRSA Actuary, an actuary who must be employed or retained by a PRSA provider.
Additional Voluntary Contributions (AVCs)
Additional payments you can make into your existing pension scheme (or into a separate special pension arrangement) to increase your pension benefits at retirement. These payments are subject to limits the Revenue Commissioners have set on the level of additional payments individuals can make in any one year.
- A person regarded by the Revenue Commissioners as responsible for the management of a pension scheme.
- In a less formal sense it means the person or body which manages the day to day administration of the scheme.
- Under the Pensions Ombudsman Regulations, the Administrator can include a great many persons who provide services to a scheme, or who apply or interpret its rules.
(See also Registered Administrator)
These are the regular contributions your Employer and you make into your pension scheme in a year.
A report required by the Pensions Act to be made available annually, explaining the main developments in your pension scheme during the year and outlining the overall value of all the investments in the scheme at the year-end. The content of the annual report is specified in the disclosure regulations. A shorter annual report may be issued for pension schemes with fewer than 100 active and deferred members.
A guaranteed income for life. It is normally secured by a lump sum payment to an insurance company. A number of factors can influence the amount of income that annuities provide, for example your age at retirement, your gender, interest rates at retirement. It may remain level during payment, or increase to compensate in whole or in part for increases in the cost of living. You can opt for an annuity which ceases when you die, or one which continues to pay out to your spouse or partner after your death.
Different annuity options are available if you decide to buy an annuity on retirement. These may include the option of paying an income to your spouse or dependant in the event of your death.
The rate applied to a lump sum to calculate the level of your regular income payments that this lump sum will provide. The income may be payable for the whole of the remainder of your life or for a fixed period of time.
Approved Minimum Retirement Fund (AMRF)
An Approved Retirement Fund which is subject to restrictions on the drawdown of capital before age 75. Needed if an individual does not fulfill minimum income conditions.
Approved Retirement Fund (ARF)
A fund managed by a qualifying fund manager into which you can transfer your Additional Voluntary Contributions (AVCs) at retirement and out of which you can draw down income during retirement subject to certain conditions. Rules apply to the amount that can be drawn down and all draw downs are subject to income tax. See also Approved Minimum Retirement Fund
An occupational pension scheme which is approved by the Revenue Commissioners under Chapter 1 of Part 30 of the Taxes Consolidation Act, 1997. See also Exempt Approved Scheme
The process of assigning investments across broad asset classes or sectors of assets. The sectors typically considered are domestic and international equities, bonds, property, cash and alternative investments.
The process of investing your funds in such a way as to try to provide the best possible return, considering the amount of risk that you are prepared to take.
The property, investments, debtors, cash and other items of which the trustees of a pension scheme are the legal owners.
An independent examination of the records and financial transactions of a pension scheme.
An independent individual or firm appointed to report on the accounts of a company or other entity (such as a pension scheme).
Authorised Unit Trust
A unit trust that has applied to the relevant regulator for this status, enabling the units to be marketed to all types of customers. The relevant regulator’s rules regulate the assets in which an authorised unit trust is permitted to invest.
Average Earnings Scheme
A scheme where the benefit accruing for each year of membership is related to pensionable earnings for that year. These schemes are not common.
When an Investment Manager is given broad discretion in relation to the management of all the main asset classes.
This is one target against which investment performance can be measured. A benchmark, usually stipulated at the outset of an investment process, can be a stock market index or a peer group. Many Investment Managers aim to beat their benchmark by one or two percentage points every year. To do so, they tend to construct a portfolio that is generally in line with their benchmark, i.e. stock or country weightings will reflect those of the chosen benchmark. To add value Investment Managers will then over or underweight assets relative to the benchmark.
A person who is entitled to benefit under a pension scheme, or who will become entitled to a benefit in specific circumstances (e.g. on the death of a member).
A statement of the benefits payable to you or your dependants in certain circumstances, e.g. retirement or death, etc. The benefit statement is issued once a year.
An initial investment charge that refers to the difference between the buying and selling price of the asset or a unit in an investment fund on a given day.
A certificate of debt issued by a company, a government or other institution, guaranteeing regular payments of interest and repayment of capital on a specified date or range of dates.
Buy Out Bond
An insurance policy that may be purchased by the Trustees of a pension scheme in the name of a member or other beneficiary to secure their benefits following leaving service or on the winding up of a pension scheme. Also used to transfer from a pension scheme the benefit allocated to a non-member spouse by a pensions adjustment order.
An investment in deposits or other short-term interest-bearing assets.
Certificate of Existence
A document confirming that a person entitled to a pension is still alive.
Chosen Retirement Date
The date on which you intend to retire. This must be within the normal retirement age limits set by the Revenue Commissioner.
