money-purchase: meaning, definition, pronunciation and examples
C1Technical, Formal (Primarily Financial/Business)
Quick answer
What does “money-purchase” mean?
A type of pension scheme where the retirement benefits depend on the contributions paid in and the investment performance of the fund, rather than a guaranteed final salary.
Audio
Pronunciation
Definition
Meaning and Definition
A type of pension scheme where the retirement benefits depend on the contributions paid in and the investment performance of the fund, rather than a guaranteed final salary.
Generally refers to any financial arrangement where the ultimate value or output is directly determined by the amount of money invested and the returns on that investment, as opposed to a predetermined, fixed outcome. It's sometimes used more broadly in non-pension contexts to describe a purchase funded by available money as opposed to credit.
Dialectal Variation
British vs American Usage
Differences
The term is predominantly used in British and Commonwealth pension regulation and financial discourse. In the US, 'defined-contribution plan' (e.g., 401(k)) is the standard term; 'money-purchase plan' is a less common specific subtype of defined-contribution plans in IRS/tax code parlance.
Connotations
In the UK, it connotes a standard workplace pension arrangement with associated regulations. In the US, it is a highly technical tax/legal term with very narrow application.
Frequency
Very high frequency in UK professional financial contexts; low frequency in general American English, where it is a specialist legal term.
Grammar
How to Use “money-purchase” in a Sentence
[money-purchase + NOUN]to be enrolled in a [money-purchase scheme]to contribute to a [money-purchase plan]Vocabulary
Collocations
Examples
Examples of “money-purchase” in a Sentence
adjective
British English
- The money-purchase scheme's performance was reviewed quarterly.
- He opted for the money-purchase arrangement over the career average plan.
American English
- The IRS has specific rules for qualifying money-purchase plans.
- Fewer companies offer traditional money-purchase pensions nowadays.
Usage
Meaning in Context
Business
The company is transitioning all new employees to a money-purchase pension scheme to limit long-term liabilities.
Academic
The paper analyses the risk-shift implications of the move from defined-benefit to money-purchase retirement systems across OECD nations.
Everyday
My pension is a money-purchase one, so I'm worried about how the stock market will perform before I retire. (Note: Term itself is technical but concept is explained in everyday language).
Technical
Under a money-purchase arrangement, the annual allowance charge applies if total inputs exceed the relevant percentage of the member's relevant earnings.
Vocabulary
Synonyms of “money-purchase”
Strong
Neutral
Weak
Vocabulary
Antonyms of “money-purchase”
Watch out
Common Mistakes When Using “money-purchase”
- Using 'money-purchase' as a noun on its own (e.g., 'I have a money-purchase') instead of as a modifier ('a money-purchase plan').
- Confusing it with 'money purchase' as a verb phrase (e.g., 'to money purchase a car').
FAQ
Frequently Asked Questions
In modern UK usage, yes, they are essentially synonymous. 'Defined-contribution' is the broader, more internationally recognised category, while 'money-purchase' is a specific, traditional term within that category in UK pension law.
No, that would be incorrect and confusing. The term is a fixed compound adjective specific to pensions and finance. For a cash transaction, you would say 'a cash purchase' or 'buying it with money'.
The individual member (the employee) bears the investment risk, as the final pension value depends on market performance. This contrasts with a defined-benefit scheme, where the employer bears the risk.
It is almost always hyphenated when used as a compound adjective (e.g., money-purchase plan). It is rarely, if ever, used as a standalone noun without the following word like 'scheme' or 'plan'.
A type of pension scheme where the retirement benefits depend on the contributions paid in and the investment performance of the fund, rather than a guaranteed final salary.
Money-purchase is usually technical, formal (primarily financial/business) in register.
Money-purchase: in British English it is pronounced /ˈmʌni ˌpɜːtʃəs/, and in American English it is pronounced /ˈmʌni ˌpɜːrtʃəs/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “A money-purchase world (refers to the shift from guaranteed pensions to investment-dependent ones)”
Learning
Memory Aids
Mnemonic
Think: You PURCHASE your future pension with the MONEY you put in. What you get depends on the 'price' (investment returns) of that purchase.
Conceptual Metaphor
RETIREMENT IS A FINANCIAL PRODUCT YOU BUY (through incremental contributions).
Practice
Quiz
In which regional variety of English is the term 'money-purchase plan' most commonly used in general financial discourse?