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Collective money purchase arrangements are a sub-category of money purchase arrangements, and are something of a halfway house between defined benefits and money purchase. »Ê¹ÚÌåÓýappy were introduced by the Pension Schemes Act 2021.

»Ê¹ÚÌåÓýapp only pension that a collective money purchase arrangement can pay to a member is a scheme pension. »Ê¹ÚÌåÓýapp only pension death benefit that can be paid is a dependantsâ€� scheme pension.

Members� collective money purchase funds are pooled; the amount available in the fund to provide benefits is for all the members collectively.

One distinctive characteristic of a collective money purchase arrangement is that the benefits can increase or decrease significantly from year to year.

»Ê¹ÚÌåÓýapp benefit will be valued broadly on the basis of the value of the investments and the member’s length of service. For example, a member may build up a unit worth £1,000 in one year but the following year the value of the units may increase so that the member now has two units but each is valued at £1,050, providing the member with pension rights totalling £2,100. However, the following year the value of the units may decrease so that the member has three units at £1,010 each, totalling £3,030. This revaluation exercise impacts all members including active members and ‘deferredâ€� members if they do not start to take their pension, or ‘pensionerâ€� members if they do.

A collective money purchase arrangement is treated differently to other types of money purchase arrangement where it is necessary to value a member’s accrued, but uncrystallised, benefits under an arrangement. »Ê¹ÚÌåÓýappre are separate provisions solely covering valuations for collective money purchase arrangements, for example, for certain lifetime allowance enhancement factor, borrowing, surcharge and transitional protection provisions.