Defined Contribution

Defined Contribution

A defined Contribution plan is defined in the sense that the contribution is defined, not the benefit. The benefit depends on the amount in the pension and the performance of the investments. There are a number of different types of DC schemes. Essentially a DC scheme exchanges a minimum time commitment for tax relief, requiring money to be held in the scheme until the member is 55.

Defined Contribution Schemes can be built up through your own contributions, those of your employer and tax relief from the government.
Defined contribution schemes give you an accumulated sum when you come to retire that you can then use to create a pension income. You can also take the lot as a lump sum but this could result in a significant tax bill.

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