Actuary - A professional working in the pension and insurance field that is responsible for calculating the liabilities of pension plans, the costs of providing pension plan benefits, reserves, premiums, pension and insurance annuity rates. Usually, to be qualified and operate as an actuary, you must acquire the relevant professional certification.

Additional Voluntary Contribution (AVC) - Also called an optional contribution, this is any extra money paid into the pension scheme by the employee in order to gain additional benefits at retirement. The employer does not normally match these contributions.

Administrator - The person or persons who administer the pension plan, i.e., who arrange for pension payments, funding of the plan, etc. For most plans, the employer is responsible for administration. However, an employer may hire a third party to administer the plan on his/her behalf. Some plans are administered by a board of trustees or similar body.

Annuitant - The person receiving a payment in annuity form.

Annuity - A periodic payment to a person, usually for life. Annuity is a term also used to describe the contracts that are sold by insurance companies, guaranteeing these payments.

Asset Mix - Refers to the proportions of various types of investments held by a pension fund, usually expressed as a percentage of total investments held in bonds, stocks, real estate, etc.

Bearer Instruments - These are financial instruments that do not have a registered owner i.e. the instrument bears no name and therefore ownership falls to the person in possession of the instrument.

Beneficiary - A person designated by a pension member to receive all or a portion of the pension benefit should the member dies.

Benefit - Generally any form of payment to which a person may become entitled under the rules of a pension plan.

Bill of Exchange - Written order to pay a sum of money on a specific date to the issuer or a named payee.

Bonds - These are debt obligations or IOUs issued by a corporate entity or government promising to repay borrowed money at fixed rate or variable rate of interest.

Certain and Continuous Period - An annuity guaranteed to be paid for a specified number of years. If the annuitant dies prior to the specified number of years, his/her beneficiary will receive the annuity for the remaining years.

Certificates of Participation - Written document attesting to the fact an investor has made an investment (in part) in an underlying asset.

Collateral - These are items (assets) pledged by an individual or corporate body as security against a loan.

Commercial Paper - a short term Promissory Note that is issued in the money market and represents the obligation of the issuing corporation. It is similar to an IOU note that is received as a result of monies loaned to third party.

Issuers of Commercial Paper can be divided into three main groups namely -

1. Financial Companies, e.g. Commercial banks, merchant banks, insurance companies etc.
2. Non-financial companies, e.g. manufacturing companies, companies in the Tourism sector.
3. Individuals, e.g. persons with high net worth.

Commuted Value - The equivalent value of a future series of payments, paid immediately as a lump sum.

Contribution - A payment made into the pension plan by the employer or the plan member.

Contribution Rate - An amount, which is usually expressed as a percentage of a salary or emoluments, paid into the pension fund.

Corporate Notes - Promissory notes issued by corporate entities.

Deferred Pension - A pension that is determined when a member's employment terminates, but is not payable until a later date, usually at normal retirement age.

Deferred Member/Pensioner - A member who is no longer contributing to nor is accruing any additional benefits from the plan, however, will receive a pension at normal retirement age.

Dependent - Anyone who relies on the member of the pension plan for financial support.

Defined Benefit Pension Scheme – This term covers all pension plans that are not Defined Contribution Pension Plans. It relates to a pension plan that defines the pension benefit to be provided based on years of plan membership, average earnings, etc., in accordance with the terms of the plan. All the investment and mortality risk is borne by the employer. If the pension fund is insufficient to cover the present value of members’ total pension, perhaps due to poorly performing investments, the employer has to make up the difference.

Defined Contribution Pension Scheme - Also known as a Money Purchase Plan, this is a pension plan that defines the amount of employer and employee contributions to the pension fund. The value of the pension is based on both the members’ and employer’s contributions and the investment income. The pension value is not guaranteed as it partly depends upon investment performance.

Eligibility Requirement - This is a condition that must be met before an employee is permitted or required to join a pension plan, e.g. a specific number of years under employment. The term may also refer to an employee’s eligibility for certain benefits.

