Glossary of pension terms

Abatement

1. 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.

2. 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 their pension has commenced – they 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 (also known as ‘accrued rights’)

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 building up retirement benefits.

Actuarial assumptions

When putting a present value on all the future benefits payable from a defined benefit scheme, the scheme actuary will make assumptions about things like future inflation, salary increases, member mortality and the rate of investment return on the scheme’s assets. These assumptions form the basis of an actuarial valuation or other actuarial calculation. Actuarial assumptions are also used when projecting the value of a defined contribution pension fund at retirement, and the amount of pension that an individual might purchase with their pension fund.

Actuarial deficit/surplus

In the context of a defined benefit scheme, this is the difference between the value of a scheme’s assets and the present value of a scheme’s liabilities (i.e., future benefit payment obligations) under a particular set of valuation assumptions. The valuation assumptions will vary depending on the purpose of the actuarial valuation and on the date of the valuation, e.g., the valuation could be carried out for statutory funding standard purposes, to calculate the future rate of contributions required from the employer and members or in order to report the pension scheme surplus or deficit in the scheme sponsor’s accounts.

Actuarial funding certificate (AFC)

A certificate that trustees of a defined benefit scheme must submit to the Pensions Authority at least every three years. It is prepared and signed by an actuary. The certificate shows whether or not a scheme holds sufficient assets at a particular date to provide for the liabilities of the scheme in respect of accrued pensions, had the scheme wound up (terminated) on the date of the certificate. The liabilities must be calculated in accordance with the funding standard provisions of the Pensions Act.

Actuarial reduction

A reduction made to the accrued pension of a member to offset any extra costs or changes arising in relation to the payment of that pension (e.g., if the pension is to be paid earlier than expected) and/or to reflect a deficit in the statutory funding level of the pension scheme.

Actuarial valuation

An assessment by an actuary of the ability of a defined benefit pension scheme to meet its benefit obligations or benefit promises. An actuarial valuation may be carried out for the purposes of:

• determining the future contributions required to pay the benefits promised and to prepare the actuarial valuation report required under section 56 of the Pensions Act (referred to as the ‘ongoing’ valuation);
• assessing compliance with the statutory funding standard provisions of the Pensions Act and preparing an actuarial funding certificate (referred to as the ‘funding standard valuation’); or
• reporting the pension scheme asset (surplus) or liability (deficit) in the company accounts of the scheme sponsor(s) (referred to as the ‘accounting valuation’).

Actuarial value

In relation to a pension scheme, it means the value placed on pension scheme benefits by the pension scheme actuary which involves estimating the amount and timing of the likely future benefit payments from the scheme (pensions and lump sums). The actuarial value is the present-day value of all future benefits payable to pension scheme members, factoring in assumptions about future salary increases, future inflation, future ill-health and mortality rates of members, as well as the expected investment return on pension scheme assets.

Actuary

The individual appointed by the trustees of an occupational pension scheme to carry out actuarial 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. Often called ‘purchasing notional service’ in public sector pension schemes.

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 allow members to make AVCs, a standard personal retirement savings account must be offered by the employer for this purpose.

Administration contract

Pension scheme trustees must enter into a legally enforceable written agreement (contract) with each service provider of the pension scheme, clearly defining the rights and obligations of both the trustees and the service provider. The Pensions Authority’s Code of Practice for trustees lists specific items to be included in contracts with outsourced service providers and lists further specific items to be included where administration services are being provided. See also section 64AM of the Pensions Act.

Administration policy

Pension scheme trustees must approve and maintain a written administration policy. The Pensions Authority’s Code of Practice for trustees sets out the areas the administration policy must cover. Trustees must keep written evidence to demonstrate that the administration policy has been complied with and reviewed periodically and at least every three years. See also sections 64AB(5), (6) and (7) of the Pensions Act.

Advisory notice

An advisory notice is a notice from the Pensions Authority advising trustees of remedial actions they must take. An advisory notice will be issued by the Authority if:

(a)   the Authority believes the trustees are failing in relation to their governance duties, the requirements relating to outsourcing and/or their duties under Part IIA of the Pensions Act, or

(b)   the Authority has carried out a supervisory review of a pension scheme and believes that one or more weaknesses and/or deficiencies exist.

The advisory notice must contain specific information about the particular legal requirement(s) not being met or the weakness or deficiency that exists, the reasons why the Authority believes the trustees are failing, the remedial action required and the deadlines that apply. Advisory notices are a preliminary step before further possible enforcement. The Authority can still institute proceedings relating to a breach of legislation after an advisory notice has been issued. The Authority will withdraw an advisory notice where the trustees have taken remedial action. See also section 26M of the Pensions Act.

Age ground

Discrimination by reference to age is discrimination on the age ground.

Alternative arrangement

Many members of occupational pension schemes are eligible to participate in selecting their scheme’s trustees. The ‘alternative arrangement’ is one of the methods set out in regulations by which members can participate in the selection of trustees. Under this alternative arrangement, the employer nominates a person or persons they propose to appoint as trustee(s), and members are asked to approve the employer’s proposals. If the members reject these proposals, an election under the ‘standard arrangement’ takes place. For more information, please refer to the Pensions Authority’s guide ‘Member participation in the selection of trustees’, available here. For more detailed information about the legislation governing the process, please see the Pensions Authority’s guidance notes on ‘Member participation in the selection of persons for appointment as trustees’, available here.

Annual compliance statement (Part VIB compliance statement)

Trustees of pension schemes must prepare an annual compliance statement (ACS) no later than 31 January each year. The ACS must contain information specified by the Pensions Authority relating to Part VIB of the Pensions Act (governance activities).  The ACS must be certified for accuracy and completeness by at least two trustees. The ACS form is available on the forms section of the Authority’s website.

Annual report

The Pensions Act requires the trustees of pension schemes to communicate information about their scheme on an annual basis, such as the parties involved in running the scheme, the number of scheme members, the financial development of the scheme and a statement of the funding position/solvency of the scheme (if applicable). The content of the annual report is specified in the Occupational Pension Schemes (Disclosure of Information) Regulations, 2006, as amended.

Previously, small trust RACs were exempt from the requirement to prepare an annual report. However, the European Union (Occupational Pension Schemes) Regulations, 2021, removed this exemption. Small trust RACs are required to prepare an annual report from 2022 onwards.

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.

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 retirement fund (ARF)

An approved retirement fund (ARF) is a post-retirement investment fund typically used by defined contribution scheme members and personal retirement savings account holders at retirement to invest any retirement funds remaining after taking tax-free cash, as an alternative to purchasing an annuity. The funds transferred to an ARF can be drawn down in a flexible way during retirement. Further information about ARFs, e.g., who can access them, how withdrawals are taxed and what happens on the death of an ARF holder, can be requested from an ARF provider. For more information see the Revenue Pensions Manual.

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.

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 over and above normal scheme entitlements. They are usually paid for by the employer or the pension scheme.

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 statement

A statement of the benefits payable in respect of an individual on the occurrence of specified events, e.g., death, retirement etc. From 2023/2024, members of occupational pension schemes (except members of unfunded public sector schemes) will receive what is formally called a ‘pension benefit statement’ annually. The pension benefit statement will show two different pension estimates for members of defined contribution schemes. Deferred members of pension schemes, i.e., those who have left employment but have not yet retired, will also be entitled to receive annual pension benefit statements from 2023/2024.

Board resolution

The directors or partners of the sponsoring employer can meet and pass a special board 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.

Book reserve scheme

Unfunded pension scheme which is accounted by a provision in the employer’s 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 date an individual qualifies for a State pension where the calculation of the pension involves a State pension offset, but members retire before the State pension becomes payable.

