Pension 100 - Defined contributions or Money purchase schemes

MONEY PURCHASE SCHEMES

THESE schemes are also known as defined contribution pensions. All private pensions are money purchase schemes and increasingly occupational schemes are more likely to be money purchase
- especially for new employees.

The amount of pension built up in these schemes depends on the amount of contributions and how that money in invested. On retirement you can take a tax-free lump sum but you have to use the rest of your pension to buy an annuity (before age 75)

An annuity is an investment which will pay you an income for the rest of your life. But the amount you will get depends on annuity rates at the time you decide to buy.

WHO NEEDS IT: Still a good deal for employees if the company is contributing. And if you are in a money purchase scheme - whether a company scheme, personal pension or stakeholder - the contribution size and the length of time you contribute will affect the investment.

The tables show the Pension you can earn - all payments are Weekly

Women: 5% Contribution -
Age of Entry	Annual Earnings
Age of Entry	£10,000	£20,000	£30,000	£40,000	£80,000
20	£27	£54	£81	£108	£216
30	£21	£42	£63	£84	£168
40	£14	£28	£42	£56	£112
50	£7	£14	£21	£28	£56
Shows Pension after Joint Employee - Employer Contribution of 5% PA

Men: 5% Contribution
Age of Entry	Annual Earnings
Age of Entry	£10,000	£20,000	£30,000	£40,000	£80,000
20	£36	£72	£108	£144	£288
30	£28	£56	£84	£112	£224
40	£20	£40	£60	£80	£160
50	£12	£24	£36	£48	£96
Shows Pension after Joint Employee - Employer Contribution of 5% PA

Women: 10% Contribution
Age of Entry	Annual Earnings
Age of Entry	£10,000	£20,000	£30,000	£40,000	£80,000
20	£54	£108	£162	£216	£432
30	£42	£84	£126	£168	£336
40	£28	£56	£84	£112	£224
50	£14	£28	£42	£56	£112
Shows Pension after Joint Employee - Employer Contribution of 10% PA

Men: 5% Contribution
Age of Entry	Annual Earnings
Age of Entry	£10,000	£20,000	£30,000	£40,000	£80,000
20	£72	£144	£216	£288	£576
30	£56	£112	£168	£224	£448
40	£40	£80	£120	£160	£320
50	£24	£48	£72	£96	£192
Shows Pension after Joint Employee - Employer Contribution of 10% PA

The tables also show the different payouts for men and women, and for different contributions. Obviously they don't cover every calculation but they provide a basic guide to what's on offer from different schemes.

The figures are in today's money and don't take account of future inflation.
With thanks to the Sun - (Personal Finance Editor), Legal & General, the Prudential and the Annuity Bureau.

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