GLOSSARY OF DEFINITIONS
Disclaimer
While the Pensions Authority has made every effort to ensure that the information
contained within this document is correct and accurate nevertheless it is possible that
errors or omissions in the content may occur from time to time.
No liability whatsoever is accepted by the Pensions Authority, its servants or agents
for any errors or omissions in the information or data or for any loss or damage
occasioned to any person acting or refraining from acting as a result of the
information or data contained within this document.
September 2015
Page 1 of 47
ABATEMENT
A system under which the gratuity payable on retirement or death is
reduced by an amount calculated by reference to the period during
which a person has not contributed to a spouses’ and children’s
pension scheme. Abatement is made even in respect of service
before the introduction of such schemes, when it would not have
been possible to contribute to them.
In practice, abatement at
retirement age is treated as a special contribution and relieved from
tax.
The term “abatement” is also used to describe a reduction in the
pension of a public servant who becomes re-employed in the public
service after his/her pension has commenced – he/she cannot
receive more than the equivalent of a full-time salary from both
sources combined.
ACCRUAL RATE
The rate at which pension benefit is built up as pensionable service is
completed in a defined benefit scheme. Often expressed as a fraction
of pensionable salary e.g. 1/60th for each year of service.
ACCRUED BENEFITS (SOMETIMES KNOWN AS ACCRUED RIGHTS )
The benefits earned in respect of service up to a particular point in
time, whether vested or not. These benefits may be calculated in
relation to current earnings or projected earnings and allowance
might also be made for increases provided for by the scheme rules or
by legislation.
ACTIVE MEMBER
A member of a pension scheme who is in ‘reckonable service’, i.e.
currently in the employment to which the scheme relates and who is
included in the scheme for a pension benefit.
ACTUARIAL ASSUMPTIONS
In a defined benefit scheme the set of assumptions made by the
actuary as to rates of investment return, inflation, increase in
earnings, mortality, etc which form the basis of an actuarial valuation
or other actuarial calculation.
ACTUARIAL DEFICIENCY /SURPLUS
The difference between the value of the assets and the value of the
liabilities under the particular valuation method and assumptions
being used.
September 2015
Page 2 of 47
ACTUARIAL FUNDING CERTIFICATE
A certificate that trustees of a defined benefit scheme must submit to
the Pensions Authority at least every three years. It is signed by an
actuary. The certificate demonstrates that the scheme complies with
the funding standard under the Pensions Act, stating whether the
scheme is capable of meeting specified liabilities in a statutory order
of priority in the event of its being wound up on the date of the
certificate.
ACTUARIAL REDUCTION
A reduction made to the accrued benefits of a member in line with
any extra costs arising in the payment of benefits and/or in line with a
deficit in the funding levels of pension scheme assets.
ACTUARIAL VALUATION
An investigation by an 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. The actuary also needs to
conduct this investigation to complete a funding certificate.
ACTUARIAL VALUE
Actuarial value is a mathematical calculation, often of the financial
condition of a pension plan. It includes the computation of the
present monetary value of benefits payable to present members, and
the present monetary value of future employer and employee
contributions, factoring in mortality among active and retired
members and also to the rates of disability, retirement, withdrawal
from service, salary and interest. It is the value of cash, investments,
and other property belonging to a pension plan, as used by the
actuary for the purpose of an actuarial valuation. The actuarial value
of assets may represent an average value over time, and normally
differs from the amount reported in the financial statements, which is
a measurement as of the date of the statement of net assets.
ACTUARY
The individual appointed by the trustees of an occupational pension
scheme to carry out valuations and advise on funding matters.
ADDED YEARS
A provision of some defined benefit schemes for building extra
pensionable service in return for additional contributions.
September 2015
Page 3 of 47
ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCS)
Additional contributions paid by a member of an occupational
pension scheme in order to secure benefits over and above those set
out in the rules of the scheme. Where an occupational pension
scheme does not provide access to an AVC facility, a standard PRSA
must be offered for this purpose.
ADMINISTRATOR
A person regarded by Revenue 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.
AGE GROUND
Discrimination by reference to age is discrimination on the age
ground.
ALTERNATIVE ARRANGEMENT
One of the available methods of choosing member trustees under the
Pensions Act regulations. Under this method, members are asked to
approve the employer’s proposals for putting member trustees into
place. If the members reject these proposals, an election under the
standard arrangement takes place.
ANNUAL REPORT
The Pensions Act requires the trustees of a pension scheme to
communicate information about the scheme, its administration and its
financial position on an annual basis. The content of the annual
report is specified in the Disclosure of Information Regulations. A
shorter annual report called an alternative annual report may be
compiled by small DB and DC schemes with less than 100 members
(including deferred members).
ANNUITY
A guaranteed retirement income for life paid at stated intervals until a
particular event (usually the death of the person receiving the
annuity). Annuities are normally purchased from a life assurance
company at retirement in return for a lump sum payment (from your
pension fund).
ANNUITY RATE(S)
The level of retirement income you receive will depend on annuity
rates at the time of your annuity purchase.
September 2015
Page 4 of 47
APPROPRIATE BACK CONTRIBUTIONS
Appropriate back contributions in relation to a scheme means –
(a) in a case where the rules of the scheme so provide, the amount
of member contributions due for the period concerned, at the
appropriate contribution rate applying during that period
calculated by reference to the salary applying at the time the
contributions are being paid, or
(b) in any other case, the amount of contributions due, calculated in
accordance with the rules of the scheme, from the beginning of
the period in respect of which admission to the scheme is
granted.
APPROVED MINIMUM RETIREMENT FUND (AMRF)
Approved minimum retirement funds are post retirement investment
accounts which allow the member on retirement to re-invest their
pension until he/she reaches 75 years in exchange for additional tax
reliefs and potentially greater investment returns. They are similar to
an ARF, except that the original investment may not be withdrawn
until age 75. Only the investment income and gains may be
withdrawn prior to that age.
APPROVED RETIREMENT FUND (ARF)
An ARF is an investment contract for the proceeds of any defined
contribution scheme, additional voluntary contributions, PRSA, RAC,
or in the case of a 5% Director other retirement benefits that are not
taken in the form of a lump sum or pension on retirement. Certain
qualifying conditions must be met to be eligible to take out an ARF.
Money is invested with a qualifying fund manager and may be
invested in any manner you wish and will accumulate tax free.
Income tax is payable on any withdrawals from the fund. A minimum
withdrawal is assumed for tax purposes even if no withdrawal is
made.
APPROVED SCHEME
An occupational pension scheme which is approved by Revenue
under Chapter I of Part 30 of the Taxes Consolidation Act, 1997
(previously Chapter II, Part I of the Finance Act, 1972). See also
“Exempt approved scheme”.
ASSETS
The property, investments, cash and other items of which the
trustees of a pension scheme are the legal owners.
September 2015
Page 5 of 47
ATYPICAL EMPLOYMENT
Employment which is other than full-time and permanent; usually
understood to embrace part-time, temporary, fixed-term contract and
seasonal working.
AUDITOR
An individual or firm appointed to report on the accounts of a
company or other entity (such as a pension scheme).
AUGMENTATION
This is when extra pension benefits are bought for a pension scheme
member over and above normal scheme entitlements. They are
usually paid for by the employer or the pension scheme.
AUTHORITY RESOLUTION
The directors or partners of the sponsoring employer can meet and
pass a special Authority resolution to establish a pension scheme
under trust. The resolution must be minuted and the overall content
of the eventual trust deed and rules must also be recorded.
AUTHORISED TRADE UNION
A trade union which has a negotiating licence under the Trade Union
Acts and which represents members of the pension scheme.
AVERAGE EARNINGS SCHEME (ALSO KNOWN AS “CAREER AVERAGE SCHEME ”)
A defined benefit scheme where pensionable salary is defined by the
average of your earnings throughout your career rather than the final
years earnings.
BENCHMARK
Target or measure against which performance will be judged – used
to assess the performance of a fund or investment portfolio.