Buy-out bond

Also known as a personal retirement bond, means an insurance policy purchased by the trustees of a pension scheme in the name of a member or beneficiary following termination of service, retirement, or the winding-up of a pension scheme. In such circumstances, a buy-out bond is bought in substitution of the members rights under the pension scheme. Under the Pensions Act, the purchase of such a bond after a member has left service may be at the option of the member or, in certain circumstances, at the option of the trustees.

Capitalisation

Capitalisation refers to the requirement for trustees of defined contribution (DC) master trusts to hold sufficient capital to cover the running costs of the master trust for a minimum period of time, as well as specified wind-up costs, in order to protect member funds in the event of the master trust winding up. The capitalisation requirements are set out in the Pensions Authority’s Code of Practice for trustees. Where trustees of a DC master trust are in breach of the capitalisation requirement, they must make an immediate report to the Authority and take steps to remedy the situation.

Career average scheme

An alternative term for an average earnings scheme.

Cash option

An alternative term for commutation.

Certificate of existence

A document confirming that a person in receipt of a pension is still alive.

Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010

The Civil Partnership and Certain Rights and Obligations of Cohabitants Act came into force on 1 January 2011. It extends marriage-like benefits to same sex couples in registered civil partnerships in the areas of property, social welfare, succession, maintenance, pensions and tax. It also establishes a financial redress scheme for opposite sex and same-sex cohabiting couples who meet certain conditions.

Civil status ground

One of the nine discriminatory grounds set out in the Pensions Act in the context of the principle of equal pension treatment. Discrimination by reference to civil status is discrimination on the civil status ground. Civil status means being single, married, separated, divorced, widowed, in a civil partnership or being a former civil partner in a civil partnership that has ended by death or been dissolved.

Closed scheme

A pension scheme that does not accept new members.

Collective investment undertaking

In the context of the investment rules for pension schemes, a collective investment undertaking is defined in section 59AB of the Pensions Act and, provided it satisfies the requirements of the definition in that section, includes:

• unit trusts,
• common contractual funds, and
• undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs) situated in a Member State.

Commutation (sometimes known as ‘cash option’)

The replacement of a series of future pension payments by an immediate lump sum.

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.

Competent authority (national competent authority)

A competent authority (or national competent authority) is an organisation with a supervisory or regulatory role. The Pensions Authority is the Irish competent authority with regard to the supervision of IORPs (pension schemes).

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 the scheme’s ability to meet the funding standard under the Pensions Act.

Conflicts of interest policy

Trustees of pension schemes must have a written policy on conflicts of interest for themselves as trustees and for the key function holders (KFHs) they engage. The policy must provide details of how the trustees will identify, monitor and manage conflicts of interest. The Pensions Authority’s Code of Practice for trustees sets out the areas the conflicts of interest policy must cover. Trustees must review compliance with the policy at least once annually and the policy must be reviewed by the trustees at least once every three years.

Note that section 64AH(7) of the Pensions Act sets out the requirement for a written protocol on conflicts of interests where a KFH performs the same function for the pension scheme and the employer.

Contingent benefits

Benefits payable from a pension scheme in the event of the death of the member during the employment (or self-employment) to which the scheme relates.

Continuity plan

Defined contribution (DC) master trusts must develop a continuity plan that includes projections of income and expenditure for at least three years, to demonstrate the viability of the DC master trust to the Pensions Authority. Further details regarding the requirements for DC master trusts can be found in the Authority’s Code of Practice for trustees (the Code).

In relation to pension schemes generally, the Code also specifies that contracts between trustees and outsourced service providers must include information about business continuity arrangements.

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.

Contributory earnings

The earnings on which contributions are calculated. See also ‘pensionable earnings’.

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.

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.

Critical review

A critical review is an in-depth review conducted by pension scheme trustees of a service provider’s performance. The critical review forms the basis for the trustees’ decision to retain or replace the current service provider.  The reasons for this decision must be documented in the critical review.

Details of the Pensions Authority’s expectations of trustees in relation to critical reviews of administrators and investment managers can be found in the Authority’s Code of Practice for trustees.

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 Member State.

Custodian trustee

A trustee responsible for holding the assets of a trust, with the other trustees being responsible for the management of the trust including the investment decisions.

Data strategy

The Pensions Authority requires trustees of all pension schemes to have in place a data strategy. The data strategy (or policy) must consider the nature and scope of the data, how and when it is to be obtained and how it is to be checked for accuracy. Further details about the data strategy requirement can be found in the Authority’s Code of Practice for trustees.

DB financial risk measure 

Section 26K of the Pensions Act requires the Pensions Authority to have in place a monitoring tool that enables it to identify deteriorating financial conditions in a pension scheme and monitor how that deterioration is remedied. To this end, the Authority has developed a defined benefit (DB) financial risk measure. Trustees of DB schemes are required to provide the Authority with any information it requests in relation to the DB financial risk measure.

Declaration of trust

The type of trust document used when the employer is 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 personal retirement savings account (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. In relation to company or ‘occupational’ pension schemes, trustees of defined contribution (DC) schemes (or the DC element of a defined benefit scheme) may specify a particular investment strategy as a default (in the event that no investment selection is made by a member), if the trustees are offering members a choice of investment options.

Deferred benefit

Any retirement benefit, payment of which is delayed, e.g., until a person reaches normal pensionable age. Most often used to refer to pensions payable at retirement age which accrue to a scheme member on leaving service before retirement.

Deferred member

A pension scheme member who has left service with an entitlement to retirement benefits payable at a future date.

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.

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 (DB) schemes provide members with retirement and death benefits based on predefined formulae set out in the rules of the scheme. Benefits are often based on a members’ salary close to retirement (or earlier death or leaving service) and on the length of time they have been a member of the scheme. For this reason, these schemes are sometimes known as ‘final salary’ schemes. However, DB schemes may also be ‘career average’ schemes in which the pension calculation is typically based on the member’s average earnings while a member of the scheme.

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’)

Defined contribution schemes provide retirement benefits based on the accumulated value of contributions paid to a pension scheme by or on behalf of a member, including the investment returns earned on those contributions less any charges. As such, it is the contributions that are ‘defined’ or known, as opposed to the benefits that the member will receive 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.

Dependant

A person who depends financially on a scheme member. Children are generally regarded as dependants until they reach the age of 18 or leave full-time education or vocational training, if later. A spouse/civil partner is always regarded as a dependant and a cohabiting partner is generally considered a dependant also. The definition of a dependant for any particular scheme is typically set out in the rules of the scheme.

Depositary

A depositary is an institution that provides safe-keeping and oversight of assets. Trustees of pension schemes must arrange for the provision of these services in relation to pension scheme assets, either indirectly, e.g., via investment managers, or by the direct appointment of a depositary. The requirements with which trustees must comply in relation to depositaries are set out in chapter 3 of Part VIB of the Pensions Act.

Designated benefit

The part of a member’s retirement benefit which is allocated for payment to their former spouse/civil partner/qualified cohabitant or children under a pension adjustment order. See the Pensions Authority’s ‘Pensions on separation and divorce checklist’ available here.

Determination

A determination is a decision, subject to appeal, to conclude some form of dispute or question. In the context of pensions, determination can refer to one of three different scenarios:

1. Provision is made, under the Pensions Act for the Pensions Authority to issue formal determinations in respect of certain questions specified in the Pensions Act.
2. Decision of the trustees or other relevant person in an internal disputes’ resolution procedure.
3. Final and binding ruling of the Financial Services and Pensions Ombudsman in a complaint or dispute, subject to appeal to the High Court.

