e rule changes mean that from April 2015, anyone aged 55 or more can take their entire pension pot as cash - assuming they have a money-purchase
pension rather than one based on their salary.
This summer, PriceWaterhouseCoopers announced that just 25% of employers were offering such schemes, preferring instead money-purchase
plans, a cash balance plan, or career average revalued earnings, also known as Care.
Because salaries increase over time, the long service/short service disparity in the annual pension from a money-purchase
plan-as a percentage of final average compensation--is much less than if salaries do not increase.
Defined contribution scheme: Also known as a money-purchase
Mr Harper pointed out the role of trustees has become more relevant than ever in money-purchase
, "defined contribution" schemes, which have replaced many final salary arrangements, because the successful investment of contributions by both employees and the company is critical to the size of the eventual pensions.
The Transport and General Workers Union urged Michelin to "think again" over shifting members on to a money-purchase
The French company is to close the pension in the UK and transfer members to a money-purchase
Three-quarters of such occupational schemes are already closed to new employees, who are now only offered less favourable money-purchase
Unlike many businesses that had resorted to money-purchase
schemes, Tesco had formulated a defined-benefit pension based on individuals' average salary over their careers.
Hewitt says a 35-year-old paying 5% of a pounds 28,000 salary into a money-purchase
(defined contribution) scheme and retiring at 65 would receive only pounds 5,000 a year in today's money.
401 (k) or money-purchase
plan) that provides a participant the opportunity to choose from a bread range of investment alternatives that includes at least three diversified investment categories with materially different risk and return characteristics.
First, since the new laws increased the level of contributions allowed by profit sharing plans to 25 percent of compensation from 15 percent, most money-purchase
, combined-money-purchase/profit-sharing and Keogh plans are obsolete.