Glossary of Terms

We use many pension-specific terms to explain and describe the specifics of your pension benefits.  This glossary was designed to guide your understanding and allow you to access common pension definitions. Please navigate to the content using the alphabetical links below. 

Disclaimer: We make every effort to ensure that all information on this website is accurate and complete. Should any discrepancy exist, the Plan Documents, statutes, or regulations shall apply. 



  • Active member
    A plan member who is actively contributing to the plan. 
  • Actuarial Equivalent
    A benefit of equivalent value when computed based on a given set of assumptions such as life expectancy, return on investments, and interest rates.

  • Actuary
    A business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension plans.

  • Actuarial Valuation
    An actuary prepares an actuarial valuation at least once every three years to assess the financial position of a defined benefit pension plan. The valuation provides information on the adequacy of the employee and employer contribution rates; it is also used to meet regulatory requirements and for accounting purposes in the plan's financial statements.

  • Annual Statement 
    A statement that is sent to plan members every year.  It contains information about the member's status in the plan, such as accumulated contributions, early retirement and normal retirement dates, and benefit earned to date (or in some cases, the account balance). 

  • Annuity
    An annuity is a contract, where you deposit a lump sum of money, and the other party agrees to pay you a guaranteed income for a set period of time or for the rest of your life. Annuities are commonly used to generate retirement income.

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  • Basic Salary
    The amount of annual employee compensation on which pension contributions are based.  In a defined benefit pension plan, it is defined in the Plan Document and is used to determine the highest average salary in the benefit formula

  • Beneficiary
    A person who, on the death of a plan member or pensioner, may become entitled to a survivor benefit under the plan.
    • Under the Pension Benefits Standards Act, a spouse is automatically entitled to the survivor benefit unless they choose to waive that entitlement. If you do not have a spouse or beneficiary, survivor benefits will be paid to your estate.
    • If youdo not have a spouse (or if your spouse has submitted a waiver), primary beneficiary(ies) can be appointed. An alternate beneficiary is entitled to benefits in the event that you no longer have a spouse or primary beneficiary.
    • Under the Income Tax Act, a spouse can be appointed as specified beneficiary to allow variable benefit provisions to transfer to that beneficiary, for their lifetime.
  • Benefit
    Any form of payment that a member or beneficiary may become entitled to under the terms of the plan.

  • Benefit Formula/ Defined Benefit Minimum Formula
    The method for calculating the benefit or a defined benefit minimum.  

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  • Canada Pension Plan (CPP)
    The CPP provides contributors and their families with partial replacement of earnings in the case of retirement, disability or death. The CPP operates throughout Canada, except in Quebec, where the Québec Pension Plan (QPP) provides similar benefits. 
    Find out more:

  • Commuted Value
    The lump sum amount of money that needs to be set aside today, at current market interest rates, to provide enough funds to pay for a pension when a plan member retires. It is calculated by taking your age, current market interest rates, and other assumptions into account.

  • Consumer Price Index (CPI)
    A measure of the average price of consumer goods and services purchased by households. The CPI measures a price change for a constant market basket of goods and services from one period to the next.  A pension plan is said to be “indexed” against the CPI if the benefits can be adjusted to bridge (maybe partially) any gap caused by the annual CPI increase.

  • Contributions
    Money paid into the pension plan by the member and employer. The contribution amounts are determined by a  contribution rate, which is the percentage of the member's basic salary.  The member’s contributions are made through payroll deduction and are therefore reported on a member’s pay stub.
    The contribution rate is defined in the Plan Document.

  • Credited Service
    The time period you are credited with as being an active member of the pension plan, based on actual time worked. For example, if you work part-time at 75 percent FTE, you would receive .75 years of credited service in a full year.

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  • Deferred Pension
    A pension benefit that is not payable until a later date, either because the member has terminated prior to earliest retirement age, or because the member chooses to defer the pension.

  • Deferred Retirement 
    Retirement after normal retirement age.

  • Defined Benefit Minimum
    The bottom "floor" value below which a benefit cannot fall. This feature is only available with certain options and to eligible pensioners. The minimum is calculated based on a defined benefit formula.
  • Defined Benefit Pension Plan
    A pension plan in which the benefit that the member receives is based on a set benefit formula that is unrelated to the contributions made by the member or employer.

  • Defined Contribution Pension Plan
    A pension plan that provides a benefit based on contributions made by the member and employer, and by the investment earnings in the plan.