An option given to a member to replace a series of future payments by an immediate lump sum. The exchange of pension for immediate cash is regulated by the Revenue Commissioners.
The factors used by the trustees to determine the amount of pension which needs to be given up in order to provide a given lump sum benefit.
Concentration of Investment
Placing a significant proportion of the assets of a pension scheme in any single investment or category of investments. This is subject to disclosure under the Pensions Act and may also impact on a defined benefit scheme’s ability to meet the funding standard under the Act.
Consumer Price Index (CPI)
A measure of inflation in the price of goods and services.
Benefit whose payment depends on the happening of a particular event ‐ specifically used in the context of the Family Law Acts to mean benefits payable from a pension scheme on the death of a member during the employment or self‐employment to which the scheme relates.
A facility offered by an insurance company that insures the death benefits under a scheme, whereby a member leaving the scheme can arrange a life policy without evidence of health. Such options are now becoming less common.
A term used to describe a period under which employers’ and/or members’ contributions are suspended.
A scheme in which active members are required to make contributions towards the cost of their benefits.
A company which acts as a trustee.
The amount paid by the life assurance company on the death of the person covered by a policy.
Deed of Appointment
A legal document by which a trustee is appointed.
Default Investment Strategy
The Trustees of a defined contribution scheme offer members’ a choice of alternative investment strategies. The Default Investment Strategy is linked to general good practice for investment for retirement and is an automatic investment strategy applied by the Trustees unless the member indicates otherwise.
An annuity which commences from a future date.
Any benefit whose payment is delayed, e.g., until a person reaches normal pension age. Most often used to refer to benefits which accrue to a scheme member on leaving service.
When you leave an employer’s service, you can leave your fund invested but cannot pay any more contributions. When you reach retirement age, you can use this fund to buy a pension.
A person entitled to a pension payment at a future date. Normally this would be an early leaver but the term can also be used to describe someone whose retirement has been postponed.
Another term for late retirement.
Defined Benefit Scheme
A pension scheme where the benefits payable to the member and/or their dependants are calculated in accordance with the rules of the scheme, usually by reference to the member’s salary and years of service completed at retirement. Also known as a Final Salary Scheme.
Defined Contribution Scheme
Also known as a Money Purchase Scheme ‐ a scheme where the individual member’s pension is determined solely by the contributions paid into the scheme by or on behalf of that member and the investment return earned on those contributions and the type of benefits chosen at retirement.
Definitive Trust Deed
The detailed trust deed governing a pension scheme which contains details of all the trustees’ powers. It is usually accompanied by the rules of the scheme.
A person who is financially dependent on a member or pensioner, or was so at the time of death or retirement of the member or pensioner. For Revenue purposes, a child of the member or pensioner may always be regarded as dependent until he or she reaches the age of 18 or ceases to receive full time educational or vocational training if later. Under the Family Law Acts, children may be dependent up to age 23.
A pension that is paid to a dependant from a deceased member’s pension scheme.
A term used to describe the portion of your spouse’s pension expectations allocated by the Court to a ‘non‐member spouse’ or dependant by means of a pension adjustment order made under the terms of the Family Law Act, 1995 or of the Family Law (Divorce) Act, 1996.
Directly Invested Scheme
A scheme whose assets are not invested exclusively in certain named categories of investment, such as insurance policies, cash, and unit funds. Such schemes become subject to the Member Trustee regulations if they have more than 12 active members.
A benefit payable to an employee who is unable to work for medical reasons. This may be paid from a pension scheme as an ill‐health early retirement benefit or it may be payable by the employer either directly or under the terms of an insurance policy or income continuance plan (which are not part of the pension scheme). A disability benefit can also arise under a voluntary disability insurance scheme, paid for in full by its members. Not to be confused with Social Welfare Disability Benefit.
Regulations issued under the Pensions Act requiring disclosure of information about pension schemes and their benefits to interested parties.
A person who ceases to be an active member of a pension scheme, other than on death, without being granted an immediate retirement benefit.
You may choose to retire at a date earlier than the normal retirement date of your pension scheme. Those with special occupations, such as sports people, may retire from age 50. With employer sponsored pension arrangements, employees can also retire from age 50. With personal pension plans, the minimum age is 60, with an option to retire early only as a result of serious ill health.
In the context of the Family Law Acts, contributions paid by or for a person under a defined contribution scheme during a period specified by the Court.
The conditions which must be met for you to be a member of a pension scheme or to receive a particular benefit. Eligibility conditions may include provisions relating to age, completion of service, status and type of employment.
The person or body with whom the member of a pension scheme has a contract of employment relevant to that scheme.
As defined in the scheme rules, the regular amount (normally a percentage of your salary) that your Employer contributes to the scheme on your behalf.
Identical entry conditions for men and women. The Pensions Act requires this.