BENEFICIARY
A person who is entitled to benefits under a pension scheme or who
will become entitled on the happening of a specified event (e.g. on
the death of a member).
BENEFIT -IN-KIND
Benefit given other than in cash which forms part of remuneration; if
taxed under Schedule E, it may be included for pension purposes
September 2015
Page 6 of 47
under Revenue rules (but may or may not be included in pensionable
pay by the scheme rules).
BENEFIT STATEMENT
A statement of the benefits payable in respect of an individual on the
occurrence of specified events e.g. death, retirement etc.
BID-OFFER SPREAD
In unit-linked investment contracts, the difference between the price
at which units can be purchased (“Offer” price) and the price at which
they can be sold back to the investment manager (“Bid” price) on any
given day.
BOND
Certificate of debt issued by a company, a government or other
institution. Bond holders are creditors of the issuer and interest is
paid at the rate stated at the time of issue. The term “bond” is also
used to describe a buyout policy. See “Personal retirement bond”.
BOOK RESERVE SCHEME
Unfunded pension scheme which is accounted by a provision in the
employers accounts. Common in some European countries.
BRIDGING PENSION
An additional pension benefit paid between the date of retirement
and some later date, when it will reduce or be discontinued. The
most common type of bridging pension is paid in the interval between
the date of retirement and the Social Welfare pension age, where
Social Welfare benefits are taken into account in calculating the
scheme pension, but members retire before these become payable.
BUY-OUT BOND
The purchase by the trustees of a pension scheme of an insurance
policy or bond in the name of a member or other beneficiaries
following termination of service, retirement, or on winding-up of a
scheme. The bond is bought in substitution of the members rights
under the pension scheme. Under the Pensions Act, purchase of
such a bond on leaving service may be at the option of the member
or, in certain circumstances, at the option of the trustees.
CAREER AVERAGE SCHEME
An alternative term for an average earnings scheme.
September 2015
Page 7 of 47
CASH OPTION
An alternative term for commutation.
CERTIFICATE OF EXISTENCE
A document confirming that a person in receipt of a pension is still
alive.
CLOSED SCHEME
A pension scheme that does not accept new members.
COMMUTATION (SOMETIMES KNOWN AS “CASH OPTION ”)
The replacement of a series of future pension payments by an
immediate lump sum. The exchange of pension for immediate cash
is regulated by Revenue.
COMMUTATION FACTORS
The mathematical 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.
COMPULSORY PURCHASE ANNUITY
An annuity that must be purchased on retirement for a member of an
insured pension scheme or for the holder of a personal retirement
bond.
CONCENTRATION OF INVESTMENT
The placing of a significant portion of the assets of a pension scheme
in any single investment or category of investment. This is subject to
disclosure under the Pensions Act and may also impact on the
scheme’s ability to meet the minimum funding standard under the
Act.
CONTINGENT BENEFITS
Benefits payable from a pension scheme in the event of the death of
the member during the period of employment (or self-employment) to
which the scheme relates.
CONTRIBUTION HOLIDAY
A term used to describe a period under which employers’ and/or
members’ contributions are suspended. This usually happens when
the fund is in surplus.
September 2015
Page 8 of 47
CONTRIBUTORY EARNINGS
The earnings on which contributions are calculated.
“Pensionable earnings”.
See also
CONTRIBUTORY OCCUPATIONAL PENSION SCHEME
An occupational pension scheme to which employees are required to
contribute (usually a fixed percentage of their pensionable pay) in
order to meet part of the cost of the benefits.
CONTROLLED FUNDING
A funding plan which has regard for the liabilities of a defined benefit
scheme as a whole, rather than for those of individual members.
CONTROLLING DIRECTOR
A director who, together with his associates, owns or controls 20% or
more of the ordinary shares of the employing company. Special
restrictions apply to controlling directors who are members of
approved schemes. See the Revenue Pensions Manual.
CO-ORDINATION
A term used in the public sector to indicate that the benefits payable
under the social welfare system are taken into account in the
occupational pension scheme. Co-ordination is generally required as
a matter of policy where Social Welfare retirement benefits are
payable. However, the calculation of the gratuity payable on
retirement or death is not normally affected by co-ordination. See
also “Integration”.
CORPORATE TRUSTEE
A company which acts as a trustee.
CROSS BORDER SCHEMES
A scheme established in one EU member state, which authorises an
employer to operate a cross-border scheme and to accept members
and contributions from an employee located in another EU state.
CUSTODIAN TRUSTEE
A trustee responsible for holding the assets of a trust, other trustees
being responsible for the management of the trust including the
investment decisions.
September 2015
Page 9 of 47
DECLARATION OF TRUST
The type of trust document used when the employer is also intending
to act as sole trustee but the actual content is comparable with the
trust deed and rules. This type of document is commonly used when
the assets of the pension scheme are totally invested and
administered by an insurance company.
DEED OF ADHERENCE
An additional trust document enabling a new employer to participate
in an existing scheme.
DEED OF APPOINTMENT
A trust document by which a trustee is appointed.
DEFAULT INVESTMENT STRATEGY
An automatic investment strategy required by law to be applied under
a PRSA contract unless the contributor indicates otherwise. The
default investment strategy for each individual PRSA product is
based on general good investment practice in saving for retirement
and approved by the PRSA actuary. Although it is not a risk-free
investment, it is designed to reduce the level of risk of the
investments. Trustees of a defined contribution scheme may specify
a particular strategy as a default if they are offering members a
choice of alternative strategies.
DEFERRED ANNUITY
An annuity which commences from a future date.
DEFERRED BENEFIT
Any pension benefit, payment of which is delayed, e.g. until a person
reaches normal pensionable age. Most often used to refer to
benefits which accrue to a scheme member on leaving service.
DEFERRED MEMBER
A person entitled to a pension payment at a future date. Normally
this would be an early leaver but the term is sometimes used to
describe someone whose retirement is being postponed.
DEFERRED PENSIONER
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.
September 2015
Page 10 of 47
DEFERRED RETIREMENT
Another term for when the normal date of retirement is postponed.
DEFICIT
In a defined benefit scheme, any excess of the value of a scheme’s
liabilities over the value of its assets as calculated by the actuary of
the scheme.
DEFINED BENEFIT SCHEME (ALSO KNOWN AS “ FINAL SALARY ” SCHEME )
Defined benefit schemes provide members with retirement and death
benefits based on formulae set out in the rules of the scheme.
Benefits are often based on a members’ salary close to retirement
and on his or her pensionable service. For this reason these
schemes are sometimes known as “final salary” schemes.
DEFINED CONTRIBUTION ELEMENT OF A DEFINED BENEFIT SCHEME
Members of defined benefit schemes can sometimes have their
contributions or transfers treated as though they had been made
under a defined contribution scheme.
DEFINED CONTRIBUTION SCHEME (ALSO KNOWN AS “MONEY PURCHASE ” PLAN)
Provides a pension based on the accumulated value of contributions
paid to a pension scheme and the investment returns earned on
those contributions.
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.
DEPENDANT
A person who depends financially on a scheme member or
pensioner. Children are regarded as dependants until they reach
the age of 18 or leave full-time education or vocational training. A
spouse is always regarded as a dependant.
DERIVATIVES
Generic term for financial instruments used to manage investment
portfolios, such as financial futures and traded options.
September 2015
Page 11 of 47
DESIGNATED BENEFIT
The part of a member’s retirement benefit which is allocated for
payment to his/her dependent spouse or children under a pension
adjustment order.
DETERMINATION
1. Provision is made, under the Pensions Act, 1990, for the
Pensions Authority to issue formal determinations in respect of
certain questions specified in the Act.
2. Decision of the trustees or other relevant person in an internal
disputes resolution procedure.
3. Final and binding ruling of the Pensions Ombudsman in a
complaint or dispute, subject to appeal to the High Court.
DIRECTLY INVESTED SCHEME
A scheme whose assets are not invested exclusively in certain
named categories of investment, such as insurance policies, cash, or
unit funds. Such schemes become subject to the member trustee
regulations if they have more than 12 active members.
