Defined Contribution Pensions

What is a defined contribution pension?

Other terms used to describe this type of pension scheme are money purchase pension, stakeholder pension or simply a personal pension. Nowadays, a defined contribution pension is one of the most popular type of pension that can be arranged by yourself, your employer, or by the two parties together. The value of the defined contribution pension is determined by the amount of money put into it, as well as how your investments perform over time.

Different types of defined contribution pensions

Adding money to your defined contribution pension

Most people believe that a defined contribution pension is not that different from a savings account with some great tax benefits.

From the moment you or your employer start adding money into your pension fund, your pension provider will start claiming tax relief in your name and add it to your pension pot. The pension provider also determines where your money will be invested. The final amount that will be accumulated into your pension fund depends on the following factors:

Paid Contributions

Investment Performance

Selection of Money Withdrawal
(i.e. regular payments, a lump sum or smaller sums)

Pension Savings Calculator

You can also use our pension savings calculator to figure out your projected retirement income, based on how much money is in your pension pot and how much you’re contributing.

Withdrawing money from your defined contribution pension plan

Once you reach 55, you have several options in terms of what you can do with your defined contribution pension. One of them is to withdraw no more than 25% of your pot and pay zero taxes on that. The remaining money can stay invested, or you can use them to purchase an annuity which means a guaranteed income for the rest of your life or a specific period.

Need help with your defined contribution pension?

Pension Questions

Do you have any questions regarding your defined contribution pension?

UK Pension Help can connect you to a qualified, regulated financial adviser who can answer any questions you might have around your defined contribution pension.

Book your free, no obligation consultation today so they can further assist you.