Directly invested scheme

In the context of member participation in the selection of trustees of a pension scheme, a ‘directly invested scheme’ is a scheme whose assets are not invested exclusively in certain named categories of investment such as insurance policies, managed funds, cash deposits or unit trusts. Such pension schemes may become subject to the Occupational Pension Schemes (Member Participation in the Selection of Persons for Appointment as Trustees) (No. 3) Regulations, 1996, if they have more than 12 active members. This means that active and pensioner members of such schemes may potentially be involved in selecting trustees.

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 a 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.

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

The disclosure of information regulations are formally named the Occupational Pension Schemes (Disclosure of Information) Regulations, 2006, as amended and the Trust RACs (Disclosure of Information) Regulations, 2007, as amended. These regulations require specific information about pension schemes and trust RACs 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 valuation

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, usually at the discretion of the pension scheme trustees, as against one which is paid to members automatically under the scheme 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, civil 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.

Early 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.

Early 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’.

Earmarked 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.

European Insurance and Occupational Pensions Authority (EIOPA)

The European Insurance and Occupational Pensions Authority (EIOPA) is one of three European Supervisory Authorities. EIOPA was established by regulation No. 1094/2010/EU of the European Parliament and of the Council of the European Union.

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.

Environmental, social and governance (ESG) factors

There are several references to environmental, social and governance (ESG) factors in the Pensions Act relating to the investment of pension scheme assets:

• The Pensions Act allows trustees of pension schemes to take account of the potential long-term impact of their investment decisions on ESG factors when investing pension scheme assets in accordance with the ‘prudent person rule’.
• The trustees’ risk management system must cover ESG risks relating to pension scheme investments where applicable, and, where ESG risks are considered in investment decisions, the trustees’ own-risk assessment must include an assessment of new or emerging ESG risks.
• The pension scheme’s governance system must include consideration of ESG factors related to assets in investment decisions.
• Trustees are also required to disclose how their investment approach takes account of ESG factors, if at all, in the statement of investment policy principles and in the information provided to new and prospective pension scheme members.

Furthermore, disclosure obligations for trustees under the Sustainable Finance Disclosures Regulation have been inserted into section 59 of the Pensions Act.

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 Part VII of the Pensions Act, 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 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.

External report

The Pensions Authority may require the trustees of a pension scheme to provide an external report examining a pension scheme’s compliance with one or more governance requirements under Part VIB of the Pensions Act.

A request by the Authority for an external report can arise on foot of:

• a supervisory review by the Authority,
• the submission of a section 26L stress-test, or
• a Part VIB compliance statement.

External report reviewer

In certain circumstances the Pensions Authority may require the trustees of a pension scheme to have an external report prepared by an external report reviewer concerning the scheme’s compliance with one or more governance requirements under Part VIB of the Pensions Act. An external report reviewer must have the necessary skills, specialised knowledge, competence, capability and sufficient detachment to prepare an objective report on the matters concerned. See also section 26O of the Pensions Act.

Family Law (Divorce) Act, 1996

The Family Law (Divorce) Act, 1996, contains the primary mechanism for the granting of decrees of divorce as well as facilitating the redistribution of property, including pensions, between parties to a divorce action.

Family Law Act, 1995

The Family Law Act, 1995, enables the courts to allocate part of a member’s pension entitlement under a pension scheme to the spouse/civil partner/qualified cohabitant who is not a member of the pension scheme in the course of judicial separation or foreign divorce.

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.

Final pensionable salary

The pensionable earnings, at or near retirement or earlier leaving service, on which a defined benefit pension is typically calculated. This may be fixed at a particular date or averaged over a number of years and will typically be defined in the member’s handbook and the trust deed and rules of the pension scheme.

Final salary scheme

A defined benefit scheme whose benefits are generally calculated by reference to salary at, or close to, retirement or earlier leaving service.

Fit and proper requirement

The trustees of a pension scheme must be collectively ‘fit’ and individually ‘proper’. Key function holders must be individually fit and proper. See the Pensions Authority’s Code of Practice for trustees for details of what ‘fit’ and ‘proper’ mean for trustees and key function holders.

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, however it can still happen in public sector schemes which are exempted from Part III of the Pensions Act.

Frozen scheme

A pension scheme which provides benefits only for members whose service has terminated; or a pension 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 employers that are usually financed by setting aside money in a trust fund, which is separate from the employer’s business, to finance the payment of retirement benefits. Separating the scheme’s assets from the employer’s business should ensure that these assets will be available to pay members’ pensions, whether or not the employer stays in business.

Funding

The provision in advance for future benefit obligations/liabilities of a pension scheme 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 pension 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.

Funding plan

A plan setting out the agreed rate of contributions to a defined benefit pension scheme aimed at meeting the cost of member benefits as they fall due.

Funding proposal

If a defined benefit pension scheme does not meet the funding standard requirements set out in the Pensions Act, the pension scheme trustees must submit a funding proposal to the Pensions Authority setting out how the pension scheme’s funding level will be restored by a future date. A funding proposal will include details of the proposed rates of contributions from the employer and members, as well as plans for the investment of the pension scheme’s assets.

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 Pensions Act sets out a funding standard for funded defined benefit (DB) pension schemes. The funding standard provisions of the Pensions Act set out the minimum assets that a pension scheme must hold and the rules that apply if a pension scheme falls short. The funding standard is designed to provide a level of protection for pension scheme members of the pensions they have already built up or ‘accrued’ in a DB pension scheme.

Funding standard reserve

Funded defined benefit pension schemes are required to hold a funding standard reserve, i.e., additional assets or ‘risk reserves’. The funding standard reserve is broadly calculated as 10% of ‘unmatched’ funding standard liabilities plus the net effect of a 0.5% fall in interest rates.

Funding standard reserve certificate (FSRC)

A certificate prepared by the actuary and submitted to the Pensions Authority which indicates whether or not the pension scheme can meet an additional risk reserve known as the ‘funding standard reserve’. A pension scheme needs to hold a risk reserve to allow for adverse future experience relating to the pension scheme’s assets and/or liabilities. This is submitted to the Authority at least once every three years along with the actuarial funding certificate.

Gender ground

Discrimination by reference to gender is discrimination on the gender ground. Gender means male or female gender.

Ground of race

Discrimination by reference to race, colour, nationality, ethnic or national origins is discrimination on the ground of race.

Guaranteed payment period

A period of time after the commencement of a pension, normally five or 10 years, for which payment of a pension would be guaranteed to be paid, whether the pensioner lives or dies in that period. If the pensioner dies during the guaranteed payment period, a lump sum equal to the balance of pension payments due over the remaining guarantee period would be payable to their dependant(s).

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 age. The benefit payable on ill-health early retirement may be greater than that paid to a member retiring early in normal health. The qualification criteria and benefits payable will be set out in the trust deed and rules of a pension scheme.

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 individual pension scheme.

Income continuance plan

One of the terms used to describe a prolonged disability insurance scheme.

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 on grounds of gender

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. Also called a ‘one-member arrangement’. The term individual arrangement can also refer to an individual contract-based retirement savings such as a personal retirement savings account (PRSA) and a retirement annuity contract (RAC).

Institution for occupational retirement provision (IORP)

IORP is an EU law term to cover the diverse range of entities in the Member States that provide retirement benefits but in Ireland IORPs are occupational pension schemes or trust retirement annuity contracts.

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 premiums.

