Defined Contribution Pension Schemes
These are best considered as savings plans but with the tax advantages of a pension contract. Contributions are built up with investment returns to provide a “pot” of money at retirement or on earlier death, which can then be used to purchase pension benefits including a tax-free cash lump sum at retirement.
The amount that a member receives at retirement depends on a number of factors: –
- The amount of contributions paid
- Investment performance over the period from the payment being made to retirement
- The market cost of buying a pension at retirement – this can vary considerably depending on economic factors and life expectancy
- Administration and other expenses.