Money purchase schemes on the increase
Published On 14 January 2008
Money purchase schemes are gaining popularity with employers, according to the Pensions Advisory Service (TPAS). The organisation has said that the schemes, also known as defined contribution plans, could become the provision of choice offered in the future.
Under these schemes, employers pay money into a retirement fund which is then invested.
Mr Hamilton explained why many employers are now opting for these money purchase schemes in favour of final salary schemes.
"Employers, almost universally, with the exception of the public sector, have made the decision that the future for them as an employer is having money purchase pension arrangements because that passes all the risk to the employees," he said.
Mr Hamilton also predicted that money purchase schemes would eventually take over the private sector.
"In ten years' time, there will be very few of the type of defined benefit scheme in the private sector; you will only find them in the public sector. And everything else will be money purchase schemes," he said.
In 2010 the government will introduce the Personal Accounts Scheme, specifically targeted at the seven million Britons who are failing to save for their retirement.
