Money purchase schemes, sometimes known as defined contribution schemes, differ from defined benefit schemes.

Instead of basing benefits on service and pay, all the money paid by both the employee and employer is invested.

Any investment returns are used to buy a pension or annuity at retirement.

They differ from defined benefit schemes in that the scheme member does not know until retirement what their pension will be.

These type of schemes are not regarded as being as good as defined benefit arrangements because of the uncertainty of their nature.

They also rely very much on how well the money has been invested and also on the rate of annuities at the time the scheme member retires.