The principle requiring one sex to be treated no less favourably than the other, as embodied in EC Council Directive 86/378 and the Pensions Act (Part VII), which also requires equal treatment on grounds other than sex.
An investment in shares issued by a company.
A system whereby pensions in payment and/or preserved benefits are increased regularly at a fixed or variable percentage rate. The percentage increase applied may be limited to the increase in a specified index. Escalation may be promised and paid for in advance of retirement, or may be granted on a discretionary basis after retirement takes place.
Exempt Approved Scheme
An approved scheme which is established under irrevocable Scheme trusts, giving rise to the tax relief allowed for in the Finance Acts.
A benefit provided by the employer which it is not legally required to provide. Payment of such a benefit cannot be enforced by the member.
Family Law Act
The Family Law Act of 1995, which is in force since 1st August 1996 applies to foreign divorces as well as judicial separation. This Act, among other things, enables the Courts to allocate part of a member’s pension entitlement under a pension scheme to the spouse who is not a member of the scheme in the course of judicial separation.
Family Law (Divorce) Act
The Family Law (Divorce) Act, 1996, which is in force since 27th February 1997, contains the primary mechanism for the granting of decrees of divorce. This Act facilitates the redistribution of property, including pensions, between parties to a divorce action.
Final Pensionable Earnings/Final Pensionable Salary
The pensionable earnings, at or near retirement or leaving service, on which the pension is calculated. This may be fixed at a particular date or may be based on the average of a number of years.
The term used by the Revenue for the maximum amount of earnings which it will permit to be used for the purpose of calculating maximum approvable benefits. The permissible alternatives are set out fully in the Practice Notes issued by the Retirement Benefits District of the Revenue Commissioners.
Final Salary Scheme
See Defined Benefit Scheme
A system of benefit provision in which employees are given a choice on the makeup of their total benefit package from an employer. Typically, under such a system, you may choose how much of the money made available by the employer would be used for the provision of pensions, death benefits, disability, health insurance, holidays, etc. Minimum limits may be laid down for certain benefits, either because they are specified by the scheme design or are made necessary by employment law or by Revenue practice. Often called, simply, ‘Flex’.
The maximum amount of death benefit which an insurance company covering a group of members for death benefits is prepared to insure for each individual, without production of evidence of health.
A deferred benefit, strictly one which is not subject to revaluation.
A scheme which provides benefits only for members whose service has terminated; or a scheme where continuing service in employment does not entitle members to accrue new pension benefits, and to which no new members are admitted.
A pool of investor’s money set up with an investment strategy attached to it, e.g. a pension fund.
Fund of Funds
A pooled fund which invests in other funds rather than directly in underlying securities.
Fund Related Charge
A charge based on the value of the policy at any given time.
An option to sell some or all of the units in one fund to purchase units in another fund that has a different investment approach. The number of units purchased may be different, depending on the price of units in each fund.
The movement of money from one fund category to another. This facility is available to all investment and pension funds.
A scheme whose benefit promises are backed by a fund of assets set aside and invested for the purpose of meeting the scheme’s liability for benefit payments as they arise. Only funded schemes may receive transfer payments relating to preserved benefits under the Pensions Act without trustee consent.
The provision in advance for future benefit liabilities by setting aside money in a trust, which is separate from the employer’s business, to finance the payment of pensions.
In relation to defined benefit schemes a certificate issued by the actuary under the funding standard provisions of the Pensions Act.
A proposal for restoring the solvency of a defined benefit scheme which fails to meet the funding standard. The proposal must be signed by the trustees and employer(s) and must be submitted to the Pensions Board for approval.
The rate at which contributions are payable to support the liability for benefits. Often used as shorthand for recommended contribution rate.
Provisions under the Pensions Act, by which defined benefit schemes are subject to periodic actuarial valuation and completion of a funding certificate, to ensure that their scheme complies with what is termed the funding standard. This is designed to ensure that, at a minimum, the scheme has sufficient funds to secure specified pension rights which members have built up, if the scheme should have to be wound up at any stage. Schemes are usually wound up when the employer company goes out of business.
Funds ‐ Open ended
These are collective investment schemes, in which the number of units in the fund varies from day to day according to the number of people wishing to buy or sell their holding in the fund.
An insurance policy issued to cover more than one individual.
A fund whose main objective is capital appreciation. Contrasts with an income fund where the main aim is to provide higher than average income in the form of a dividend payment.
Annuity that is guaranteed to make payments for a minimum period even if the annuitant dies during that period. Payments continue after that period if the annuitant is still alive.
Guaranteed Payment Period
A period, normally 5 years, for which payment of a pension will be guaranteed by the scheme rules, whether the pensioner lives or dies.
Ill‐Health Early Retirement
Retirement on medical grounds before normal retirement date. The benefit payable in these circumstances may be greater than that paid to a member retiring early in normal health.