DISABILITY BENEFIT
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.
DISABILITY GROUND
Discrimination by reference to disability is discrimination on the
disability ground. Disability means total or partial absence of a
person’s bodily or mental functions, including the absence of a part of
person’s body, the presence in the body of organisms causing or
likely to cause chronic disease or illness, the malfunction,
malformation or disfigurement of a part of a person’s body, a
condition or malfunction which results in a person learning differently
from a person without the condition or malfunction, or a condition
illness or disease which affects a person’s thought processes,
perception of reality, emotions or judgement or which results in
disturbed behaviour. Disability includes a disability which exists at
present, or which previously existed but no longer exists, or which
may exist in the future, or which may be imputed to a person.
September 2015
Page 12 of 47
DISCLOSURE
Disclosure means the giving out of information, either voluntarily or to
be in compliance with legal regulations or workplace rules.
DISCLOSURE OF INFORMATION REGULATIONS
Regulations issued under the Pensions Act requiring specific
information about pension schemes and their benefits to be disclosed
to interested parties.
DISCONTINUANCE
Cessation of contribution payments to a scheme, leading to its
becoming paid up, or with a view to its winding-up.
DISCONTINUANCE V ALUATION
Actuarial valuation conducted on the basis that the scheme is to be
discontinued.
DISCRETIONARY INCREASE
An increase in benefits which is awarded on a discretionary basis, as
against one to which the member is entitled under the rules. Can be
ad-hoc or regular in nature.
DISCRETIONARY POWERS
Powers conferred on the trustees or on the employer by the trust
deed and rules of a pension scheme whereby issues (for example,
the destination of death benefits) can be determined at their
discretion.
DISCRIMINATION
Less favourable treatment of one person as against another in a
comparable situation on a discriminatory ground regarding access to
or membership of an occupational benefit scheme. Discrimination
includes the issue of an instruction to discriminate.
DISCRIMINATORY GROUNDS
Gender, family status, marital status, sexual orientation, religion, age,
disability, race and traveller community membership are the
discriminatory grounds. Discrimination on a discriminatory ground
contrary to the principle of equal pension treatment is prohibited
under Part VII of the Pensions Act.
September 2015
Page 13 of 47
DIVIDEND WITHHOLDING TAX
Tax deducted from overseas investment income.
In general,
dividends paid and other distributions made by Irish resident
companies are liable to a dividend withholding tax (DWT) at the
standard rate. This tax may be reclaimable.
E ARLY LEAVER
A person who ceases to be an active member of a pension scheme,
other than on death, without becoming entitled to an immediate
retirement benefit.
E ARLY RETIREMENT
The retirement of a member, with immediate retirement benefit,
before normal pensionable age. The benefit may be reduced
because of early payment See also “Ill-health early retirement”.
E ARMARKED CONTRIBUTIONS
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.
E ARNINGS CAP
Limit, currently €115,000 per annum, on earnings from all sources for
the purpose of calculating allowable tax relief on personal
contributions to all forms of pension arrangements, including PRSAs.
Separate or simultaneous employments or self-employment no
longer generate separate allowances.
ELIGIBILITY
The conditions which must be met for a person to be a member of a
scheme or to receive a particular benefit. These may, for example,
relate to age, service, status and type of employment.
EMPLOYEE
A person of any age engaged under a contract of employment, i.e. a
contract of service or apprenticeship expressed orally, in writing or
implied.
EMPLOYER
The person or body with whom the member of a pension scheme has
a contract of employment relevant to that scheme.
September 2015
Page 14 of 47
ENDOWMENT ASSURANCE POLICY
A policy which provides for a lump sum at a future maturity date or on
earlier death.
EQUAL ACCESS
Identical entry conditions for men and women. The Pensions Act
requires this.
EQUAL TREATMENT
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.
ESCALATION
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 the pension has commenced.
EXCHANGE OF LETTERS
A method of creating a pension scheme trust, in which a letter from
the employer constitutes all or part of the documentation of an
individual pension arrangement. A copy of the letter is signed by the
employee to acknowledge its terms.
EXEMPT APPROVED SCHEME
An approved scheme which is established under irrevocable trusts,
giving rise to the tax relief allowed for in the Finance Acts.
EXEMPT UNIT TRUST
A unit trust specifically designed for pension schemes and charities,
which receives the same tax treatment as a directly invested pension
scheme.
EX-GRATIA BENEFIT
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.
September 2015
Page 15 of 47
FAMILY LAW ACT
The Family Law Act of 1995, which, among other things, enables the
Courts to allocate part of a member’s pension entitlement under a
scheme to the spouse who is not a member of the scheme in the
course of judicial separation. In force from 1 August 1996 and
applies to foreign divorces as well as judicial separation.
FAMILY LAW (DIVORCE ) ACT
The Family Law (Divorce) Act, 1996. As well as facilitating the
redistribution of property, including pensions, between parties to a
divorce action, this Act contains the primary mechanism for the
granting of decrees of divorce. In force from 27 February 1997.
FAMILY STATUS GROUND
Discrimination on the family status ground occurs where less
favourable treatment is based on the fact that one person has family
status and the other person does not. A parent has family status to a
person under the age of 18, or a parent or resident primary carer to a
person over 18 with a disability needing continuing regular or
frequent support.
FAS 87 AND 88
US Financial Accounting Standards dealing with the treatment of
pension costs in employers’ accounts. FAS 88 applies when
schemes are wound up or when benefits are settled on termination of
employment.
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.
FINAL REMUNERATION
The term used by 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 Revenue Pensions Manual.
FINAL SALARY SCHEME
A defined benefit scheme whose benefits are calculated by reference
to pay or salary at, or close to, retirement.
September 2015
Page 16 of 47
FINANCIAL ADVISER
A financial adviser is someone who is regulated by the Central Bank
of Ireland to give advice to individual members of the public.
Advisers can either be “tied” and only able to advise on products of
the product producer or can be “independent” and able to advise on a
range of providers and products. It is important when selecting an
adviser that you understand how they are being paid for the advice
that is being given and what impact any commission being paid will
have on your pension or investments.
FINANCIAL SERVICES (PENSIONS)
The unit of Revenue which supervises the benefit and contribution
structure of pension schemes granted approval under the Taxes
Consolidation Act, 1997 (previously the 1972 Finance Act).
FLEXIBLE BENEFITS
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, employees 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’.
FLUCTUATING EMOLUMENTS
Employee earnings not paid on a fixed basis, but additional to basic
wage or salary. Includes bonuses, commissions, benefits in kind and
share option gains.
FORFEITURE OF BENEFITS
Termination or suspension of all or part of the benefits under an
occupational pension scheme. Forbidden in relation to preserved
benefits by the Pensions Act, it can still happen in public sector
schemes which are exempted from Part III of the Act.
FOREGOING
An agreement in writing whereby the employee forgoes part of
his/her future earnings in return for a corresponding payment by the
employer into a pension scheme.
September 2015
Page 17 of 47
FREE COVER
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.
FROZEN BENEFIT
A deferred benefit which is not subject to revaluation.
FROZEN SCHEME
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.
FUNDED SCHEMES
Occupational pension schemes set up by most companies and by
commercial semi-state bodies are usually financed by setting aside
money in a trust fund, which is separate from the employer’s
business, to finance the payment of pensions. Separating the
schemes assets from the employer’s business should ensure that
these assets will be available to pay member’s pensions, whether or
not the employer stays in business.
FUNDING
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 benefits when they arise.
FUNDING CERTIFICATE
A certificate issued by the actuary under the Funding Standard
provisions of the Pensions Act.
FUNDING LEVEL
The relationship, usually expressed as a percentage, between the
actuarial value of a scheme’s assets and its actuarial liability.
FUNDING METHOD
The approach used by an actuary in an actuarial valuation. A variety
of methods can be used, but whatever method is employed should
be adequately described in the valuation report.