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. This is 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 audit function

The internal audit function assesses the adequacy and effectiveness of a pension scheme’s internal controls and other elements of the pension scheme’s governance system, including trustee oversight of outsourced activities. The scope and detail of the internal audit function should be proportionate to the size and internal organisation of the scheme and the size, nature and complexity of the activities of the scheme. Further details about the scope of the internal audit function are set out in the Pensions Authority’s Code of Practice for trustees. See also section 64AJ of the Pensions Act.

Internal audit policy

The trustees of a pension scheme must establish, approve and apply a written internal audit policy. This document should provide a framework within which the internal audit function can work to provide objective and independent assurance and advice to the trustees. Further details can be found in the Pensions Authority’s Code of Practice for trustees. See also section 64AB of the Pensions Act.

Internal control system

The trustees of a pension scheme must put in place an effective internal control system to include administrative and accounting procedures, an internal control framework and appropriate reporting arrangements at all levels. The internal control system should provide reasonable assurance that a pension scheme is compliant with legislation, properly administered and managed, and has appropriate reporting systems in place. See the Pensions Authority’s Code of Practice for trustees for further details about the internal control system requirement and the Authority’s expectations of what the internal control framework should include. See also section 64AB of the Pensions Act.

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. Complaints or disputes typically pass through the pension scheme’s/PRSA’s IDR procedure before they are submitted to the Financial Services and Pensions Ombudsman, if necessary.

Investment

In relation to a pension scheme, the process by which contributions and net income of a scheme are used with a view to increasing the value of pension scheme assets by means of the purchase and sale of equities, bonds, property and other assets directly or through collective investment undertakings. The investment of pension scheme assets is subject to:

• the trust deed and rules of the pension scheme,
• the investment rules contained in the Pensions Act, and
• the Occupational Pension Schemes (Investment) Regulations, 2021 and the Trust RACs (Investment) Regulations, 2021.

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 manager contract(s)

The trustees of a pension scheme must enter into a legally enforceable written agreement (contract) with each service provider, clearly defining the rights and obligations of both the pension scheme and the service provider. The Pensions Authority’s Code of Practice for trustees lists specific items that must be included in all such contracts and specifies further additional items that must be included in contracts with investment managers. See also section 64AM of the Pensions Act.

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

The investment regulations are formally named the Occupational Pension Schemes (Investment) Regulations, 2021 and the Trust RACs (Investment) Regulations, 2021. All previous investment regulations have been revoked and most of the content of the previous regulations now appear in section 59AB of the Pensions Act. The investment regulations provide that pension schemes may borrow money but only for liquidity purposes and only on a temporary basis. The investment regulations also outline the information that should be included in a statement of investment policy principles and the rules on how this information should be presented. See also investment rules.

Investment rules

Investment rules contained in the Pensions Act set out certain investment and borrowing rules that trustees must comply with when investing the assets of a pension scheme. These include the requirement to:

• invest prudently, in the best interests of members and beneficiaries, and predominantly on regulated markets,
• properly diversify investments so as to avoid excessive reliance on any particular asset, issuer etc., and
• invest in a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole.

IORP II Directive

The IORP II Directive is the second EU pensions directive which sets out common rules for occupational pension schemes across Member States aimed at protecting members and ensuring that pension schemes are well run by means of:

• new governance, including ‘fit and proper’ requirements,
• new risk assessment/risk management requirements for schemes,
• rules to improve communications to members, and
• enhanced powers for supervisors, among other new measures.

The IORP II Directive builds on the first EU pensions directive of 2003 (IORP I). EU countries were required to transpose the IORP II Directive into national law. The formal title of the directive is ‘Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs)’.

Key function holder (KFH)

A key function holder (KFH) is a named individual or corporate entity responsible for the delivery of a key function to a pension scheme. The key functions are risk management, internal audit and, for regulatory own funds schemes, actuarial. The KFH reports any material findings and recommendations to the pension scheme trustees. KFHs must meet the relevant ‘fit’ and ‘proper’ requirements. Further details can be found in the Pensions Authority’s Code of Practice for trustees. See also Part VIB of the Pensions Act.

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.

Liabilities

The obligations of a pension 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.

Long service benefit

The benefits that would be payable to a member of a pension scheme on the assumption that they remain in relevant employment until normal pensionable age (NPA). Long service benefit may take the form of regular pension payments and/or a lump sum and includes any benefits payable on the death of a member after NPA to the member’s spouse/civil partner or dependants.

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 bonds or a combination of these.

Marital status ground (now civil status ground)

In the context of the principle of equal pension treatment, the civil status ground is one of the nine discriminatory grounds set out in the Pensions Act. Discrimination by reference to an individual’s civil status is discrimination on the civil status ground. Civil status means being single, married, separated, divorced, widowed, in a civil partnership or being a former civil partner in a civil partnership that has ended by death or been dissolved.

Master trust

A master trust, also known as a multi-employer pension scheme, is a scheme typically set up by a pension company (founder) and used by two or more employers to provide retirement benefits for their employees. The multiple employers, and their employees who opt to join, pay contributions to the master trust. Different contribution rates can apply for different employers.

The trustees of the master trust are responsible for ensuring the master trust is operated in accordance with the Pensions Act and the Pensions Authority’s Code of Practice for trustees.

Maximum approvable benefits

The maximum benefit which Revenue will permit to be paid under an approved pension scheme to an individual, taking account of factors such as remuneration and service completed. Further information can be found in the Revenue Pensions Manual.

Member

A person who has been admitted to membership of a pension scheme and who remains entitled to benefits under the scheme. This includes active members, deferred pensioners and pensioners.

Member (selected) trustees

A person selected by qualified members for appointment as a trustee in accordance with the ‘standard arrangement’ or a person whose selection is approved by qualified members for appointment as a trustee in accordance with the ‘alternative arrangement’ or a person selected to fill a trustee vacancy in accordance with the ‘casual vacancies’ provisions.

Member civil partner

In the context of a pension adjustment order granted under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010, the civil partner who is a member of the pension scheme or arrangement from which the order is being sought.

Member engagement policy

Trustees of a pension scheme must prepare a written policy setting out how they will engage with members. The policy must cover the objective of each communication, the circumstances in which the communication takes place, the frequency of same and the form of communication to be used. For master trusts, the engagement policy must cover engagement with employers as well as members. For further information, see the Pensions Authority’s Code of Practice for trustees.

Member qualified cohabitant

In the context of a pension adjustment order granted under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010, the qualified cohabitant who is a member of the pension scheme or arrangement from which the order is being sought.

Member spouse

In the context of a pensions adjustment order made under the Family Law Act, 1995 (for judicial separation) or the Family Law (Divorce) Act, 1996, the spouse who is the member of the pension scheme or arrangement from which the order is being sought.

Member State

Member State means a Member State of the European Union or a state which is a contracting party to the Agreement on the European Economic Area.

Money purchase scheme

Another name for a defined contribution pension scheme.

Money purchase underpin

An arrangement in a defined benefit pension scheme whereby a certain minimum benefit accrues on a defined contribution basis. Usually of benefit to early leavers.

Net pensionable pay

Pay on which retirement benefits are calculated in public service pension schemes. It means pensionable remuneration less twice the annual rate of the State Pension (Contributory) payable to a person with no dependants, usually calculated on the last day of service. It is called net pensionable remuneration in the Single Public Service Pension Scheme. See also ‘co-ordination’.

Net relevant earnings

These are broadly defined as earnings from a trade or professional employment, less certain allowable expenses.

Nomination

The naming by a member of a person or persons to whom they wish any death benefit, payable from a pension scheme, to be paid in the event of their death. Also called a ‘wishes letter’ or ‘expression of wishes’. Such a letter or expression of wishes cannot bind the trustees, but trustees 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 civil partner

In the context of a pension adjustment order made under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010, the civil partner who is not a member of the pension scheme or arrangement from which the order is being sought.

