Glossary of Terms | London Borough of Bexley

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Glossary of Terms

Accounting Policies	The rules and practices adopted by the authority that determine how the transactions and events are reflected in the accounts.
Accruals	Amounts included in the accounts for income or expenditure in relation to the financial year but not received or paid as at 31 March.
Active Management	Active management or active fund management is where the fund manager makes specific investments with the aim of outperforming an investment benchmark.
Active Member	Current employee who is contributing to a pension scheme.
Actuarial Gains and Losses	These arise where actual events have not coincided with the actuarial assumptions made for the last valuations (known as experience gains and losses) or the actuarial assumptions have been changed.
Actuary	An independent professional who advises the Council on the financial position of the Fund. Every three years the actuary values the assets and liabilities of the Fund and determines the funding level and the employers’ contribution rates.
Additional Voluntary Contributions (AVC)	An option available to active scheme members to secure additional pension benefits by making regular contributions to separately held investment funds managed by the Fund’s AVC provider.
Admitted Body	An organisation, whose staff can become members of the Fund by virtue of an admission agreement made between the Council and the organisation. It enables contractors who take on the Council’s services with employees transferring, to offer those staff continued membership of the Fund.
Asset Allocation	The apportionment of a Fund’s assets between different types of investments (or asset classes). The long-term strategic asset allocation of a Fund will reflect the Fund’s investment objectives.
Benchmark	A measure against which the investment policy or performance of an investment manager can be compared.
Bonds	Investments, mainly in government stocks, which guarantee a fixed rate of interest. The securities represent loans which are repayable at a future date, but which can be traded on a recognised stock exchange in the meantime.
CIPFA (Chartered Institute of Public Finance and Accounting)	CIPFA is the professional institute for accountants working in the public services. CIPFA publishes the Code.
Creditors	Amounts owed by the Council for goods and services received but not paid for as at 31 March.
Debtors	Amounts owed to the Council for goods and services provided but where the associated income was not received as at 31 March.
Deferred Members	Scheme members, who have left employment or ceased to be active members of the scheme whilst remaining in employment but retain an entitlement to a pension from the scheme.
Defined Benefit Scheme	A type of pension scheme, where the pension that will ultimately be paid to the employee is fixed in advance, and not impacted by investment returns. It is the responsibility of the sponsoring organisation to ensure that sufficient assets are set aside to meet the pension promised.
Derivative	A derivative is a financial instrument which derives its value from the change in price (e.g. foreign exchange rate, commodity price or interest rate) of an underlying investment (e.g. equities, bonds, commodities, interest rates, exchange rates and stock market indices), which no net initial investment or minimal initial investment and is settled at a future date.
Employer Contribution Rates	The percentage of the salary of employees that employers pay as a contribution towards the employees’ pension.
Equities	Ordinary shares in UK and overseas companies traded on a stock exchange. Shareholders have an interest in the profits of the company and are entitled to vote at shareholders’ meetings.
Exchange Traded	This describes a financial contract which is traded on a recognised exchange such as the London Stock Exchange or the London International Financial Futures Exchange.
Financial Assets	Financial assets are cash, equity instruments within another entity (e.g. shares) or a contractual right to receive cash or another asset from another entity (e.g. debtors) or exchange financial assets or financial liabilities under potentially favourable conditions (e.g. derivatives).
Financial Instrument	Any contract giving rise to a financial asset in one entity and a financial liability or equity in another entity.
Financial Liabilities	Financial assets are contractual obligations to deliver cash or another financial asset (e.g. creditors) or exchange financial assets or financial liabilities under potentially unfavourable conditions (e.g. derivatives).
Forward Foreign Exchange Derivative	Forward foreign exchange derivatives are over the counter contracts whereby two parties agree to exchange two currencies on a specified future date at an agreed rate of exchange.
Index	A calculation of the average price of shares, bonds, or other assets in a specified market to provide an indication of the average performance and general trends in the market.
Over the Counter	This describes a financial contract which is potentially unique as they are not usually traded on a recognised exchange.
Passive Management	Passive management is where the investments mirror a market index.
Pooled Investment Vehicles	Funds which manage the investments of more than one investor on a collective basis. Each investor is allocated units which are revalued at regular intervals. Income from these investments is normally returned to the pooled fund and increases the value of the units.
Projected Unit Method - Pension Fund Valuation	An accrued benefits valuation method in which the scheme liabilities make allowance for projected earnings. An accrued benefits valuation method is a valuation method in which the scheme liabilities at the valuation date relate to: the benefits for pensioners and deferred pensioners (i.e. individuals who have ceased to be active members but are entitled to benefits payable at a later date) and their dependents, allowing where appropriate for future increases, and The accrued benefits for members in service on the valuation date
Related Parties	Two or more parties are related parties when at any time during the financial period: one party has direct or indirect control of the other party; or the parties are subject to common control from the same source; or one party has influence over the financial and operational policies of the other party, to an extent that the other party might be inhibited from pursuing at all times its own separate interests; or The parties, in entering a transaction, are subject to influence from the same source, to such an extent that one of the parties to the transaction has subordinated its own separate interests Advice from CIPFA is that related parties to a local authority include Central Government, bodies precepting or levying demands on the Council Tax, members and chief officers of the authority and its pension fund.
Related Party Transaction	A related party transaction is the transfer of assets or liabilities or the performance of services by, to or for a related party, irrespective of whether a charge is made. Examples of related party transactions include: the purchase, sale, lease, rental or hire of assets between related parties; the provision by a pension fund to a related party of assets of loans, irrespective of any direct economic benefit to the pension fund; the provision of services to a related party, including the provision of pension fund administration services; and transactions with individuals who are related parties of an authority or a pension fund, except those applicable to other members of the community or the pension fund, such as Council Tax, rents and payments of benefits
Return	The total gain from holding an investment over a given period, including income and increase or decrease in market value.
Scheduled Body	An organisation that has the right to become a member the Local Government Pension Scheme under the scheme regulations. Such an organisation does not need to be admitted, as its right to membership is automatic.
The Code	The Code incorporates guidance in line with IFRS, IPSAS and UK GAAP Accounting Standards. It sets out the proper accounting practice to be adopted for the Statement of Accounts to ensure they ‘present fairly’ the financial position of the Council. The Code has statutory status via the provision of the Local Government Act 2003.
Unrealised Gains/Losses	The increase or decrease in the market value of investments held by the fund since the date of their purchase. Note: values throughout these accounts are presented rounded to whole numbers. Totals in supporting tables and notes may not appear to cast, cross-cast, or exactly match to the core statements or other tables due to rounding differences.