September 2015
Page 18 of 47
FUNDING PLAN
The agreed timing of contributions with the aim of meeting the cost of
a given set of benefits in a defined benefit scheme.
FUNDING PROPOSAL
If a defined benefit scheme does not meet the Funding Standard set
out by the Pensions Act, the scheme trustees must submit a funding
proposal to the Pensions Authority explaining how they intend to
rectify the scheme’s funding.
FUNDING RATE
The rate of which contributions are payable to support the liability for
benefits. Often used as shorthand for recommended contribution
rate.
FUNDING STANDARD
The Funding Standard ensures that a defined benefit scheme has
sufficient funds to secure the pension rights that members have built
up should the scheme have to be wound up at any stage. To comply
with the Funding Standard, a defined benefit scheme must be able to
meet certain liabilities, as set down in the Pensions Act.
GENDER GROUND
Discrimination by reference to gender is discrimination on the gender
ground. Gender means male or female gender.
GRATUITY
A tax-free lump sum payment, payable at pension age or on death,
which may be subject to abatement. See also “Short service gratuity”
and “Marriage gratuity”.
GROUND OF RACE
Discrimination by reference to race, colour, nationality, ethnic or
national origins is discrimination on the ground of race.
GROUP POLICY
An insurance policy issued to cover more than one individual.
GUARANTEED ANNUITY OPTION
A right to apply the proceeds of an insurance policy to purchase an
annuity at a rate guaranteed in advance in the policy.
September 2015
Page 19 of 47
GUARANTEED PAYMENT PERIOD
A period, normally five years, for which payment of a pension would
be guaranteed by the scheme rules, whether the pensioner lives or
dies.
HANCOCK ANNUITY
An annuity for an employee, former employee or dependant
purchased at or after the employee’s retirement, death or leaving
service. It is called after a decided tax appeal, which allowed the full
purchase price for tax purposes in the year of payment.
HEDGE FUND
An investment fund that takes a higher than normal degree of risk,
often using borrowed money, in the hope of achieving a high
absolute return.
HEDGING
A strategy aimed at reducing potential losses in an investment. An
example would be a forward transaction in a currency at an agreed
future price to protect against exchange rate fluctuations.
HYBRID SCHEME
A scheme which combines features of two or more types of pension
design e.g. a defined benefit scheme with a defined contribution
element.
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.
IMMEDIATE ANNUITY
An annuity which commences immediately or shortly after its
purchase.
INCAPACITY
Inability to continue working due to ill-health or disability. Its precise
meaning in practice is determined by the rules of each separate
scheme.
INCOME CONTINUANCE PLAN
One of the terms used to describe a prolonged disability insurance
scheme.
September 2015
Page 20 of 47
INDEXATION
A system whereby pensions in payment and/or preserved benefits
are increased automatically at regular intervals by reference to a
specified index of prices or earnings.
INDIRECT DISCRIMINATION
A form of sex discrimination, usually unintentional, which is deemed
to exist if conditions are applied to a group of workers which, though
not expressly related to sex, are more likely to be met by one sex
than the other.
INDIVIDUAL ARRANGEMENT
A pension scheme with only one member whose documents relate
only to that member.
INSURED SCHEME
A pension scheme where the sole long-term investment medium
used by the trustees is an insurance policy. All of the benefits are
provided by an insurance company with whom the trustees have
taken out a contract to pay regular contributions.
INTEGRATION
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.
INTERIM TRUST DEED
A form of trust deed commonly used to establish a pension scheme
on broadly stated terms leaving the detailed provisions and rules to
be provided later by a definitive trust deed.
INTERNAL DISPUTE RESOLUTION (IDR)
An arrangement for resolving a complaint or dispute which is
subjected to a resolution process within the pension scheme or
PRSA in which it arises, before it can be submitted to the Pensions
Ombudsman.
INVESTMENT
The process by which contributions and net income of a scheme are
used to increase the value of pension fund assets by means of cash
deposits, the purchase and sale of equities, bonds, property and
other assets as authorised by the trust deed and by law.
September 2015
Page 21 of 47
INVESTMENT MANAGER
A person or body to which the investment of the whole or part of the
assets is delegated by the trustees in accordance with the provisions
of the trust document.
INVESTMENT PERFORMANCE MEASUREMENT
The comparison of the rate of return of a given pension fund with the
notional return of a hypothetical fund, or the actual rates of return of
other funds, over the same period.
INVESTMENT REGULATIONS
Regulations issued under the Pensions Act setting out certain
investment rules that trustees must comply with when investing the
assets of a pension scheme. The relevant statutory instrument
references are SI No 294 of 2006, SI No 188 of 2007 and SI No 455
of 2010.
IRREVOCABLE TRUST
A trust which cannot be revoked or taken back by the employer who
establishes it. Such trusts are normally required by Revenue 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.
“KNOCK FOR KNOCK”
See “Transfer options”.
LARGE SCHEME
A scheme with 100 or more active and deferred members.
LATE RETIREMENT
The retirement of a member, with immediate retirement benefit, after
normal retirement age. The benefit may be increased because of
later payment.
LETTERS OF EXCHANGE
A method of setting up a pension scheme for a single employee. The
letter itself must include all the rules and powers usually contained in
a trust deed and rules and must make reference to the irrevocable
nature of the pension scheme in order to receive Revenue approval.
September 2015
Page 22 of 47
LIABILITIES
The obligations of a scheme to pay amounts of money either
immediately or in the future. Liabilities whose payment is dependent
on unpredictable future events (such as the death of a member) are
called “contingent liabilities”.
LIFE ASSURANCE SCHEME
A scheme which provides only a benefit payable on the death of a
member whilst in service.
LIFESTYLE INVESTMENTS
An asset allocation strategy used mainly in defined contribution
schemes, in which members investments are adjusted depending on
age and term to retirement. Typically, assets are invested in equities
for younger members and systematically switched.
LONG SERVICE BENEFIT
Pension benefits payable at or after the normal pensionable age
(NPA), assuming that you remain in relevant employment until the
NPA. Long service benefit may take the form of regular pension
payments and/or a lump sum. It also includes any benefits payable
on death after the NPA to your spouse or dependants. These
benefits may be a separate pension or, for example, a guaranteed
payment of your pension for a set period after your death.
MANAGED FUND
Funds managed for you by others namely, investment professionals
such as fund managers. Managed funds can invest in a variety of
assets including shares, property and fixed interest or a combination
of these.
MANAGEMENT COMMITTEE OR COMMITTEE OF MANAGEMENT
These terms tend to be used in a variety of senses. A management
committee may provide a local forum for members to discuss pension
issues. Similarly, some employers will negotiate with trade unions
and employee representatives on pensions. This may be through the
usual channels or through special pension negotiation committees
and the term management committee might be used in this context.
Sometimes the term management committee is reserved for a
separate committee set up by the main trustee body who may
oversee specific duties or the day-to-day administration.
September 2015
Page 23 of 47
MARITAL STATUS GROUND
Discrimination by reference to marital status is discrimination on the
marital status ground. Marital status means whether a person is
single, married, separated, divorced, or widowed.
MARRIAGE GRATUITY
A gratuity formerly paid to a woman who was obliged to leave service
as a result of marriage. Now generally in disuse.
MATURE SCHEME
A defined benefit scheme in which the proportion of pensioners to
active members is high, so that contributions may be less than the
outflow of benefit payments.
MAXIMUM APPROVABLE BENEFITS
The maximum benefit which Revenue will permit to be paid under an
approved scheme to an individual, taking account of factors such as
remuneration and service completed.
MEANS TEST
An earnings limit imposed by Government to determine eligibility for
the state pension (non-contributory) and other social assistance
payments including widowers pensions and dependent relative
allowances.
MEMBER
A person who has been admitted to membership of a pension
scheme and who is entitled to benefits under the scheme. This will
include active members, pensioners and deferred pensioners.
MEMBER SPOUSE
In the context of a pensions adjustment order given under the Family
Law Acts, the spouse who is the member of the pension scheme in
question.