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  • Guarantee (Single Life)
    A type of survivor benefit that can be selected at retirement. Survivor benefits are paid to a spouse, beneficiary, or estate, upon a member’s death. 
    With a Single Life Guarantee, the pension is paid for the member’s lifetime, but if the member dies before the guarantee expires, the pension will be paid to the beneficiary for the remainder of the guarantee. For example, if a member with a 10 year guarantee passes after 5 years, the beneficiary will continue to receive the pension for the 5 remaining years that are left on the guarantee (if the beneficiary is the estate, it will receive a lump-sum commuted value).

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  • Immediate Pension  
    A pension that becomes payable on the first of the month following the month in which a plan member retires.

  • Inactive Member         
    A plan member who has terminated and left their funds in the pension plan, in order to take a benefit at a later date (selected a deferred pension).

  • Indexing      
    Adjustments to benefits according to a formula that is based on the Consumer Price Index.

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  • Joint Life Option
    A type of survivor benefit that can be selected at retirement. 
    The Joint Life option allows for a specified percentage of the pension to continue to a spouse for their lifetime following the death of the member.
    For example, with a 60% Joint Life option, 100% of the pension is paid for the member’s lifetime.  Upon the member’s death, 60% of the pension is paid for the surviving spouse’s lifetime. 

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  • Life Income Fund (LIF) 
    A type of registered retirement income fund that is used to hold pension funds and eventually payout a retirement income. 

  • Limited Member       
    The former spouse of a plan member who has been designated, as a result of a separation, as a "limited member" and is entitled to a portion of the plan member's benefits.

  • Locked-In    
    Under pension legislation, refers to benefits must be used to provide a lifetime pension and therefore that cannot be paid as cash or transferred without restrictions.  Under certain conditions, some benefits can be exempt from this requirement and consequently be "unlocked". 

  • Locked-In Retirement Account (LIRA)
    A type of registered retirement savings alternative that locks in the pension funds in investments.

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  • Member         
    A person who is contributing to the pension plan (active member), who is not receiving benefits under the plan (pensioner), or who has been a contributor but has not yet received benefits from the plan (inactive member).

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  • Pension     
    A type of employment benefit that provides a retirement income, usually in the form of periodic payments, to those who have become entitled to that benefit under the terms of a pension plan. 

  • Pension Adjustment (PA)
    A pension adjustment represents the value of the pension benefits you earned in the previous year. Canada Revenue Agency (CRA) uses the pension adjustment to calculate your RRSP contribution room, then reports this information to you on a Notice of Assessment.

  • Pension Estimate
    An estimate that is prepared to provide an estimated forecast of the pension benefits that will become available to a member
  • Pensioner     
    A retired member, beneficiary or limited member who is receiving a pension.

  • Pension Statement
    Annual Statement.

  • Plan Document
    A document that provides the terms and conditions of a pension plan; it describes the various rights and obligations of the parties, including a description of the eligibility rules, benefits available, contributions requirements, etc. 

  • Plan Sponsor
    Refers to a designated party, usually an employer, which sets up a retirement plan for the benefit of the organization's employees.

  • Power of Attorney
    Written authorization to represent or act on another's behalf in private affairs, business, or some other legal matters.

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  • Registered Retirement Income Fund (RRIF)
    A retirement fund similar to an annuity contract that pays out income to a beneficiary. 

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  • Single Life Guarantee

  • Small Benefit
    A benefit with a total value not exceeding 20 percent of the Year's maximum pensionable earnings (YMPE) under the Canada Pension Plan (CPP).  A small benefit may be released from the locking-in conditions imposed by the Pension Benefits Standards Act.

  • Spouse          
    Defined in the Pension Benefits Standards Act as:

    • Persons who are married to each other, and who have not been living separate and apart from each other for a continuous period longer than 2 years

    • persons who have been living with each other in a marriage-like relationship for a period of at least 2 years immediately preceding the date of transaction.

  • Survivor Benefits     
    Benefits payable under a pension plan to the surviving spouse, beneficiary, or estate of a deceased member or pensioner.  Pension plans may offer various types of survivor benefits, either in the form of guarantees or joint life options. Generally, the longer the guarantee period and/or the greater the amount continuing to the survivor (spouse, beneficiary, or estate), the lower the member’s monthly pension payment.

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  • Termination
    For pension plans, termination refers to a member ending active membership in the plan, normally as a result of ending the employment relationship. Terminated members who no longer contribute to the plan but choose to leave their benefits on deposit for a future pension (ie, a deferred pension) are called "inactive members". 

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  • Vesting
    In a pension plan, vesting means entitlement. In British Columbia, all pension plan benefits are immediately vested: members are entitled to the benefits the moment they are earned.

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  • Year's maximum pensionable earnings (YMPE)
    Maximum salary limit for contributions to the Canada Pension Plan (CPP).  It is set by Canada Revenue Agency each year according to a formula based on average wage levels.  The YMPE is often used to determine a pension plan's contribution rates. Find out more:

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