Glossary of pension terms

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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.