MEMBER TRUSTEES
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.
September 2015
Page 24 of 47
MINIMUM RETIREMENT AGE
The earliest age at which the pension scheme allows a member to
retire with an immediate pension, other than on grounds of incapacity
or ill-health.
MONEY PURCHASE SCHEME
Another name for a defined contribution scheme.
MONEY PURCHASE UNDERPIN
An arrangement in a defined benefit scheme whereby a certain
minimum benefit accrues on a defined contribution basis. Usually of
benefit to early leavers.
MONEY WEIGHTED RETURN ( ALSO KNOWN AS TIME WEIGHTED RETURN )
An absolute measure of the rate of return achieved on assets, which
is affected by the timing of cash flows into and out of the fund.
MULTINATIONAL POOLING
An arrangement which links the insured benefit plans of a
multinational company in different locations worldwide, to obtain cost
savings, improved service, possibly better non-medical limits and
better financial information. May be arranged with a single insurer or
a group of participating insurers in different countries.
NATIONAL PENSIONS BOARD
A Board established by the Minister for Social Welfare in 1986 to
advise the Minister on pension matters.
NATIONAL PENSIONS POLICY I NITIATIVE (NPPI)
In 1995 the Pensions Authority and the Department of Social
Protection commissioned the ESRI to undertake a survey of
occupational and personal pensions. This survey showed that
approximately 50% of the workforce in Ireland has supplementary
pension cover in addition to social welfare pension cover. The NPPI
was launched in October 1996 to facilitate debate on how to achieve
a fully developed national pension system and to formulate a strategy
and make recommendations for actions needed to achieve this
system.
September 2015
Page 25 of 47
NET PENSIONABLE PAY
Pensionable remuneration, less twice the annual rate of the
maximum contributory old age pension payable under the social
welfare system to a person with no dependants, calculated on the
last day of service. See also “Co-ordination”.
NET RELEVANT EARNINGS
These are broadly defined as earnings from a trade or professional
employment, less certain allowable expenses.
NEW CODE
A term now practically in disuse to refer to the code of practice
relating to the approval of pension schemes by Revenue under the
1972 Finance Act.
NOMINATION
The naming by a member of a person or persons to whom he or she
wishes any death benefit to be paid in the event of his/her death.
Also called a ‘wishes letter’ or ‘expression of wishes’. Such a letter or
expression of wishes cannot bind the trustees but they would
normally try to give effect to the deceased member’s wishes.
NON-CONTRIBUTORY SCHEME
A pension scheme which does not require contributions from active
members, i.e. the employer is liable for all contributions needed to
support the scheme.
NON-MEMBER SPOUSE
In the context of a pensions adjustment order given under the Family
Law Acts, the spouse who is not a member of the scheme in which
an order is being sought.
NON-PENSIONABLE EMPLOYMENT
Employment in which an individual has no right to benefits from an
occupational pension scheme other than lump sums and dependants’
benefits payable on death in service.
NON-STANDARD PRSA
A PRSA that has no limit on charges and you can invest in a range of
funds.
September 2015
Page 26 of 47
NORMAL PENSIONABLE AGE/NORMAL RETIREMENT AGE
This is the age at which retirement benefits become payable. This will
be set out in the governing documents of an occupational benefit
scheme.
NOTIONAL SERVICE
Members of civil or public sector pension schemes who are likely to
have less than 40 years service by their minimum retirement age,
can top up their benefits through notional service purchase (NSP).
This means buying back missing years of service by lump sum or a
regular payment which would be a percentage of their salary.
OBJECTIVE JUSTIFICATION
It may be possible to justify the fixing of different levels of contribution
under a defined contribution scheme by reference to a legitimate aim
of the employer. Legitimate employment policy, labour market and
vocational training objectives are examples of legitimate aims
specified in the Act. Similarly, it is a defence to a claim of indirect
discrimination to show that the rule complained of was implemented
to achieve a legitimate aim of the employer, and that the rule is an
appropriate and necessary way of achieving that aim.
OCCUPATIONAL BENEFIT
Payments in the form of pensions, payable in respect of termination
of service, retirement, old age, death, interruptions of service by
reason of sickness or invalidity, accidents, injuries or diseases arising
out of or in the course of a person’s employment, unemployment or
expenses incurred in connection with children or other dependants.
OCCUPATIONAL BENEFIT SCHEME
This is formally defined in the Act as a scheme or arrangement for
providing occupational benefits to employees and the self-employed.
This definition includes occupational pension schemes, personal
pension plans and PRSAs, but also includes other arrangements
such as permanent health insurance.
OCCUPATIONAL PENSION SCHEME
A pension scheme set up by an employer to provide retirement
and/or other benefits for employees. It is sometimes called a
‘company pension scheme’.
September 2015
Page 27 of 47
OFFSET
An amount of salary which is disregarded under the rules of a
scheme, to take account of a social welfare pension. Can also be
applied to a deduction from the member’s pension to take account of
a social welfare pension. See “Integration”.
ONE-MEMBER ARRANGEMENT
A scheme which is established for one person only and that one
person will always be the only member, and that member has
discretion as to how the resources of the scheme are invested unless
the scheme is subject to a pensions adjustment order, in which case
it may also include the person(s) referred to in that order.
ON-THE-SPOT FINES
Instead of prosecuting for a breach of certain specified offences of
the Pensions Act through the Courts, the Pensions Authority may
instead notify a person in writing that it is alleged that a summary
offence has been committed and that if, within 21 days of the notice,
the person has remedied the offence to the satisfaction of the
Authority and paid the appropriate fine, the prosecution will not
proceed. These are called “on-the-spot fines”.
OVERLAP
An arrangement under which a dependant’s pension comes into
immediate payment on the death of a pensioner, while a minimum
guaranteed period of payment of the main pension is still running.
OVERRIDING LEGISLATION
The application of statutory requirements to pension schemes by
means of provisions which expressly override the scheme rules. All
the provisions of the Pensions Act and its regulations are overriding
legislation.
P AID UP BENEFIT
A benefit secured for an individual member under a contract of
insurance whose contributions have ceased to be payable in respect
of that member. One form of deferred benefit.
P AID UP PERSONAL PENSION PLAN
This is a personal pension plan to which you no longer pay
contributions and from which you have yet to draw a benefit.
September 2015
Page 28 of 47
P AID UP SCHEME
A scheme where no further contributions are being paid, but whose
assets continue to be held by the trustees and applied under its rules.
P ARTICIPATING EMPLOYER
An employer whose employees have a right to be members of a
scheme. Used where schemes cater for more than one employer.
P ASSIVE INVESTMENT MANAGEMENT
A style of portfolio management that links the investments to a
particular index or indices, so that their value tracks changes in that
index or those indices.
P AST SERVICE
Service before a given date. Frequently used to indicate service with
the employer before the members entry into the pension scheme.
P AST SERVICE BENEFIT
The benefit granted in respect of past service.
P AST SERVICE RESERVE
A term describing the present value of all benefits accrued to the date
of the calculation, by reference to projected earnings.
P AY- AS -YOU-GO
Often abbreviated to PAYG, this is the method of financing pension
promises out of the current income of the employer, there being no
advance funding of the pension liabilities. It is used for social welfare
schemes and for many (though not all) public sector occupational
schemes. See also “Unfunded scheme”.
P AY PARITY
A term used to describe the system of increasing pensions in
payment and deferred pensions in line with the pay for the post held
by the scheme member before retirement or leaving service, as
appropriate.
PENSIONABLE EARNINGS /PENSIONABLE SALARY
The earnings on which benefits and/or contributions are calculated.
September 2015
Page 29 of 47
PENSIONABLE SERVICE
The period of service which is taken into account in calculating the
pension benefit.
PENSIONER
A member who is currently receiving payment of a pension from a
pension scheme.
PENSION ADJUSTMENT ORDER (PAO)
An order made following a decree of judicial separation or divorce
whereby the Court adjusts a member’s pension rights in favour of
his/her spouse/civil partner or a dependent child.
