The Compendium

Personal Contract Plans (PCPs)

Personal Contract Plans are a specific type of hire purchase agreement offered by car dealers as a way to pay for a car. In a PCP contract, the purchaser pays a deposit and continue to make regular instalments, usually over three or four years.

There is usually a large lump sum payment at the end of the contract.

At the end of the contract the purchaser can either:

• Pay the final lump sum and keep the car; or
• Return the car to the seller (the person can take out a new PCP arrangement on another car).

During the period of the agreement the purchaser does not legally own the car; this only happens when the final payment is made. The purchaser must stick to certain restrictions on usage and maintenance, such as mileage limits and servicing obligations.

[See ‘Hire Purchase’, ‘HP’ and ‘Retention of Title’.]

Personal Pension Scheme

Personal pensions are pensions that are arranged by an individual seeking a pot of money to live on upon retirement. They are sometimes known as ‘defined contribution’ or ‘money purchase’ pensions.

Depending upon the investment decisions made by the scheme and the state of the markets over the years the pension is invested, the member will receive a pension that’s based on how much was paid in.

Some employers offer personal pensions as workplace pensions.

The money paid into a personal pension is put into investments (such as stocks and shares) by the pension provider to give the member of the scheme an income when they retire. The money the investor gets from a personal pension usually depends on:

• how much has been paid in;
• how the fund’s investments have performed – they can go up or down;
• how they decide to take their money (they can take an annuity or regular payments, or both).