Money Purchase Plan

Program for buying a pension annuity that provides for specified, regular payments, usually based on salary.

Contributions to a pension plan on a fixed basis according to a formula, with variable benefits. Contributions can be made under an Allocated Funding Instrument (paid to an insurance company that purchases an individual Annuity or a group Deferred Annuity), or under an Unallocated Funding Instrument. Individual benefits will be determined by the person's age, sex, normal retirement age, and rate schedules in effect at the time the insurance company receives the contributions. These plans are appropriate for an organization that must know its premium outlay in the years ahead. See also Defined Contribution Plan.