An annuity which commences immediately, or shortly after, it is purchased.
Income Continuance Plan
One of the terms for prolonged disability insurance.
Indexation (also known as Index Linking)
The system under which pensions in payment (and possibly also preserved benefits) are increased automatically at regular intervals by reference to the rate of increase in a specified index of prices or earnings.
A form of sex discrimination ‐ usually unintentional ‐ which is deemed to exist if a group of workers who are discriminated against is in practice predominantly of one sex rather than the other.
A pension scheme with only one member, whose documents relate only to that member.
(See Indexation and Escalation)
A pension scheme where the sole long term investment medium used by the trustees is an insurance policy (other than a managed fund policy).
The system of designing scheme benefits to take into account all or part of the benefits payable by the state under the social welfare arrangements. Known in public sector schemes as co‐ordination.
Equities, bonds, property and cash assets into which your contributions are invested with the intention that they will increase in value and/or generate income in order to increase the value of the Pension Account.
A professional person or body to which the investment and management of all or part of the scheme assets is delegated by the trustees, subject to the provisions of the trust documents.
Internal Dispute Resolution (IDR)
IDR regulations require trustees of every pension scheme to have procedures in place for dealing with complaints from actual or potential beneficiaries. These procedures must be completed before any complaint is brought before the Pensions Ombudsman.
A Trust which cannot be revoked or taken back by the employer who establishes it. Such trusts are required by the Revenue Commissioners in order to give tax free build up to the assets of the pension scheme. The trust has the effect of separating scheme assets from the assets of the employer, but tax free build up won’t be given if there is a possibility that the employer could take back the assets.
Large Cases Division – Financial Services/Pensions
The branch of the Revenue Commissioners which supervises the benefit and contribution structure of pension schemes granted approval under the Chapters 1 to 3 of Part 30 of the Taxes Consolidation Act, 1997.
Life Assurance Scheme
An approved scheme which only provides benefits on the death of a member in service.
An asset allocation strategy used mainly in defined contribution schemes, in which a member's investments are adjusted depending on age and term to retirement. Typically, assets are invested in equities for younger members and automatically switched to bonds and cash as retirement approaches. The purpose is to reduce the risk of loss of pension-buying power as the member approaches retirement.
Lump Sum Death-In-Service Benefit
As defined in the scheme rules, a tax-free lump sum, not exceeding certain limits set by the Revenue Commissioners, payable on the death of a member while still in service with the employer.
A pool of assets that is invested in a mix of investments (including company shares, Government stocks and property) on behalf of policyholders. Experienced investment managers conduct the purchase and sale of the assets, and the performance of the fund is monitored regularly.
Maximum Approvable Benefit
The maximum benefit which the Revenue Commissioners will permit to be paid under an approved scheme to an individual, taking account of factors such as remuneration and service completed.
A person who has been admitted to membership of a pension scheme and is entitled to benefits under the scheme. This will include active members, pensioners and deferred pensioners.
For Family Law Act purposes, the spouse who is a member of the pension scheme in question.
Trustees who are appointed by members or whose appointment by the employer has been approved by the scheme members in accordance with the regulations made under the Pensions Act.
Minimum Retirement Age
The earliest age at which pension scheme rules would allow a member to retire with an immediate pension, other than on grounds of ill health.
Money Purchase Scheme
Another name for a defined contribution scheme.
The naming by a member of a person or persons to whom he/she wishes any death benefit to be paid. This will usually not be binding on the trustees. (Also called a Wishes Letter.)
A pension scheme whose rules do not require any contribution from active members ‐ i.e. the employer is liable for all contributions needed to support the scheme.
Normal Pension Age/Normal Retirement Age
The age by reference to which the normal retirement date is determined. See also Normal Pensionable Age.
The age at which a member of a pension scheme normally becomes entitled to receive retirement benefits. This date is the benchmark which determines early retirement and late retirement.
Normal Pensionable Age
This term has a specific meaning in the Pensions Act. It is the later of (a) age 60 or (b) the earliest date at which a member is allowed by the rules of the scheme to receive immediate retirement benefits on leaving service, other than under an early retirement.
Normal Retirement Date
The date the member of a pension scheme is due to retire, usually between the ages of 60 and 75.
Occupational Pension Scheme
This is formally defined in the Pensions Act as a scheme which is approved under Chapter 1 of Part 30 of the Taxes Consolidation Act, 1997, or whose approval has been applied for to the Revenue Commissioners. The term occupational pension scheme is generally used to distinguish job related pension schemes from state social welfare schemes. A buyout bond is not an occupational pension scheme under the Pensions Act. Neither is a PRSA, even if the employer contributes to it.
