PSI20.1.13 - Funding and Surpluses: Funding General - Money Purchase Schemes

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN13.11]

The same general actuarial principles apply also to money purchase schemes. With a final salary scheme the members are promised benefits based on a set fraction or percentage of final remuneration, for example 1/60th of final remuneration for each year of service. But members of money purchase schemes have no such guarantee. Where the scheme is being funded by reference to specifically targeted benefits for each member, the actuary will calculate the level of contributions required for each member to provide those target benefits. Where no specifically targeted benefits are being aimed for but the employer proposes to make contributions at a particular rate, the actuary must carry out calculations to ensure that such contributions are not likely to produce benefits in excess of the Revenue permissible maximum. In either case on retirement, a member has no guaranteed level of benefit and will receive whatever benefits can be provided from the funds available subject to Revenue limits.

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