The cost of public sector pensions in Scotland Prepared for the Auditor General for Scotland and the Accounts Commission


Appendix 1. Glossary of pension and other technical terms



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Appendix 1. Glossary of pension and other technical terms

Accrual rate – the rate at which members earn their pension benefits in a defined benefit scheme. For every year worked a proportion of pay is earned as pension. For example, in a final salary pension scheme with an accrual rate of 60ths, someone retiring after 20 years would get a pension of one-third (20/60ths of their final salary.

Actuarial valuation – an assessment done by an actuary, usually every three or four years. The actuary will work out whether enough money is being paid into a pension scheme to pay pensions when due and assess whether employees’ and employers’ contributions are sufficient.

Actuary – an expert on pension scheme assets and liabilities, life expectancy and probabilities (the likelihood of things happening) for insurance purposes.

Commutation – a process by which pension scheme members swap some of their annual pension for a lump sum.




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