Paid Up Benefit
A benefit secured for an individual member under a contract of insurance whose premiums have ceased to be payable in respect of that member. One form of deferred benefit.
A style of investment management whereby the Investment Manager attempts to limit risk by linking the investments to a particular index or indices, so that their value tracks changes in that index or those indices. The Investment Manager does not engage in Active Management.
Service before a given date ‐ frequently used to indicate service before the member’s entry into the pension scheme.
Past Service Benefit
A benefit granted in respect of past service.
Strictly speaking, this is the assets of a pension scheme but the term is very often used for the scheme itself.
A plan approved by the Revenue, designed to provide an income in retirement. Tax relief may be available on contributions, and the growth in the underlying investments of the plan is free of tax.
Pensionable Earnings/Pensionable Salary
The earnings on which benefits and/or contributions are calculated.
The period of service taken into account in calculating a pension benefit.
A member currently receiving payment of a pension from a pension scheme.
An Act of 1990 for the regulation of pension schemes, which provides a framework for preservation of benefits, a funding standard in the case of defined benefit schemes, disclosure of information, equal treatment of men and women, the duties and responsibilities of trustees and a Pensions Board to supervise the operation of the Act. In the United Kingdom jurisdiction, the term refers to an Act of 1995 which contains many provisions similar, but not identical, to those of the Pensions Act 1990.
Pensions (Amendment) Act, 1996
An Act which introduced extensive amendments to the Pensions Act 1990, extended the powers of the Pensions Board and introduced ‘Whistle Blowing’.
Pensions (Amendment) Act, 2002
An Act which extended the Pensions Act, increased preservation rights, introduced PRSAs and established the office of the Pensions Ombudsman.
Pensions Adjustment Order (PAO)
A Court order made to the trustees of a pension scheme in the course of a judicial separation or divorce action, or at any time after the making of a separation order or divorce decree, directing the trustees to pay part of a member’s benefit, called a designated benefit, to the non‐member spouse or to another dependant.
The statutory body set up under the Pensions Act to monitor and supervise the operation of the Pensions Act and pension developments generally.
An officer appointed under the Pensions Act, to investigate and determine complaints or disputes involving occupational pension schemes and PRSAs, to award financial redress where appropriate, and to decide disputes of fact or law.
Permanent Health Insurance
One of the terms for prolonged disability insurance.
Personal Pension Plans
Personal Pension Plans are designed to cater for pension planning for the self-employed or employed in non‐pensionable employment. Contributions made to a personal pension plan are exempt from tax at the persons highest rate of tax and the retirement age may be selected at any time from age 60 to age 70. Up to 25% of the pension fund on retirement may be taken as a tax free cash sum the balance of the fund can be used to purchase an annuity or invested in an AMRF/ARF.
Personal Retirement Bond (PRB)
A single-premium insurance contract incorporating Revenue requirements as they apply to pension schemes, purchased to buy out a member's preserved benefit , either on leaving service or subsequently, or (most commonly) when a scheme is wound up. PRBs are also used to transfer from a pension scheme the benefit allocated to a non-member spouse by a PAO.
Personal Retirement Savings Account (PRSA)
A PRSA is a low cost, flexible pension plan taken out with an authorised PRSA provider designed particularly for those who are not members of an occupational pension scheme. It is a portable pension that can be carried from job to job or transferred to another PRSA provider.
A poll held under the member trustee regulations to determine whether members wish to appoint member trustees by means of the Standard Arrangement or accept an Alternative Arrangement offered by the employer.
Premium or Contribution
The amount payable by the owner of the policy to the life assurance company at agreed regular intervals.
Describes the obligation which trustees have under the Pensions Act to retain benefits for scheme members who leave the employment and who satisfy certain conditions.
This term is often used to describe any benefit emerging on termination of employment or of membership of a pension scheme, which is payable at a later date. Under the Pensions Act it has the specific meaning of that part of the benefits which must be preserved as a result of the operation of the Act.
Privately Invested Scheme
A description often applied to a self‐administered scheme.
Prolonged Disability Insurance
An insurance contract taken out by an employer and/or by an employee, designed to pay an income in the event of an employee becoming disabled long term. Benefits under these policies are usually paid after a minimum period of absence from work through illness or injury.
In terms of pension fund investment, property is generally an investment in land and buildings, usually commercial properties such as shops and offices, which produce income and may also increase in value over time.
A person who, within 3 years of retirement, death or leaving service, held more than 5% of the voting shares in the employer or its parent company. Shares held by a spouse and minor children are counted, as are share held by a trust to which the director concerned had transferred shares. Proprietary Directors qualify to invest in ARFs on retirement.
An employee in employment to which a scheme applies who will join or be entitled to join the scheme if he remains in the employment and there is no change either to his contract of employment or to the rules of the scheme.
See Personal Retirement Savings Account.
