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.
Meanwhile, Prudential believes a 25-year-old paying into a money-purchase pension
from this year should expect a pension at 65 worth pounds 16,023 a year, but pounds 57,714 if they are on a final-salary scheme.
In a money-purchase pension
scheme, the amount of pension you get depends on how much money has been paid into your fund, and how well the scheme's investments have performed by the time you retire.
A-Day introduces the concept of unsecured pension, a way of crystallising benefits from money-purchase pension
savings schemes before the age of 75.
Assuming that your employer has a money-purchase pension
scheme, the lower interest rate will only be applied from January 1, 2003 and will nor affect your pension in a big way.
The above increases have drawn much attention to the fact that employees can now reach the maximum contribution level through a defined contribution plan, so that any existing money-purchase pension
plan (MPPP) could be terminated in 2002 without sacrificing contribution levels.
Business owners whose maximum contributions are reduced in this way may wish to adopt a money-purchase pension
plan, which allows a higher percentage contribution (up to 25%).
As an example, if a company has two plans--a profitsharing plan and a money-purchase pension
plan--and the plans independently qualify, an examination of the moneypurchase plan would not preclude the profit-sharing plan from applying for VCR correction.
The limit for contributions to a money-purchase pension
plan is 25 percent, with a maximum of $30,000 total.
Two situations address money-purchase pension
Workers are losing out as half of Britain's 100 largest companies are switching from final salary to money-purchase pension
For money-purchase pension
plans, this is of direct importance to the employees covered under the plan; for defined benefit plans, this is important in reducing the total cost of funding the pension payments.