What is a money purchase scheme?
A money purchase scheme is also known as a defined contribution scheme. Under a money purchase scheme you are not guaranteed a set level of pension when you take your benefits. Instead, the benefits you receive are based on a number of factors including the amount of money contributed to your pension fund, the performance of the assets into which it is placed and the annuity rates available at the time you take your benefits.
Show A money purchase scheme is also known as a defined contribution pension scheme. You make contributions each month and the pension you receive is based on factors such as contributions paid, returns on investments and annuity rates at the time you retire. Your employer may also make contributions depending on the scheme’s rules.
A ‘money purchase scheme’ provides benefits based upon the amount of money that is in YOUR own pension ‘pot’ when benefits are due to be paid. The amount that will be in your ‘pot’ when benefits arise will depend upon the payments made into your ‘pot’; the investment return achieved on each individual payment to the pot; and any costs which are charged against your growing ‘pot’. The benefits you or your dependents will get from a money purchase scheme will come entirely from your ‘pot’. Employer sponsored money purchase schemes include Contracted-Out Money Purchase Schemes (COMPS), Contracted-In Money Purchase Schemes (CIMPS), Executive Pension Plans (EPP) and Small Self Administered Schemes (SSAS). Other types of money purchase schemes include Personal Pension Plans (PPP), Stakeholder Pensions (Stakeholder or SHP) and Group(ed) Personal Pension Plans (GPP). These arrangements may be presented as employer schemes but in fact are personal arrangements rather than employer sponsored sch