A PRSA designed to be used for additional voluntary contributions by members of occupational pension schemes.
Public Sector Pension Scheme
An occupational pension scheme for employees of central or local Government, statutory and other semi‐state bodies. Many of these schemes are not funded.
Purchased Life Annuity
An annuity purchased privately by an individual member is different from the type of annuity purchased by pension scheme trustees, which are often described as ‘compulsory’ annuities. In accordance with legislation, parts of the instalment payments of a purchased life annuity are exempt from income tax.
In relation to the member trustee selection process, an active member or a pensioner (but not a deferred pensioner or a dependant or other beneficiary receiving payments from the scheme).
Qualifying Fund Manager (QFM)
A financial institution authorised to operate Approved Retirement Funds (ARFs). Includes: banks, building societies, credit unions, the Post Office Savings Bank, bodies authorised for collective investments such as unit trusts, UCITs, etc., and members of the Irish or any EU Stock Exchange who have notified the Revenue Commissioners of their intention to act as QFMs.
A term defined in the Pensions Act as the period of service to be taken into account to entitle a pension scheme member to preserved benefits on leaving service. Currently it is two years’ reckonable service, including any period represented by a transfer value paid in from another pension scheme.
The whole period of a member’s service (whether full time or part‐time) in relevant employment while a member of the scheme, but excluding service when the member was covered for death benefit only, or when the member has been notified by the trustees that a period of service does not entitle him to a retirement benefit. Service added or credited to the member, but not actually served, does not count. This term does not necessarily include all of pensionable service, which can take into account service completed before the member joins the scheme.
Recommended Contribution Rate
The contribution rate recommended by the actuary as being necessary to support the benefit promises made under the scheme.
Refund of personal contributions
You are entitled to a refund of your own (not your employer’s) contributions if you have been in the company pension less than two years. This refund is only based on the fund built up by your contributions and is taxed at the standard tax rate applicable at that date. Should you elect this option the fund built up by the company’s contributions (if you are entitled to this) is returned to the company.
From 1st November 2008, the Trustees of all Schemes must appoint a ‘Registered Administrator’ to provide them with ‘core administration functions’.
Core administration functions include:
- Preparing the member benefit statements,
- Drafting the Trustee Annual Report, and
- Maintaining sufficient records to produce the above.
Registered Administrators, are responsible for:
- Preparation and delivery of member benefit statements within 5 months of the Scheme year-end;
- Preparation and issue of the draft Trustee Annual Report (incorporating draft accounts where applicable) for review by the Trustees within 8 months of the Scheme year-end.
These documents will be issued to the Trustees directly or via the Employer.
Regulations concerning structural business statistics require all EU member states to furnish specified information to Eurostat. This statistical information corresponds closely to the information required for the preparation of scheme annual reports.
The Pensions Board is responsible for the gathering of these statistics and the onus to furnish this information to the Board is placed on the registered administrators in respect of the schemes for which they are responsible.
The relevant statistical information must be furnished in respect of each scheme to the Board annually within 9 months of the scheme year end for scheme years commencing on or after 1 January 2008.
Employment to which a scheme applies.
The proportion of the member spouse’s retirement benefits earned during the relevant period, as the court orders to be paid to a dependent spouse or children under a PAO.
The period to be taken into account, as specified by the court, during which the member spouse’s retirement benefits were earned, for the purpose of calculating the designated benefit.
In relation to any scheme, for the purposes of the rules on Whistle Blowing, these are the trustees, actuary, auditor, administrator, insurer, investment manager and anyone employed by such persons. Legal advisers are excluded.
Every scheme has an annual renewal date. This is the date at which the records are updated, and the benefit statements are effective as of this date. In some Pension Schemes this may also be the specific date in the year when new members are permitted to join, when changes can be made or when the salary on which contributions or benefits are calculated is determined.
The Pensions Act requires that certain relevant persons providing services to a scheme should report to the Pensions Board any material misappropriation or fraudulent conversion of the assets of a scheme. There are penalties for failure to report as required. This process is also known as ‘Whistle Blowing’.
The facility open to anyone to report to the Pensions Board on any matter concerning ‘the state and conduct’ of a scheme. Anyone who does so in good faith is protected by the Act.
A term used by the Revenue Commissioners to denote retirement or death benefits in respect of the earlier service of an employee with a former employer or an earlier period of self‐employment. These may have to be taken into account in computing maximum approvable benefits.
The accumulated value, taking account of investment returns, of the contributions, which have been paid by the Employer on your behalf, together with your own contributions and any Additional Voluntary Contributions (AVCs) you have paid. The account may include any transfer payment into the Pension Plan. The benefits available to you on retirement will depend on the value of your Retirement Account at that time.
