Registered Pension Schemes

A pension scheme which is subject to the new tax regime is known as a Registered Pension Scheme.

There are four main types of Registered Pension Scheme:-

Defined Benefit Schemes

A defined benefit, or final salary scheme, is provided by an employer for the benefit of the employees. These schemes provide benefits based on a member’s salary and length of service.

Money Purchase Schemes

Money purchase schemes provide benefits based on the accumulation of contributions paid into the scheme. These benefits will depend upon the investment returns achieved within the fund. A money purchase scheme may be provided by an employer for the benefit of employees, or maybe an individual arrangement. There are no guarantees on the eventual level of benefits paid out.

Hybrid Schemes

A hybrid scheme is a mixture between a defined benefit and a money purchase scheme. It is offered by an employer for the benefit of employees and the eventual level of benefits paid out is expressed as the greater of the accumulated funds and a pre-defined level of benefit based on service and salary.

Cash Balance Schemes.

A cash balance scheme is a type of money purchase scheme provided by an employer for the benefit of employees. The benefits are based on accumulated contributions paid into the scheme. However, there is also an underlying “promise” for each member at retirement, whereby, in the event that the funding fails to provide the required level of benefits, it will be made up to that level by the scheme.

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