Non-member qualified cohabitant

In the context of a pension adjustment order made under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act, 2010, the qualified cohabitant who is not a member of the pension scheme or arrangement from which the order is being sought.

Non-member spouse

In the context of a pension adjustment order made under the Family Law Act, 1995 (for judicial separation) or the Family Law (Divorce) Act, 1996, the spouse who is not a member of the pension scheme or arrangement from which the 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 personal retirement savings account (PRSA) that has no limit on charges and where investments are not limited to pooled funds.

Normal pensionable age (NPA)

Normal pensionable age (NPA) means the earliest age at which a pension scheme member is entitled to receive immediate retirement benefits from a pension scheme in normal circumstances, or age 60, whichever is later. NPA usually coincides with normal retirement age.

Normal retirement age (NRA)

Normal retirement age (NRA) is the age at which retirement benefits normally become payable under a pension scheme. NRA will typically be defined in the member’s booklet and the governing documents of a pension scheme.

Notional service

Members of civil or public sector pension schemes (excluding the Single Public Service Pension Scheme) who are likely to have less than 40 years’ service by their minimum retirement age, can top up their benefits through the purchase of notional service (PNS). This means buying back missing years of service by way of a lump sum payment or regular payments which would usually be subject to tax relief.

Objective justification

It may be possible to justify fixing different levels of age or qualifying service (or both) as a condition in relation to the accrual of benefits under a defined benefit scheme or the level of contributions to a defined contribution scheme by reference to a legitimate objective of the employer. Legitimate employment policy, labour market and vocational training objectives are examples of legitimate objectives specified in the Pensions 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. See section 72 of the Pensions Act.

Occupational benefit

Occupational benefits, as defined in the Pensions Act, include payments in the form of pensions, payable in respect of:

• retirement, old age or 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 section 65 of the Pensions Act, in relation to the principle of equal treatment, as a scheme or arrangement for providing occupational benefits to employees and the self-employed. This definition includes certain occupational pension schemes and pension contracts, and also includes permanent health insurance arrangements.

Occupational pension scheme

A scheme set up for employees which provides either or both of the following benefits:

• retirement benefits for members,
• death benefits for the dependant(s) of members.

Offset

An amount of salary which is disregarded under the rules of a pension scheme, to take account of a social welfare pension. It can also be applied to a deduction from the member’s pension to take account of a social welfare pension. See also ‘integration’.

One-member arrangement

A pension 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 pension scheme are invested unless it is subject to a pension adjustment order, in which case it may also include the person(s) referred to in that order.

On-the-spot fines (or notice of intention to prosecute)

Instead of prosecuting through the courts for a breach of certain specified offences of the Pensions Act, the Pensions Authority may 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 fines are known as ‘on-the-spot fines’. Further information is available here.

Outsourcing

The trustees of a pension scheme may enter into an arrangement to assign any activity, such as a key function or the administration of the scheme, to a third-party service provider. All outsourcing arrangements must be subject to written and legally enforceable contracts between the trustees and the service provider. Trustees have a duty to notify the Pensions Authority of their outsourcing arrangements. Where the trustees of a scheme outsource an activity, they remain responsible for ensuring compliance with their obligations under the Pensions Act in respect of that activity and must be satisfied that the outsourcing arrangement is not detrimental to the pension scheme. See section 64AM of the Pensions Act.

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 pension scheme’s rules. All the provisions of the Pensions Act and its regulations are overriding legislation.

Own-risk assessment (ORA)

The trustees of a pension scheme must carry out and document an own-risk assessment (ORA) for their pension scheme at least once every three years, and without delay following any significant change in the risk profile of their pension scheme. They must take account of the ORA when making a strategic decision in respect of their pension scheme. The Pensions Authority may request a copy of an ORA from the trustees. For further information see the Authority’s Code of Practice for trustees and section 64AL of the Pensions Act.

Paid-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.

Paid-up scheme

A pension scheme where no further contributions are being paid, but whose assets continue to be held by the trustees and applied under its rules.

Participating employer

An employer whose employees are members of a pension scheme. Used where pension schemes cater for more than one employer.

Past service

Service completed before a given date, usually the date of a pension scheme valuation.

Past service benefit

The benefit granted in respect of past service.

Past service reserve

A term describing the present value of all benefits accrued to the date of the calculation, by reference to projected earnings.

Pay 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.

Pay-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’.

Pension adjustment order (PAO)

An order made following a decree of judicial separation or divorce whereby the court:

• adjusts a member’s pension scheme rights in favour of their spouse/civil partner/qualified cohabitant or a dependent child, or
• makes a nominal or ‘nil’ PAO whereby a member’s pension benefits are effectively not adjusted – instead the value of pension benefits can be taken into account in the making of court orders relating to other assets.

Pension fund

This is the assets of the pension scheme, but the term is very often used for the pension scheme itself.

Pension plan

Another term for pension scheme.

Pension scheme

A term used by the Pensions Authority to refer to occupational pension schemes and trust retirement annuity contracts collectively, i.e., arrangements which typically provide retirement benefits for members with or without benefits for their 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.

Pensionable salary

The earnings or salary on which contributions, pensions and lump sum benefits are typically calculated in a pension scheme.

Pensionable service

The period of service which is taken into account in calculating the pension benefit.

Pensioneer trustee

A Revenue term. Trustee boards of a small self-administered pension scheme, as defined in the Revenue Pensions Manual, must include a Revenue approved ‘pensioneer trustee’. Please refer to the Revenue Pensions Manual for further information. See also ‘small self-administered pension scheme’.

Pensioner

A member who is currently receiving payment of a pension from a pension scheme.

Pensioner member

A person being paid from a pension scheme (also called a pensioner).

Pensions (Amendment) Act, 1996

An Act which introduced extensive amendments to the Pensions Act, extending the powers of the Pensions Authority and introducing ‘whistle-blowing’ obligations on certain persons involved in pension schemes. The persons subject to whistle-blowing obligations now also include certain persons involved in PRSAs and trust RACs, registered administrators and key function holders since later legislation was passed in 2003, 2008 and 2021 respectively. For further information, see the Pensions Authority’s guidance entitled ‘Compulsory and voluntary reporting to the Pensions Authority’ available here.

Pensions (Amendment) Act, 2002

An Act which extended the Pensions Act, by increasing preservation rights for early leavers, introducing a framework for PRSAs and establishing the office of the Pensions Ombudsman (now the Financial Services and Pensions Ombudsman).

Pensions Act

The Pensions Act, 1990, as amended, is the principal piece of pensions legislation in Ireland and has been considerably amended and extended since 1990.

Pensions Authority

The Pensions Authority is the statutory body that supervises compliance with the requirements of the Pensions Act, by trustees of occupational pension schemes and trust retirement annuity contracts, personal retirement savings account providers, registered administrators and employers. The Pensions Authority also provides guidance and information to these parties on their duties and responsibilities and advises the Minister for Social Protection on pension matters.

Pensions Authority monitoring tools

Section 26K of the Pensions Act requires the Pensions Authority to have one or more monitoring tools in place to enable it to identify deteriorating financial conditions in a pension scheme and also to monitor how that deterioration is remedied. The Authority may request certain information from the trustees of a pension scheme where it wishes to apply a monitoring tool to a pension scheme and the trustees must provide that information. See also defined benefit financial risk measure.