A contract effected with an insurance company under Chapter 2 of Part 30 of the Taxes Consolidation Act, 1997. Applicable to the self‐employed and to persons in non‐pensionable employment. Sometimes called a Personal Pension.
The benefits available to you at retirement based on the value of your Retirement Account and which may be taken as a tax-free lump sum at retirement and/or retirement income for life.
An occupational pension scheme approved by the Revenue and registered with the Pensions Board.
The application to preserved benefits of compulsory increases in their value prior to the date of payment. Revaluation applies only to defined benefit schemes under the Pensions Act. This term is often used also to describe any similar non-compulsory increases.
The Revenue Commissioners Large Cases Division – Financial Services/Pensions.
The organisation charged by Government with the collection of tax revenue and which, through the Large Cases Division – Financial Services/Pensions, monitors the operation of pension schemes which are granted tax approval.
Any threat to the accumulation of retirement benefits. It can often arise from fluctuations in investment returns.
The extent to which you and/or the Trustees are prepared to accept short-term volatility or Risk, e.g. tolerance of potentially greater fluctuations in short-term investment returns in anticipation of higher investment returns in the long run.
The detailed provisions of a pension scheme - usually set out in a formal way and given authority by the trust deed. Normally accompanies the definitive deed.
This can refer to a pension plan sponsored by an employer, or to a pension plan for a group such as a trade or profession.
Section 50 Order
An instruction given to the trustees of a scheme by the Pensions Board, pursuant to Section 50 of the Pensions Act, to reduce the promised benefits under the scheme so that the Funding Standard can be met.
A pension scheme where the assets are invested (other than wholly by payment of insurance premiums by the trustees), through an in‐house manager or an external investment manager. The term is not used to indicate the method by which benefits and contributions are administered, but is now almost exclusively used to refer to the way in which the investments are managed.
The investment of a scheme’s assets in the business of the employer or that of an associated company, or loans made to such bodies out of the pension scheme’s assets. Regulated under both disclosure and minimum funding standards provisions of the Pensions Act.
Single Life Insurance
A contract with only one person covered by the policy.
In the context of the Pensions Act, a pension scheme with fewer than 100 active and deferred members.
Spouse / Dependant’s Pension on Death in Service
As defined in the scheme rules, a pension payable to a spouse and/or a dependant on the death of a member while still in service with the Employer.
One of the available methods of choosing member trustees under the Pensions Act regulations. It involves an election under the proportional representation system. See also Alternative Arrangement.
A PRSA approved as a Standard PRSA by the Pensions Board, which means that it complies with certain investment requirements and that the charges it makes to contributors are capped at levels prescribed by law.
The amount paid by the State to people who have attained State Pensionable Age and are entitled to benefit. The full State Pension payable to a single person who has paid social insurance contributions throughout their working lifetime is approx. €230 per week (2011).
State Pensionable Age
The age from which pensions are normally payable by the social welfare scheme, currently 65 (State Pension Transition) or 66 (State Pension) for both men and women.
Statement of Investment Policy Principles (SIPP)
A formal statement prepared by the plan’s Trustees specifying their governance arrangements including their investment objectives, risk measures and investment fund choices available to scheme members.
A scheme to provide benefits which supplement the benefits given under another scheme. Also called a Top‐up Scheme.
In a defined benefit scheme, any excess of the value of a scheme’s assets over its liabilities as calculated by the actuary to the scheme. Sometimes referred to as an ‘actuarial surplus’.
Switch Date / Frequency
As defined in the scheme rules, the date or frequency on which you can change your investment fund choice.
Target Benefit Scheme
A form of defined contribution scheme which aims for, but does not guarantee, a particular level of benefit. Commonly, contributions paid to such schemes are reviewed at regular intervals and adjusted to take account of factors such as pay increases and investment returns in the period between reviews.
Term Assurance Policy
A policy which provides a lump sum on death before a fixed future date. Such policies are frequently used for the provision of lump sum benefits payable on death in service.
Top Hat Scheme
A scheme designed to provide benefits in excess of those provided by an employer’s main pension scheme.Membership of such schemes is usually confined to senior executives or directors.
See Supplementary Scheme
The money paid into the Retirement Account by you and/or your Employer.
A payment made from one pension scheme to another, or to an insurance company to purchase a buy-out policy, in lieu of the benefits which have accrued to the member under the scheme. In this form, it specifically refers to transfers made under the preservation requirements of the Pensions Act.Other payments from one scheme to another are usually called transfer value.
You may be able to transfer the value to another pension plan, e.g. the pension plan of a new employer or a personal retirement bond (a pension policy in your own name which gives you control over the fund). It may also be possible to transfer your benefits to a PRSA subject to certain restrictions. See Transfer Payment
A pension which is so small that it can be subject to full commutation without prejudicing the approval of the scheme by the Revenue Commissioners.The present triviality limit is a pension of €330 per annum before commutation or a fund value of €20,000 after commutation.
