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Glossary

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.

Approved Retirement Fund (ARF)
An ARF is an investment contract for the proceeds of any AVCs, or in the case of a 5% Director or RAC holder other retirement benefits that are not taken in the form of a lump sum or pension on retirement. Certain qualifying conditions must be met to be eligible to take out an ARF. Money is invested with a "Qualifying Fund Manager" (which includes banks, building societies and insurance companies) and may be invested in any manner you wish and will accumulate tax-free. Income tax is payable on any money you withdraw from the fund.

Approved Minimum Retirement Fund (AMRF)
An ARMF is like an ARF except that you cannot withdraw your original investment until you are aged 75. You can only withdraw the
investment income in the meantime.

Buy Out Bond
A single premium Pension Plan effected by the trustees of an occupational pension scheme in the name of a member who is leaving that scheme, in lieu of providing deferred retirement benefits under the scheme for that member.

Deferred Benefit
If you leave an occupational pension scheme before normal retirement age having completed the vesting period but do not have entitlement to an immediate pension, then you are entitled to a deferred benefit. This is the benefit to which you are entitled from normal retirement age based on service completed to date of exit in a defined benefit scheme, or on the accumulation of employee and employer contributions in a defined contribution scheme.

Defined Benefit Scheme (also known as "final salary" scheme)
Defined benefit schemes provide members with retirement and death benefits based on formulae set out in the rules of the scheme. Benefits are often based on a member's salary close to retirement and on his or her pensionable service. For this reason these schemes are sometimes known as "final salary" schemes. Many defined benefit schemes are "integrated" with the State pension. This means that they provide a level of benefit that makes an allowance for the State pension.

Defined Contribution Scheme (also known as "money purchase" scheme)
Defined contribution schemes provide benefits by using the value of the member's individual retirement account at the time a benefit is purchased. The value of a member's retirement account and the ultimate benefit depends on three main factors:

1. The contributions paid into the account.
2. The investment returns on those contributions and
3. The cost of purchasing the member's pension using annuity rates.

Many company defined contribution pension schemes also provide benefits should a member die in the service of the employer. These benefits are usually based on the member's salary at death.

Occupational Pension Scheme
A pension scheme set up by an employer to provide retirement benefits for employees. This term is used interchangeably with "Company Pension Scheme".

Personal Retirement Savings Accounts (PRSAs)
A PRSA is a contract between an individual and an authorised PRSA provider in the form of an investment account. The PRSA benefits will be determined by the contributions paid by and on behalf of the contributor and the investment return on those contributions. There are two types of PRSA contract:

1. A Standard PRSA is a contract that has a maximum charge of 5% on the contributions paid and 1% per annum on the assets under management. Investments are only allowed in pooled funds which include unit trusts and life company unit funds.
2. A Non-Standard PRSA is a contract that does not have maximum limits and charges and/or allows investments in funds other than pooled funds.

A register of PRSA providers and their products is available from the Pensions Board.

Preserved Benefit
Prior to the Pensions Act, 1990, occupational pension schemes were not obliged to preserve benefits on leaving service i.e. the only benefit paid was a refund of member's contributions. The Pensions Act, 1990, requires schemes to provide a minimum preserved benefit for those leaving service between 1 January 1993 and 1 June 2002 provided 5 years scheme membership have been completed, of which at least 2 must be completed after 1 January 1991. The Pensions Amendment Act, 2002, requires schemes to provide a minimum preserved benefit to those who leave after 1 June 2002 with 2 or more years scheme service. In the case of a defined benefit scheme, the preserved benefit means a deferred pension, deferred retirement gratuity and benefits in the event of death before pension commences. In the case of a defined contribution scheme, preserved benefit refers to the accumulation of employer and employee contributions.

PRSI

A shortened name for Pay Related Social Insurance, under which individuals who earn an income pay related contributions to the Social Insurance Fund, and in return are covered for certain Social Insurance Benefits e.g., Social Welfare Old Age Contributory Pension.

Retirement Annuity Contract (RAC)
An individual pension policy which can only be effected by individuals who are in non pensionable employment or who have taxable earnings from a self-employed trade or profession. Also known as Personal Pension Plans.

Trustees

Individuals or a company which, alone or jointly looks after the assets held in a trust fund. In a company pension scheme the trust fund is the monies and assets for the time being held by the trustees subject to the trusts of the scheme.

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