Pension benefit statement (PBS)

A pension benefit statement (PBS) is an annual statement issued to members of pension schemes (excluding unfunded public sector schemes) who have not yet retired, including deferred members, i.e., members who have left service with an entitlement to retirement benefits payable at a future date.

The PBS must contain certain key information, including information on the pension benefits a member has already built up and the pension benefits that might be paid if the member continues in the pension scheme until retirement.

Pensions Data Register (PDR)

The Pensions Authority’s Pensions Data Register (PDR) is the national register of pension schemes. PDR holds data on all occupational pension schemes and allows registered administrators (RAs) and interested parties (external users) to manage and submit data electronically to the Authority through an online services portal. PDR provides the Authority with the capability to fully administer the register and all recorded information via a comprehensive back office application. The desktop application is deployed across the Authority and is used by staff on a daily basis.

 Data that can be submitted through PDR includes:

• Scheme registrations.
• Annual scheme information submissions.
• Actuarial funding certificate submissions.
• Funding standard reserve certificate submissions.
• Annual actuarial data returns.
• Scheme fee payments.
• Scheme data amendments and updates (e.g., names of trustees, etc.).

Pensions Ombudsman (now Financial Services and Pensions Ombudsman)

An officer appointed under the Financial Services and Pensions Ombudsman Act, 2017, whose functions include the investigation and adjudication of complaints arising from the conduct of a pension provider involving alleged financial loss by an act of maladministration or any dispute of fact or law.

Personal pension contract

A retirement savings contract, usually with an insurance company, providing benefits at retirement. Personal pension contracts may be taken out by those who are self-employed or who are in non-pensionable employment. There are two forms of personal pension contracts: personal retirement savings accounts (PRSAs) and retirement annuity contracts (RACs). PRSAs can also be used by people in pensionable employment who wish to make additional voluntary contributions. The tax treatment of contributions, maximum benefits and drawdown options for RACs are broadly the same as for PRSAs.

Personal retirement bond (PRB)

Also known as a ‘buy out bond’ or BoB, a personal retirement bond (PRB) is a special type of personal pension contract, where the only premium payment comes from a transfer payment from an occupational pension scheme. Rules around accessing PRB funds reflect the rules of the transferring pension scheme. The value of a PRB at retirement depends on the transfer payment amount and the investment return achieved over the term to retirement. Generally, individuals can take a tax-free lump sum from a PRB and use the remaining funds to buy an annuity (pension) or invest in an approved retirement fund. Revenue restrictions apply.

Personal retirement savings account (PRSA)

A personal retirement savings account (PRSA) is a personal retirement savings contract that any individual can take out with an authorised PRSA provider. It is effectively an investment account used to save for retirement and savings can only be accessed at retirement. PRSAs are a type of defined contribution arrangement. Income tax relief is given on contributions to a PRSA, within limits set by Revenue. Revenue also set rules regarding how and when retirement savings can be accessed. Further information on these matters can be found in the Revenue Pensions Manual. A register of authorised PRSA providers and their approved PRSA products is available here. The Authority has also published a guide to PRSAs, available here.

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.

Preliminary poll

A poll held under the ‘member participation in the selection of trustee regulations’ to determine whether members wish to appoint trustees by means of the ‘standard arrangement’ or whether they wish to accept an ‘alternative arrangement’ offered by the employer.

Preservation

Describes the obligation which trustees have under the Pensions Act, to retain benefits in a pension scheme for members who finish their employment before normal pensionable age having completed two years’ qualifying service or more. The benefits, known as ‘preserved benefits’, may be held within the scheme or transferred out of the scheme at any time before retirement. Note that the qualifying period for a preserved benefit was previously five years and was reduced to two years for those who finished their employment since 1 June 2002. Different rules apply for members of a scheme whose employment terminated before 1 June 2002.  Please refer to the Pensions Authority’s ‘Preservation of benefits and minimum value of contributory retirement benefits’ guidance, which can be found here.

Preserved benefits

A statutory entitlement to a preserved benefit is provided under the legislation to a member of an occupational pension scheme who satisfies the qualifying condition and whose service in relevant employment terminates before retirement for any reason other than death. The qualifying condition is currently that a member must have completed at least two years’ qualifying service. The qualifying period was previously five years and was reduced to two years for those who finished their employment since 1 June 2002. Different rules apply for members of a pension scheme whose employment terminated before 1 June 2002. For further information about preserved benefits, refer to the Pensions Authority’s ‘Preservation of benefits and minimum value of contributory retirement benefits’ guidance, which can be found here.

Principal employer (also known as ‘the sponsoring employer’)

Commonly used in pension 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 pension scheme or, in a pension 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 pension scheme. The nine discriminatory grounds are gender, civil status, family status, sexual orientation, religious belief, age, disability, race and membership of the travelling community.

Priority liabilities

In the event of the wind-up (termination) of a defined benefit pension scheme, the trustees of the pension scheme must ensure that the wind-up is carried out in accordance with the rules of the pension scheme and the Pensions Act. Where the pension scheme has a deficit, the Pensions Act sets out the order of priority in which assets must be distributed, depending on whether the sponsoring employer is solvent or insolvent.

The ‘single insolvency order’ will apply if the pension scheme sponsor (the employer) is solvent at the date of wind up. Under the single insolvency order, benefits will be distributed in the following order of priority:

1. Additional voluntary contributions (AVCs) and transfers in of AVCs; and defined contribution (DC) benefits and transfers in of DC benefits.
2. Pensioner benefits (excluding post-retirement increases), in accordance with the following limits:

(a) the annual pension is €12,000 or less, 100% of the pension;

(b) if the annual pension is more than €12,000 and less than €60,000, the greater of €12,000 and 90%
of the pension; and

(c) if the annual pension is €60,000 or more, the greater of €54,000 and 80% of the pension.

3. 50% of active and deferred benefits, excluding post-retirement increases.
4. Remaining pensioner benefits, excluding post-retirement increases.
5. Remaining active and deferred benefits, excluding post-retirement increases.
6. Any remaining benefits, including post-retirement increases.

If the employer itself is insolvent, the ‘double insolvency order’ will apply.

For further information, please see the Pensions Authority’s guidance entitled ‘Social Welfare and Pensions No. 2 Act, 2013’, available here.

Prospective member

An employee who is or will be eligible to join the pension scheme.

PRSA AVC

Also known as an ‘AVC PRSA’, means a personal retirement savings account designed to be used for additional voluntary contributions by members of occupational pension schemes. An AVC PRSA is linked to the main pension scheme.

PRSA provider

An authorised investment firm, life assurance company or credit institution which produces, markets or sells PRSA products.

Prudential supervision

All pension schemes are subject to prudential supervision by the Pensions Authority. This includes supervision of:

• a pension scheme’s governance system, i.e., compliance with the ‘fit’ and ‘proper’ requirements, the risk and internal audit function requirements, the own-risk assessment requirement, outsourcing rules and depositary rules,
• the operation of the scheme,
• investment rules,
• investment management, and
• the information to be provided to members.

As part of its prudential supervision, the Authority must carry out a supervisory review of a pension scheme to assess the system of governance, the risks faced by a scheme and the management of those risks. The approach to prudential supervision must be forward-looking and risk-based, and it must comprise a combination of off-site activities and on-site inspections. See Part IIA of the Pensions Act.

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 Financial Services and 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.

Qualified auditor

A person appointed to audit the accounts of a pension scheme 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, or
• 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 organised for the purpose of selecting new trustee(s) of a relevant pension scheme.

Qualifying service

Currently, a pension scheme member must complete two years’ qualifying service before they are entitled to a benefit (formally called a ‘preserved benefit’) from the pension scheme on leaving service. Qualifying service is defined in the Pensions Act. It broadly means service as a member of the pension scheme plus service in any other pension scheme relating to the same employment plus any period in a previous pension scheme from which a transfer value has been 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.