Euro Bond - Bonds issued by a country outside of the country in a currency that is not the currency of the issuing country.

Financial Derivatives - These are by-products created as secondary products based on an existing primary (financial) asset.

Guaranteed Annuity - An annuity that will be paid to a person for his or her lifetime, with a minimum number of payments guaranteed. For example, if a person who owns an annuity that has a five-year guarantee dies after three years, payment will continue to the persons or spouse for two years.

Investments - Any item of asset representing monetary value.

Investment Debentures - These are short-term bonds issued by the Government of Jamaica, usually for periods 12 to 18 months, to raise funds for budgetary needs. Interest payments are made half yearly or quarterly with full principal repayment at maturity or in instalments over the life of the bond.

Investment Managers - Professionals employed by the employer to help in deciding how the pension funds should be invested. The trustees of the pension plan supervise these managers.

Investment Return - Earnings of a pension fund including interest, dividends, and capital gains and losses.

Joint-and-Survivor Annuity - An annuity that pays one individual for his or her life, and then provides an annuity for the person's surviving spouse. The survivor’s annuity is usually in a reduced amount.

Local Registered Stocks - These are locally registered bonds issued by the Government of The tenure of these securities is usually between two to ten years. These bonds can be issued at a fixed or variable rate. The variable rate bonds are usually re-priced half yearly using the six months Treasury bill rate as the benchmark. The longer tenures (5 to 10 years) may have quarterly interest payments.

Money Purchase Plan - Please see the definition for Defined Contributed Pension Scheme.

Negotiable Instrument - Written instrument containing a promise to pay another party called the payee a definite sum of money on demand or at a specified future date.

Normal Retirement Date - The date at which the member becomes entitled to retirement benefits without reduction or increase.

Participant - A person who is or may become eligible to receive a benefit from a pension plan. A participant may also be known as the member.

Pensionable Service - The total time spent working, which counts toward your benefit. It is usually the total number of years you contributed to the plan, up to the date of retirement.

Pension Benefit – This is a benefit payable as an annuity to a participant/member or beneficiary of a pension plan.

Pension Fund - The pool of pension plan assets that have been accumulated from the contributions made and the investment income is called a Pension Fund. The assets usually include equities, bonds, government paper and real estate.

Plan Administrator - The person, committee, or company designated by a pension plan to manage the plan's daily operation.

Plan Sponsor - An employer who establishes or maintains a pension plan for its employees is known as the sponsor.

Portability Options - Options available on termination, death, or when a plan winds up. An individual may transfer the commuted value of accumulated pension benefits to another approved pension plan, if agreed to by the new plan. The commuted value may also be used to purchase an immediate or deferred annuity. A member may choose to forego these options and instead receive a deferred pension at retirement.

Primary Dealer - Exclusive agent of the central bank (Bank of Jamaica).

Promissory Note - Written instrument containing an unconditional promise by a party, called the maker who signs the instrument to pay to another party a definite sum of money either on demand or at a specified future date.

Retirement - Withdrawal from the active work-force because of age. This term may also be used in the sense of permanent withdrawal from the labour force for any reason, including disability.

Secured Paper - Commercial paper in the money market that is backed by a guarantee from a financial institution.

Tradable - Items of assets that can be easily bought and sold.

Treasury Bills - These are Bills of exchange issued by the government of a country to raise funds for short term needs. These are tradable bearer instruments with a maximum tenure of one year.

Trustee - A person or organisation with a duty to receive, manage and disburse the assets of a plan

Unsecured Paper - Commercial paper issued in the money market without the support of a guarantee from a financial institution. (i.e. if the borrowing entity defaults the investor may loose his money).

Vested Benefits (Vesting) - Benefits to which an employee is entitled under a pension plan by satisfying age and/or service requirements. Usually involves the locking in of accumulated benefits.

Wind-up - Discontinuation of all or part of a pension plan by the employer. Often results from bankruptcy of the employer or from corporate restructuring or downsizing.