Defined Contribution Increases Compared
Published / Last Updated on 06/06/2020
Defined Contribution ‘money purchase' invested linked pension schemes are either:
- Private: personal pensions, grouped personal pensions, stakeholder pensions, workplace pensions, self invested personal pensions (SIPP) and flexible drawdown schemes or
- Company sponsored: investment linked schemes such as company money purchase schemes, small self administered schemes (SSAS) and executive pensions.
Revaluation of ‘Frozen’ Defined Contribution Pension Funds
Legal requirements for revaluation do not apply to Money Purchase arrangements. They may increase or decrease in value depending upon where your pension fund is invested. There are no guaranteed increases.
Indexation
There used to be a requirement that Company Pension schemes that were investment linked, money purchase, defined contribution schemes had to buy you an income in retirement via an annuity that increased each year in line with Limited Price Indexation (LPI) increases i.e. inflation (Consumer Prices Index) CPI subject to a maximum capped increase of 5% pa. This was removed as part of ‘Pensions Simplification’ rules that started after 5 April 2005 where the Pensions Act 2004 removed the requirement for indexation of pension payments for Defined Contribution schemes.
