In a defined contribution (DC) pension scheme, you build up pension savings that you use to provide an income when you retire. Your pension savings build up based on:
- contributions from you (and your employer if you’re in a workplace scheme), and
- returns on your investments.
The value of your pension savings in a DC scheme depends on things like:
- how much has been paid in
- how the money has been invested
- when you decide to take your pension savings.
DC pensions are sometimes known as money purchase pensions.
In a DC pension scheme, even if your employer pays contributions, the amount of money you have at retirement will depend on how much was paid in and how the investments have performed. The amount of pension you receive is not guaranteed, so it is up to you to make sure you’ve got enough money to give you the kind of retirement you want.