PENSION FUND
This is the assets of the pension scheme, but the term is very often
used for the scheme itself.
PENSION PLAN
Another term for pension scheme.
PENSION SCHEME
An arrangement, other than accident insurance, to provide pension
and/or other benefits for members on leaving service or retirement
and for the members dependants in the event of death.
PENSIONABLE EMPLOYMENT
Employment may be referred to as pensionable if the individual is a
member of an occupational pension scheme as a consequence of
that employment.
PENSIONER MEMBER
A person being paid from a pension scheme (also called a
pensioner).
PENSIONEER TRUSTEE
An individual or body corporate involved with pension schemes and
accepted under Revenue requirements as a trustee of a small selfadministered scheme or small member controlled scheme.
September 2015
Page 30 of 47
PENSIONS ACT
An Act of 1990 for the regulation of pension schemes, which provides
for preservation of benefits, a minimum funding standard in the case
of defined benefit schemes, disclosure of information, equal
treatment, defines the duties and responsibilities of trustees and
establishes a Pensions Authority to supervise the operation of the
Act. The Act has been considerably amended and extended.
PENSIONS (AMENDMENT ) ACT, 1996
An Act which introduced extensive amendments to the Pensions Act
1990, extended the powers of the Pensions Authority 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 AUTHORITY
The Pensions Authority is a statutory body set up under the Pensions
Act, 1990. It was previously known as the the Pensions Board. The
Authority regulates occupational pension schemes, trust RACs and
Personal Retirement Savings Accounts (PRSAs) in Ireland.
PENSIONS OMBUDSMAN
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 PLAN
A policy taken out with an insurance company in order to provide
benefits in retirement. These may be taken out by those who are
self-employed or who are in non-pensionable employment. There
are two forms of personal pension plans, a Retirement Annuity
Contract (RAC) and a Personal Retirement Savings Account (PRSA).
PERSONAL RETIREMENT BOND
A personal retirement bond is a special type of personal pension
plan, to which the only premium payment is a transfer value from a
previous scheme. The benefits available from a personal retirement
September 2015
Page 31 of 47
bond at retirement age depend on the investment return achieved
during the period between the payment of the contribution and
retirement.
PERSONAL RETIREMENT S AVINGS ACCOUNT (PRSA)
A PRSA is a personal pension plan that you take out with an
authorised PRSA provider. It is like an investment account that you
use to save for your retirement. PRSAs are a type of defined
contribution scheme. You make regular contributions to your pension,
and a proportion of these are tax deductible. A register of authorised
PRSA providers and their approved PRSA products is available on
the Pensions Authority’s website.
POOLED FUNDS
Also known as managed funds, these are collective investment
schemes in which investors’ money is pooled to buy a portfolio of
assets, including government bonds, deposits, property and stocks.
See also “Unit linked investment”.
PPS NUMBER
Personal public service number – a unique reference number for
each person in the State that identifies the person for all matters
related to tax, social insurance and social welfare benefits.
PRELIMINARY POLL
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.
PRESERVATION
Describes the obligation which trustees have under the Pensions Act
to retain benefits for scheme members who have completed two
years’ qualifying service since 1 January 1991 and finished their
employment after 1 June 2002 or completed at least five years’
qualifying service (two since 1991) and finished their employment
before 1 June 2002.
PRESERVED BENEFITS
These are the retirement benefits that a scheme member retains
when they have completed two years’ qualifying service since 1
January 1991 and finished their employment after 1 June 2002 or
completed at least five years’ qualifying service (two since 1991) and
finished their employment before 1 June 2002.
September 2015
Page 32 of 47
PRINCIPAL EMPLOYER (ALSO KNOWN AS “THE SPONSORING EMPLOYER”)
Commonly used in scheme documentation for the particular
participating employer which is given special powers or duties in
areas such as the appointment of trustees, rule amendments and
winding up. Usually the employer that started the scheme or, in a
scheme catering for many unrelated employers, one chosen as a
proxy for all.
PRINCIPLE OF EQUAL PENSION TREATMENT
This principle dictates that there shall be no discrimination on any of
the nine discriminatory grounds in respect of any rule of a scheme.
The nine discriminatory grounds are gender, marital status, family
status, sexual orientation, religious belief, age, disability, race and
membership of the travelling community.
PRIORITY LIABILITIES
Liabilities which are given precedence by the scheme rules in a
winding up. Scheme rules are, however, overridden by the statutory
priorities in Part IV of the Pensions 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 on a long-term basis.
PROPRIETARY DIRECTOR
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 shares held by a trust to which the director concerned had
transferred shares. Proprietary directors qualify to invest in ARFs on
retirement.
PROSPECTIVE MEMBER
An employee who is or will be eligible to join a scheme.
PRSA AVC
A PRSA designed to be used for additional voluntary contributions by
members of occupational pension schemes.
September 2015
Page 33 of 47
PRSA PROVIDER
An authorised investment firm, life assurance company or credit
institution which produces, markets or sells PRSA products.
PRSI
A shortened name for Pay Related Social Insurance, whereby
workers earning an income pay contributions to the Social Insurance
Fund. In return, they are covered for certain benefits, such as a
State pension.
PUBLIC AUTHORITY PENSION SCHEME
A statutory scheme to which Section 776 of the Taxes Consolidation
Act, 1997, applies or a scheme where benefits are paid for in whole
or in part from central funds or moneys voted by the Oireachtas, and
which provide for an appeal to a Minister for the resolution of
disputes prior to referral to the Pensions Ombudsman.
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 and pension benefits are paid as they fall
due by the State from current spending.
PURCHASED LIFE ANNUITY
An annuity purchased privately by an individual is different from the
type of annuity purchased by pension scheme trustees, which are
often described as “compulsory” annuities. A purchased life annuity
is purchased from personal assets rather than from the proceeds of a
pension scheme. Therefore, the legislation provides that part of the
instalment payments of a purchased life annuity are exempt from
income tax, being treated as a return of those personal assets.
QUALIFIED AUDITOR
A person appointed to act as auditor who must not be:
-
a member or trustee of the pension scheme
a person employed by any of the trustees
an employer of any member of the pension scheme
a director of the employer or a participating employer.
QUALIFIED MEMBER
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). Qualified
members may vote in a preliminary poll or an election.
September 2015
Page 34 of 47
QUALIFYING FAMILY LEAVE
Any period throughout which a member is absent from work for family
reasons, and in respect of which the employer pays the member’s
salary.
QUALIFYING FUND MANAGER (QFM)
A financial institution authorised under the 1999 Finance Act to
operate approved retirement funds (ARFs) on behalf of the selfemployed and proprietary directors.
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 Revenue of their intention to act as QFMs.
QUALIFYING MATERNITY ABSENCE
Any period throughout which a woman is absent from work due to
pregnancy or childbirth, and in respect of which her employer, or
former employer, pays her any salary.
QUALIFYING SERVICE
A term defined in the Pensions Act as the service which a pension
scheme member must complete before becoming entitled to a
preserved benefit on leaving service. Currently, it is two years’
service including any period in a previous scheme from which a
transfer value was received.
RATE OF RETURN
The percentage change in the value of an investment over a period,
taking into account the income from it and the change in its market
value, often expressed as an equivalent annual rate. See also “Time
weighted return”, “Money weighted return” and “Real rate of return”.
REAL RATE OF RETURN
The difference between the rate of return and a selected measure of
inflation (often taken as CPI) over a period.
RECOMMENDED CONTRIBUTION RATE
The contribution rate recommended by the actuary as being
necessary to support the benefit promises made under the scheme.
September 2015
Page 35 of 47
RECKONABLE SERVICE
A term defined in the Pensions Act. It is the period of a person’s
scheme membership, not necessarily the whole period of
employment, and excluding any time when covered for death benefits
only.