Reckonable service

A term defined in the Pensions Act. In relation to a pension scheme member, reckonable service broadly means service in the relevant employment while a member of the pension scheme excluding service during which the member was not building up retirement benefits.

Recommended contribution rate

The contribution rate recommended by the actuary as being necessary to support the benefit promises made under the pension scheme.

Registered administrator

Trustees of every pension scheme 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 trustee annual reports and annual pension benefit statements for members, the maintenance of sufficient and accurate member records and the submission of annual scheme information 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 to which a pension scheme applies.

Relevant percentage

The proportion of the member spouse’s/member civil partner’s/member qualified cohabitant’s retirement benefits earned during the relevant period, as specified by the court, which must be paid to the non-member dependent spouse/non-member civil partner/non-member qualified cohabitant or other dependents of the member (where permitted under the legislation) under a pension adjustment order.

Relevant period

The period during which the member spouse’s/member civil partner’s/member qualified cohabitant’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 pension scheme or personal retirement savings account (PRSA), for the purposes of the rules on whistle-blowing set out in Part VIII of the Pensions Act, relevant persons include, as applicable, the trustees, actuary, auditor, administrator, PRSA provider, registered administrator, insurer, investment manager, key function holder (KFH), depositary and anyone employed by such persons. Legal advisers are excluded. There is a legal obligation on relevant persons to report suspected fraud or material misuse of assets to the Pensions Authority.

Additional reporting requirements apply to KFHs who must inform the Authority where they believe there is a substantial risk that a pension scheme will not comply with a materially significant statutory requirement, or that a significant material breach of statutory requirements has occurred, and the trustees have failed to take appropriate remedial action.

Religion ground

Discrimination by reference to religious belief is discrimination on the religion ground. Religious belief includes religious background or outlook.

Remuneration policy

Trustees of a pension scheme are required to have a sound remuneration policy in relation to paid trustees, key function holders and any other service providers. A remuneration policy must aim to ensure that conflicts of interest are avoided and excessive risk-taking is not encouraged. The Pensions Authority’s Code of Practice for trustees sets out what should be covered in a remuneration policy. See also section 64AG of the Pensions Act.

Reporting, compulsory

The Pensions Act requires trustees and other ‘relevant persons’ providing services to a pension scheme or a personal retirement savings account to report suspected fraud or material misuse of assets to the Pensions Authority. Additional reporting obligations apply to key function holders who must inform the Authority where they believe there is a substantial risk that a pension scheme will not comply with a materially significant statutory requirement, or that a significant material breach of statutory requirements has occurred, and the trustees have failed to take appropriate remedial action. This process is also known as ‘whistle-blowing’.

Reporting, voluntary

A person can report to the Pensions Authority on any matter concerning the state and conduct of a pension scheme or a personal retirement savings account. Anyone who does so in good faith is protected by the Pensions Act against legal action for defamation.

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 a ‘personal pension plan’ or a ‘personal pension contract’.

Retirement benefits

In the context of pension adjustment orders on separation or divorce/dissolution, this means any payment arising under a pension scheme, payable to the member spouse/member civil partner/member qualified cohabitant or to others, at and following retirement of the member.

Revaluation

A preserved benefit payable to a member from a defined benefit pension scheme will normally be revalued over the period from the member’s date of leaving service to 1 January prior to the date the benefit becomes payable. The rate of revaluation for any full year will broadly be the increase or decrease in the Consumer Price Index in that year, subject to a maximum increase of 4%. The revaluation percentage for any year is prescribed by the Minister for Social Protection by way of regulations following the end of the year.

Revenue

The organisation charged by Government with the collection of tax revenues. It has powers in relation to the approval, for tax purposes, of pension schemes, personal pension contracts and personal retirement savings account products. A pension scheme approved to the satisfaction of Revenue is known as an ‘exempt approved scheme’.

Revenue limits

Revenue restrict either the amount of benefits ultimately payable to an individual and/or the contributions payable by or in respect of an individual.

Risk benefits

Benefits payable in the event of death or disability, which are not pre-funded. These risks are often insured.

Risk management function

Trustees of a pension scheme are required to have a risk management function which is proportionate to the size and organisation of the pension scheme, as well as to the size, nature, scale and complexity of the activities of the pension scheme. The risk management function must facilitate a risk management system for which trustees should adopt strategies, processes and reporting procedures designed to ensure that the risks facing a pension scheme can be identified, measured, monitored, managed and regularly reported to the trustees. See the Pensions Authority’s Code of Practice for trustees for further details. See also section 64AI of the Pensions Act.

Risk management policy

Trustees of a pension scheme are required to have a written policy in relation to risk management. The Pensions Authority’s Code of Practice for trustees lists the areas to be covered in the risk management policy. See also section 64AB of the Pensions Act.

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, as defined in the Pensions Act, means an occupational pension scheme.

Scheme year

A period in relation to a pension 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, or

(c) such other date as may be agreed between the trustees and the Pensions Authority.

The trustee annual report and accounts of a pension scheme usually relate to a period of 12 months, however in certain circumstances they can relate to a longer period not exceeding 23 months.

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 provisions of the Pensions Act can be met.

Self-investment

The investment of the pension scheme’s assets in the business of:

• the employer, or
• that of an associated employer, or
• any director or shadow director of the employer or an associated employer.

It also includes loans made to such bodies out of the pension scheme assets. Self-investment is regulated under both the disclosure and funding standard provisions of the Pensions Act.

Service provider

A service provider, in relation to a pension scheme, is an individual or entity that carries out a key function, the management or any other activity on behalf of the trustees, e.g., administration, investment and legal services. See also Outsourcing.

Sexual orientation ground

The sexual orientation ground is one of nine discriminatory grounds listed in the Pensions Act. The Pensions Act prohibits discrimination of people on the ground of sexual orientation in any rule of an occupational benefit scheme. Sexual orientation means heterosexual, homosexual or bisexual orientation.

Small scheme

A pension scheme with less than 100 active and deferred members (not including pensioners). The distinction between ‘small’ and other sized group schemes was relevant prior to 2023 in terms of trustee obligations. However, from 2023 trustee obligations are the same for both types of group scheme.

Small self-administered pension scheme (SSAP)

A Revenue term which means a self-administered pension scheme (SSAPP) with less than 12 members or a scheme designed primarily for ‘20% Directors’ (i.e., a director of the sponsoring employer who at any time in the last three years has owned or controlled more than 20% of the voting rights in the company or its parent). SSAPs are occupational pension schemes that are subject to the requirements of the Pensions Act. Special conditions attach to the approval by Revenue of SSAPs. These include the requirement to appoint a Revenue approved pensioneer trustee as well as Revenue restrictions on SSAP investments aimed at preventing types of self-investment. Further information can be found in the Revenue Pensions Manual.

Sovereign 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.

Standard arrangement

The ‘standard arrangement’ is one of the methods set out in regulations by which active and pensioner members of certain pension schemes can participate with the employer in the selection of trustees. It typically involves members selecting trustees from among their own nominees by means of an election. For more information, please refer to the Pensions Authority’s guide ‘Member participation in the selection of trustees’, available here. For more detailed information about the legislation governing the process, please see the Pensions Authority’s guidance notes on ‘Member participation in the selection of persons for appointment as trustees’, available here. See also ‘alternative arrangement’.

Standard PRSA

A standard personal retirement savings account (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.

