Defined contribution

Definition: 

This is another term for a money purchase pension. In a defined contribution pension scheme, each member builds up their own 'pensions pot'. When you retire, you use this pot to provide a pension by purchasing an annuity. The size of your pension will depend on how much you and your employer have contributed, how well your scheme's investments have performed, and annuity rates when you retire. The only pensions promise that is made to you is that the defined contribution will be put into your pensions pot. This contrasts with a defined benefit/salary-related scheme.

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