A legal concept under which property is held by one or more persons (the trustees) for the benefit of other persons (the beneficiaries) for the purposes specified by the person setting up the trust. The trustees may be beneficiaries.
A legal document, executed in the form of a Deed, which establishes, regulates or amends a trust. See Definitive Trust Deed
Law which consists of a number of statutory provisions dating back to the Trustee Act, 1893, and principles of equity which have evolved over the years in cases decided in the Courts.
An individual or a company which, alone or jointly, becomes the legal owner of the Pension Scheme to be administered for the benefit of members (the beneficiaries), in accordance with provisions of the document creating the trust and the provisions of trust law generally and the Pensions Act. Trustees have a duty to act in the best interest of the members. Certain schemes, mainly in the public sector, are not set up under trust. In these cases, the Pensions Act includes the administrators of the schemes in its definition of Trustees.
Twenty Per Cent Director
A proprietary director who, with other specified connected persons, owns or controls more than 20% of the voting shares of the employer or its parent. The benefits that can be provided to 20% directors are somewhat restricted by the Revenue Commissioners.
Undertakings for Collective Investments in Transferable Securities (UCITS)
The UCITS legislation governs how a fund can be marketed with the European Union and is designed to allow cross border fund sales to investors of different nationalities. To obtain UCITS status a fund must invest within defined but wide parameters. The fund may then be sold in any EU country, subject only to the marketing rules of that country. The funds are often umbrella funds based in recognised European off-shore centres such as Luxembourg or Dublin. A non‐UCITS fund, such as a hedge fund, is not allowed to be actively marketed within the EU.
Unitised collective investment funds, usually domiciled offshore but increasingly adopted as a structure for UK OEICs. These funds offer investors a choice of sub-funds and share classes within one vehicle. Often offer free switching between each sub-fund.
A scheme under which advance financial provision for the payment of benefits is not normally made. Instead the cost of pensions is met from the employer’s current income in the same way as the salaries and wages of employees. The term may also be used to describe a scheme where funds are set aside to provide for benefit payments only at the time of a person’s retirement.
A unit is a measure used to identify the policyholder’s individual share in a unit‐linked or unit trust fund.
The unit price is calculated by dividing the overall value of the fund at a specific point in time by the number of units in the fund at that time.
A financial product where money from a number of investors is pooled together and invested collectively in investments such as shares and bonds. Each investor owns a unit (or a number of them), the value of which depends on the value of those items owned by the fund. A unit trust allows modest investment to be diversified away from a holding in a single or small number of companies. See Collective Investments and Open Ended.
Policyholder’s premiums are pooled together by an insurance company and invested by a fund manager to gain the benefit of being a single large investor. Unit funds invest in assets, such as company shares (equities) and fixed interest securities (gilts and bonds). These funds are valued at regular intervals, and the value of the fund may rise or fall, in line with the underlying investments; this usually means that the fund value is not guaranteed at any stage. The total value of the assets in the fund is divided amongst the policyholders by way of allocating individual units to each policyholder, depending on their contribution to the fund and the growth earned on that contribution.
The trigger which starts the process of selecting member trustees under the Pensions Act Regulations.
A term commonly used by actuaries to mean the method used by them to value the assets and liabilities of the scheme and the actuarial assumptions which they use in this valuation.
An investment technique that searches for firms that have not been, to the investor’s mind, fully valued by the market and might be due for a re-rating. The manager of a portfolio will not want to pay too highly for stocks, unlike a growth manager, who will pay more for guaranteed growth prospects of a firm. The lines between the two camps, value and growth are more blurred than these definitions would suggest. Growth managers dislike paying too much for growth, and value managers are unlikely to buy at any price a stock that is not growing.
This has different meanings for different people:
For active members, benefits to which they would unconditionally be entitled to on leaving service, which may or may not include statutory rights to preserved benefits;
For deferred pensioners who have already left the employment, their deferred/preserved benefits;
For pensioners, the pension which they are receiving; including, where appropriate, the related benefits for spouses and other beneficiaries.
A term for voluntary or compulsory reporting to the Pensions Board as provided under Sections 83 and 84 of the Pensions Act. See entries under ‘Reporting’.
The process of terminating a pension scheme, usually by applying the assets to the purchase of immediate and deferred annuities or buyout bonds; by transferring annuities already purchased to the ownership of the payees; or by transferring the assets and liabilities to another pension scheme in accordance with scheme documentation. A scheme is not wound up until no further assets remain under the control of its trustees.
A form completed by a member naming a person or persons to whom he or she wishes any death benefit to be paid. This will usually not be binding on the Trustees but will provide guidance to them in the event of a member’s death. See also Nomination.