Statement of investment governance

Trustees of pension schemes must prepare and maintain a written statement outlining the governance process used when deciding the pension scheme’s investment objectives and investment strategy. Trustees must consider this statement when appointing or reviewing any investment service provider, or when making decisions in relation to the investment of pension scheme assets. The statement of investment governance must be made available to members on request. Further information can be found in the Pensions Authority’s Code of Practice for trustees.

Statement of investment policy principles (SIPP)

A written statement prepared and reviewed at least every three years by the trustees of a pension scheme that includes:

• the investment objectives of the trustees,
• the investment risk measurement methods,
• the risk management processes to be used,
• the strategic asset allocation, and
• information on how the investment policy takes into account environmental, social and governance factors.

The statement should be written in a clear and comprehensible manner, avoid the use of jargon or technical terms where everyday terms can be used instead and be presented in a way that is easy to read.

Statement of reasonable projection (SORP)

A statement projecting the possible future worth of a defined contribution (DC) retirement fund, which is based on assumptions about future contributions paid, investment returns on those contributions, and the cost of buying an annuity (pension) when a member retires. SORPs should be used as a guide in assessing whether or not an individual is on track to meet their retirement savings goals.

SORPs are issued annually to PRSA contributors, and members of DC schemes until 2023/2024 (for DC schemes, SORP requirements continue to apply until trustees issue the first pension benefit statement to members in accordance with new legislation and the assumptions set by the Pensions Authority).

Statutory guidance

Statutory guidance is issued by the Pensions Authority and prescribed by the Minister for Social Protection under regulations. Statutory guidance has the force of law and should be read in conjunction with the provisions of the Pensions Act and regulations made thereunder to which it relates. Statutory guidance issued by the Pensions Authority to date can be found here.

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.

Stress-test

The Pensions Authority may require a pension scheme to conduct a ‘stress-test’ for the purposes of identifying deteriorating financial conditions and monitoring how that deterioration is remedied. Such a stress-test would assess a pension scheme’s ability to identify possible future adverse economic scenarios and the ability of the pension scheme to withstand those possible adverse economic scenarios. See section 26L of the Pensions Act.

Separately, EIOPA conducts a stress test exercise every three years. Larger Irish pension schemes are required to participate in the EIOPA stress test exercise and perform the necessary calculations. See section 54A of the Pensions Act.

Superannuation scheme

A term often used in the public service to describe an occupational pension scheme available to civil and public servants.

Supervisory review process

The Pensions Authority must review the strategies, processes and reporting procedures established by the trustees of a pension scheme to comply with certain requirements of the Pensions Act, including the governance requirements and investment rules. The Authority decides on the scope and frequency of the supervisory review and must take into account the size, nature, scale and complexity of the activities of each pension scheme. A supervisory review by the Authority includes:

(a) an assessment of the qualitative requirements relating to the system of governance,

(b) an assessment of the risks that the pension scheme faces, and

(c) an assessment of the ability of the pension scheme to assess and manage those risks.

See section 26J of the Pensions Act.

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 scheme actuary, is called a surplus.

System of governance

Trustees of pension schemes must have an effective system of governance to manage the activities of the pension scheme. The system of governance encompasses general governance requirements as well as rules around trustee board composition, the key function requirements (risk management and internal audit), the remuneration policy and written policies for risk management, internal audit and outsourced activities.

The system of governance should include:

(a) an adequate and transparent organisational structure with a clear allocation and segregation of responsibilities which:

(i) sets out the functions and activities required to manage the pension scheme, and

(ii) states each person responsible for carrying out each function and activity,

(b) an effective system ensuring the transmission of information, and

(c) consideration of environmental, social and governance factors in investment decisions.

Target benefit scheme

A form of defined contribution pension scheme which aims for, but does not guarantee, a particular level of benefit. Commonly, contributions paid to such pension 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 are secure.

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 pension scheme lump sum benefits payable on death in service.

The Pensions Authority

The Pensions Authority is the statutory body that supervises compliance with the requirements of the Pensions Act, 1990, as amended, by trustees of occupational pension schemes and trust RACs, PRSA providers, registered administrators and employers. The Pensions Authority also provides guidance and information to these parties on their duties and responsibilities and advises the Minister for Social Protection on pension matters.

Transfer payment (also known as ‘transfer value’)

A member of a pension scheme who is entitled to a preserved benefit is entitled to take a transfer payment from that pension scheme to:

• another pension scheme of which they are a member or prospective member,
• a buy-out bond, also known as a ‘personal retirement bond’, with an insurance company, or
• a personal retirement savings account (PRSA) with a PRSA provider,

in lieu of the benefits payable to the member from the pension scheme from which the transfer payment is made.

In the case of a defined benefit pension scheme, the transfer payment is the actuarial value of the deferred pension (preserved benefit). This may be reduced to reflect the funding position of the pension scheme. In the case of a defined contribution pension scheme, the transfer payment is the accumulated value of contributions paid by or in respect of the member.

Traveller community ground

Discrimination by reference to membership of the traveller community is discrimination on the traveller community ground under the Pensions Act. 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 small enough that it can be fully commuted (converted to a cash lump sum) without prejudicing the approval of the scheme by Revenue. Further details can be found in chapter 7 of the Revenue Pensions Manual.

Trust

To qualify for full tax approval, funded pension schemes must normally be set up as irrevocable trusts. A trust is an arrangement under which a person or a group of people (trustees) hold and look after property on behalf of others. The property is called a trust fund and the people on whose behalf the trust fund is held are called beneficiaries. In the case of a pension scheme set up as a trust, the assets are held by the pension scheme trustees for the benefit of the members and beneficiaries of the pension scheme.

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 govern how the pension scheme is managed and sets out how the benefits are determined and to whom they are payable . The Pensions Act is overriding however, i.e., it applies even if the trust deed and rules do not contain a corresponding provision or provides something different.

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 pension 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. In these arrangements a trust is set up for individuals in or connected with a particular occupation or occupations by a body comprising or representing the majority of the individuals. The trust enters into retirement annuity contracts (personal pensions) on a collective basis for the members of the group. Trust RACs are established on a defined contribution basis.

Trustee

In the context of pension schemes means an individual or a company which alone, in the case of a company, or jointly becomes the legal owner of assets to be administered for the benefit of pension scheme members and beneficiaries in accordance with the provisions of the document creating the trust, the provisions of trust law generally and the Pensions Act which is overriding. Since the second EU pensions directive was transposed, the Pensions Act requires there to be a minimum of two trustees for each pension scheme, or two directors in the case of a sole corporate trustee.

Trustee training

Trustees of pension schemes are required under section 59AA of the Pensions Act to receive appropriate training within six months of their appointment and at least every two years thereafter. Further details are available here.

Unapproved scheme

A pension scheme not designed to be approved by Revenue. Such schemes are not controlled by the Pensions Act.

Unfunded schemes

Pension 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 of this sector.

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 pension scheme rules. Thus, if the scheme benefit was 30/45ths of salary and the member could serve 35 years, they 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.

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 pension scheme.

Valid request

The trigger which starts the process of selecting member trustees under the relevant regulations.

Valuation 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 be unconditionally entitled on leaving service, which may or may not include statutory rights to a preserved benefit.

(b) For deferred pensioners who have already left the employment, their deferred/preserved benefit.

(c) For pensioners, the pension which they are receiving, including, where appropriate, the related benefits for spouses/civil partners 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 personal retirement savings account (PRSA) or a voluntary report on the state and conduct of a pension scheme or a PRSA.

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, personal retirement savings account or buy-out bond in accordance with pension scheme documentation. A pension 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 they wish any death benefit to be paid in the event of their 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.