Money Purchase

Definition

A money-purchase pension plan is a pension plan to which employers and employees make contributions based on a percentage of annual earnings, in accordance with the terms of the plan. Upon retirement, the total pool of capital in the member's account can be used to purchase a lifetime annuity. The amount in each money-purchase plan member's account differs from one member to the next, depending on the level of contributions and the investment return earned on such contributions.

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