Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Money purchase benefits definition

What does Money purchase benefits mean? In practice, money purchase benefits are defined contribution benefits in occupational pension schemes and personal pensions where the value depends on contributions paid for a member and investment performance, with no promise from the scheme about the final amount. In UK law, the term is defined in section 181 Pension Schemes Act 1993 (as amended), subject to exclusions in section 181B. A benefit is money purchase only if its amount is calculated by reference to payments made by or for the member and there is no potential scheme funding shortfall. If the scheme guarantees an investment return, annuity rate or...

UK Hybrid Occupational Pension Schemes: DB/DC Structures, Underpins, PPF, Employer Debt, Auto‑Enrolment, Governance and TPR Guidance

Published by a LexisNexis Pensions expert

Practice notes

What is a hybrid pension scheme?

Current pensions law largely divides UK occupational pension schemes into two categories, based on whether they qualify as money purchase schemes. In outline:

a money purchase scheme is one where every benefit provided is a money purchase benefit (see Practice Note: money purchase benefits—the statutory definition for the statutory meaning of “money purchase benefits”)

Defined benefit schemes are, generally, not separately defined. There are limited exceptions for automatic enrolment under the Pensions Act 2008 (PenA 2008) and for the types of benefits payable as authorised payments under the Finance Act 2004 (FA 2004), under which:

a defined benefits (DB) scheme is one where none of the benefits provided are money purchase benefits (note also the similar definition of a “defined benefits arrangement” in FA 2004, s 152(6))

For most purposes, these definitions therefore do not address situations where only some of a scheme’s benefits are money purchase. Schemes delivering a mixture of benefit types are commonly known as hybrid schemes. Two statutory definitions exist...

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Stephen Maynard

Gateley Legal

Stephen provides advice to trustees and employers of occupational pension schemes on all aspects of pensions law and also advises businesses on the pensions aspects arising from corporate transactions and restructurings. His experience includes advising on the drafting and interpretation of scheme documentation, advising trustees and employers on their responsibilities when proposing changes to pension schemes, working on the pensions aspects of corporate transactions, advising on obligations under TUPE and in respect of automatic enrolment and transferring schemes to the Pension Protection Fund and the Financial Assistance Scheme. Stephen also manages a number of occupational pension schemes to which Gateley's independent trustee company acts as the corporate trustee and takes an active role in the management and governance of the trustee company and its schemes ...

Michael Collins

Gateley Legal

Michael advises employers and trustees of occupational pension schemes on all aspects of pensions law as well as dealing with pensions issues on corporate transactions. He also provides legal advice to executive pension providers and other pension professionals. Michael is well placed to advise on all pensions-related issues, having advised clients ranging from owner-managed businesses in relation to their executive pensions to the multi-billion-pound pension funds of major international companies, including putting in place contingent assets (such as parent company guarantees or charges over property) in order to improve the security of pension scheme benefits and reduce levies payable to the Pension Protection Fund. ...

Web page updated on 22/05/2026

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