REGISTERED ADMINISTRATOR
Trustees of every scheme (including large trust RAC schemes) must
appoint a registered administrator to provide various services to the
scheme known as "core administration functions". The "core
administration functions" are the preparation of annual reports and
annual benefit statements for the trustees, the maintenance of
sufficient and accurate records of members and their entitlements to
discharge the above functions and the submission of Annual Scheme
Information (ASI) to the Pensions Authority.
RELEVANT EARNINGS
Relevant earnings are broadly defined as income from a trade or
profession or from an office or employment other than a pensionable
office or employment.
RELEVANT EMPLOYMENT
Any employment where you are making contributions to a pension
scheme.
RELEVANT PERCENTAGE
The proportion of the member spouse’s retirement benefits earned
during the relevant period, as specified by the Court, which must be
paid to the dependent spouse or children under a pension adjustment
order.
RELEVANT PERIOD
The period during which the member spouse’s retirement benefits
were earned, as specified by the Court, which must be taken into
account in determining the designated benefit.
RELEVANT PERSON
In relation to any scheme, for the purposes of the rules on whistleblowing, relevant persons are the trustees, actuary, auditor,
administrator, insurer, investment manager and anyone employed by
such persons. Legal advisers are excluded.
September 2015
Page 36 of 47
For the purposes of the Pensions Ombudsman regulations, the
relevant person in relation to a scheme is the trustee/s of the
scheme; or the Minister in a public authority scheme; and, in relation
to a PRSA, the PRSA provider.
RELIGION GROUND
Discrimination by reference to religious belief is discrimination on the
religion ground. Religious belief includes religious background or
outlook.
REPORTING, COMPULSORY
The Pensions Act requires that certain relevant persons providing
services to a scheme should report to the Pensions Authority 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”.
REPORTING, VOLUNTARY
The facility open to anyone to report to the Pensions Authority on any
matter concerning ‘the state and conduct’ of a scheme. Anyone who
does so in good faith is protected by the Pensions Act against legal
action for defamation.
RETAINED BENEFITS
A term used by Revenue to denote retirement or death benefits in
respect of an employee’s earlier service with a former employer or an
earlier period of self-employment. These may have to be taken into
account in computing maximum approvable benefits.
RETIREMENT ANNUITY CONTRACT (RAC)
An individual pension policy which can only be effected by individuals
who are in non-pensionable employment or who have taxable
earnings from a self-employed trade or profession. Also known as
“personal pension plans”.
RETIREMENT BENEFITS
This means any payment arising under a pension scheme, payable
to the member spouse or to others, at and following retirement.
REVALUATION
The preserved benefit which is payable to a member from a defined
benefit scheme will normally be revalued at the end of every year,
starting with the calendar year before the benefits become payable.
Revaluation helps to maintain the purchasing power of a member’s
September 2015
Page 37 of 47
preserved benefit until he or she reaches retirement. The rate of
revaluation for a full year will be either 4% or the increase in the
Consumer Price Index if it is less than 4% in that year.
REVENUE
The organisation charged by Government with the collection of tax
revenues and which, through Financial Services (Pensions), monitors
the operation of pension schemes which are granted tax approval.
REVENUE LIMITS
Revenue restricts either the amount of benefits ultimately payable to
an individual and/or the contributions payable by or in respect of an
individual.
RISK
Any threat to the accumulation of benefits or the solvency of a
pension fund. Can often arise from the variability of investment
returns. Investments with a greater degree of risk built in must offer
higher returns to attract investors.
RISK BENEFITS
Benefits payable in the event of death or disability, which are not prefunded. These risks are often insured.
RISK PREMIUM
The extra yield of an investment over the ‘risk-free’ rate, demanded
by investors to compensate them for taking the higher risk.
RULES
The detailed provisions of a pension scheme normally set out in a
formal way and usually given authority by a trust deed.
SCHEME
Scheme means an occupational benefit scheme.
SCHEME YEAR
A period selected by the trustees of a scheme for the purposes of the
annual report and accounts. It may be any year beginning on (a) a
date specified in the scheme documents; (b) 1 January; (c) such
other date as may be agreed between the trustees and the Pensions
Authority. It can be more than a year in certain circumstances, but
can never exceed 23 months.
September 2015
Page 38 of 47
SECTION 50 ORDER
An instruction given to the trustees of a scheme by the Pensions
Authority, pursuant to Section 50 of the Pensions Act, to reduce the
promised benefits under the scheme so that the funding standard can
be met.
SEGREGATED FUND
Scheme assets invested by an external investment manager,
independently of other funds under its control. Often used to indicate
an individual portfolio of stocks and shares in contrast to a pooled
fund.
SELF-ADMINISTERED SCHEME
A pension scheme where the assets are directly invested in stock
markets, etc. They may be managed by 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.
SELF-INVESTMENT
The investment of the schemes assets in the business of the
employer, or that of an associated employer, or loans made to such
bodies out of the pension schemes assets. Regulated under both
disclosure and minimum funding standard provisions of the Pensions
Act.
SEXUAL ORIENTATION GROUND
Discrimination by reference to sexual orientation is discrimination on
the sexual orientation ground.
Sexual orientation means
heterosexual, homosexual or bisexual orientation.
SHORT SERVICE GRATUITY
A gratuity paid to a person on leaving service, where the length of
pensionable service is insufficient to qualify the individual for a
preserved benefit.
SMALL SCHEME
A scheme with less than 100 active and deferred members (not
including pensioners).
September 2015
Page 39 of 47
SMALL SELF-ADMINISTERED SCHEME
A scheme with less than 12 members as set by Revenue. A small
self-administered scheme must appoint a pensioneer trustee.
SOCIALLY RESPONSIBLE INVESTMENT
Socially responsible investing, also known as sustainable, sociallyconscious, or ethical investing, describes an investment strategy
which seeks to maximise both financial return and social good. In
general, socially responsible investors favour corporate practices that
promote environmental stewardship, consumer protection, human
rights, and diversity. Some (but not all) avoid businesses involved in
alcohol, tobacco, gambling, weapons, and/or the military.
SOVERIGN ANNUITY
An annuity linked to sovereign bonds issued by Member States of the
European Union.
The annuity payments may be reduced if
underlying reference sovereign bonds default.
SPECIAL CONTRIBUTION
Any employer or employee contribution not regarded by Revenue as
an ordinary annual contribution.
SPOUSES’ & CHILDREN’ S PENSION SCHEME
A scheme usually separate from the main superannuation scheme in
a public sector body, designed to supplement the superannuation
scheme and to provide only pensions payable to spouses and
children of deceased members. The pensions are payable on death
before, or after, retirement. Such schemes are almost always
contributory. When these schemes were first introduced, entry was
voluntary but became compulsory for subsequent entrants to service.
STANDARD ARRANGEMENT
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”.
STANDARD PRSA
A Standard PRSA can only invest in pooled funds except for
temporary cash holdings. There is a maximum charge of 5% on
each contribution you pay and a maximum 1% annual fund
management charge, based on your fund value.
September 2015
Page 40 of 47
STATE PENSION AGE
The age from which pensions are normally payable by the social
welfare scheme, currently, sixty-six (old age pension) for both men
and women.
STATEMENT OF INVESTMENT POLICY PRINCIPLES (SIPP)
A written statement prepared at least every three years by the
trustees that includes:




the investment objectives of the trustees
the investment risk measurement methods
the risk management processes to be used
the strategic asset allocation
STATEMENT OF REASONABLE PROJECTION
A statement predicting the likely future worth of a pension, which is
based on assumptions relating to future contributions and investment
returns and the cost of buying an annuity when a member retires.
STATUTORY SCHEME
A scheme whose operation is governed either by an Act of the
Oireachtas or by regulations made under a statutory instrument in
pursuance of such an Act.
STOCK LENDING
A process by which stock is released to a third party for a fixed or an
open period, in return for collateral and a fee for doing so. Normally
a short-term transaction.
STOCK SELECTION
The continuous process of selecting which stocks are to be included
in a portfolio.
