Pension benefits

Meaning of 'money purchase benefit'

The Pension Schemes Act 1993, s 181, currently defines 'money purchase benefits' as 'benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or by any other person in respect of the member and which fall within Section 181B'.

Broadly speaking, a benefit (other than a pension in payment) will fall within the Pension Schemes Act 1993, s 181B if its amount is calculated solely by reference to assets which are sufficient to meet the resulting liabilities, so that it cannot be possible for a funding deficit to arise.

This amended definition of 'money purchase benefit' was introduced by the government through the Pensions Act 2011, s 29 to reflect the cases Aon Trust Corporation v KPMG [2006] 1 All ER 238 and Bridge Trustees v Houldsworth [2012] 1 All ER 659.

Section 29 came into force on 24 July 2014 with retrospective effect from 1 January 1997.

For more information, see Practice Notes:

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Money purchase benefits—the statutory definition
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Money purchase benefits—the transitional regulations [Archived]

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