SUBSTITUTION OPTION
A facility offered by an insurance company that insures the death
benefits under a scheme, whereby a member leaving the scheme
can effect a life policy without evidence of health. Whereas a
continuation option would allow the member to continue the type of
insurance used in the scheme, the substitution option requires him to
take out a different type of policy (say, endowment or whole-of-life,
instead of term assurance). Such options are now becoming less
common.
September 2015
Page 41 of 47
SUPERANNUATION SCHEME
A term often used in the public service to describe an occupational
pension scheme available to civil and public servants.
SUPPLEMENTARY SCHEME
A scheme to provide benefits over and above the benefits given
under another scheme. Also called a “top-up scheme” or “top hat
scheme”.
SURPLUS
In a defined benefit scheme, any excess of the value of a scheme’s
assets over the value of its liabilities as calculated by the actuary of
the scheme.
SURRENDER VALUE
In an insurance contract, the available value of the benefits being
funded, when the contract is terminated before its projected maturity
date.
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.
TEMPORARY ANNUITY
An annuity payable for a fixed term or until earlier death. Also called
a “term annuity”.
TEMPORARY CASH HOLDINGS
Short-term deposits that provide a secure income.
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.
TIME WEIGHTED RETURN (ALSO KNOWN AS “MONEY WEIGHTED RETURN”)
A relative measure of the rate of return earned by assets,
independent of the timing of cash flows in and out of the fund.
September 2015
Page 42 of 47
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.
TRANSFER NETWORK
There are two networks in the public service under which the
pensionable service given in participating bodies can be transferred
in full to any other participating body. The two networks involved are
the public service transfer network (1979) and the local government
(transfer of service) scheme 1984. Bodies wishing to be designated
for the purpose of transfer under both networks must apply
separately to the appropriate bodies – the Department of Finance
and the Department of Environment, Community and Local
Government respectively.
TRANSFER PAYMENT
A payment from one pension scheme to another, or to an insurance
company to purchase a buy-out bond or PRSA, in lieu of the benefits
which have accrued to the member under the scheme.
TRANSFER VALUE
If you leave an occupational pension scheme with entitlement to
deferred benefit, then you may be entitled to elect to transfer your
benefits to either a new employers scheme, to a personal retirement
bond, or to a PRSA (only possible if less than 15 years’ service
completed). In the case of a defined benefit scheme, the transfer
value represents the actuarial value at the date of transfer of any
pensions payable to your dependants in the event of your death. In
the case of a defined contribution scheme, the transfer value
represents the accumulated value at the date of transfer of the
employer and employee contributions.
TRAVELLER COMMUNITY GROUND
Discrimination by reference to membership of the traveller community
is discrimination on the traveller community ground. Traveller
community means the community of people commonly so called who
are identified by both themselves and others as people with a shared
history, culture and traditions including historically a nomadic way of
life on the island of Ireland.
TRIVIAL PENSION
A pension which is so small that it can be subject to full commutation
without prejudicing the approval of the scheme by Revenue. The
present triviality limit is €330 per annum.
September 2015
Page 43 of 47
TRUST
An arrangement under which a person or a group of people (trustees)
hold and look after property on behalf of others. In the case of a
pension scheme, the assets are held by the pension scheme trustees
for the benefit of the members of the pension scheme and their
dependants, and for the purpose of providing income in retirement.
TRUST DEED
The legal document, executed in the form of a deed, which
establishes, regulates or amends a trust.
TRUST DEED AND RULES
Occupational pension schemes are set up under trust. The trust deed
and rules governs how the scheme is managed and sets out how the
benefits are determined and to whom they are payable.
TRUST FUND
In a company pension scheme the trust fund is the monies and
assets held by the trustees, subject to the trusts of the scheme.
TRUST LAW
Trust law comprises a number of statutory provisions dating back to
the Trustee Act, 1893, and principles of equity which have evolved
over many years in cases decided in the Courts.
TRUST RAC
A Trust RAC is a scheme established under trust and approved by
Revenue under Section 784(4) or Section 785(5), Chapter 2, Part 30
of the Taxes Consolidation Act, 1997.
TRUSTEE
An individual or a company which alone or jointly becomes the legal
owner of assets to be administered for the benefit of someone else
(the beneficiaries), in accordance with the provisions of the document
creating the trust and the provisions of trust law generally and the
Pensions Act.
TWENTY PER CENT (20%) 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 Revenue.
September 2015
Page 44 of 47
UNAPPROVED SCHEME
An occupational pension scheme not designed to be approved by
Revenue. Such schemes are not controlled by the Pensions Act.
UNFUNDED SCHEMES
Schemes in the non-commercial sector, such as the civil service,
local government, education and health services, are financed on a
pay-as-you-go basis. This means that the cost of pensions is met
from current exchequer expenditure in much the same way as the
salaries and wages of employees. These schemes can operate in
this way as the State is in a position to obtain the money it needs to
pay pensions.
UNIFORM ACCRUAL
A principle applied to calculate a member’s accrued benefits, in
cases where the potential service of the member differs from the
period required to “earn” maximum benefits under the scheme rules.
Thus, if the scheme benefit was 30/45ths of salary and the member
could serve 35 years, he/she would be deemed to have earned
1/35th of the maximum benefit in each year of service. This principle
underlies preservation of benefits under the Pensions Act.
UNIT LINKED INVESTMENT
Arrangements whereby the contributions paid by the investor are
used to purchase units, the price of which fluctuates according to the
value of the underlying investment portfolio. See also “Pooled
funds”.
UP-RATING
This is the practice of increasing the value of a benefit or contribution
so that it keeps pace with any changes made in the pensionable pay
appropriate to the job which the person holds or held at a particular
time.
Up-rating can apply to deferred benefits, refunds of
contributions which become repayable on re-entry to service and to
marriage gratuities which are repaid on reinstatement to membership
of the scheme.
V ALID REQUEST
The trigger which starts the process of selecting member trustees
under the Pensions Act regulations.
September 2015
Page 45 of 47
V ALUATION BASIS
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.
VENTURE CAPITAL
Funds put up by investors to finance new or growing businesses.
VESTED RIGHTS
This has different meanings for different people.
(a) For active members, benefits to which they would unconditionally
be entitled on leaving service, which may or may not include
statutory rights to preserved benefit.
(b) For deferred pensioners who have already left employment, their
deferred/preserved benefit.
(c) For pensioners, the pension which they are receiving, including,
where appropriate, the related benefits for spouses and other
beneficiaries.
VESTING PERIOD
This is the period of membership of an occupational pension scheme,
which you must complete in order to be entitled to deferred benefits
on leaving service.
VICTIMISATION
Where the dismissal or otherwise adverse treatment of an employee
by their employer occurs as a reaction to a complaint, or participation
in a complaint by an employee in relation to a breach of the Principle
of Equal Pension Treatment.
VOLATILITY
The frequency and magnitude of price changes of assets.
WHISTLE-BLOW
To report a breach of the law to the relevant authorities, for example,
to make a compulsory report to the Pensions Authority of a material
misappropriation or a fraudulent conversion of the resources of a
pension scheme or a voluntary report on the state and conduct of a
scheme.
September 2015
Page 46 of 47
WINDING UP
The process of terminating a pension scheme, usually by applying
the assets to the purchase of immediate and deferred annuities or
buy-out bonds; by transferring annuities already purchased to the
ownership of the payees; or by transferring the assets and liabilities
to another pension scheme, PRSA or buy-out bond in accordance
with scheme documentation. A scheme is not wound up until no
further assets remain under the control of its trustees.
WISHES LETTER
The naming by a member of a person or persons to whom he or she
wishes any death benefit to be paid in the event of his/her death.
Also referred to as ‘nomination’ or ‘expression of wishes’. Such a
letter or expression of wishes cannot bind the trustees but they would
normally try to give effect to the deceased member’s wishes.
WITH-PROFITS POLICY
An insurance policy under which a share of surpluses disclosed by
actuarial valuations of the insurance companies life and pensions
business is payable as an addition to guaranteed benefits or as a
reduction in future premiums.
September 2015
Page 47 of 47