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What does Defined Contribution mean?

Sometimes known as “Money Purchase”, the amount of contributions that will be made into the fund are known in advance. However, the amount of benefits that will be paid at retirement are not known in advance as they will be dependent upon the value of the investments at retirement and the cost of purchasing an annuity (i.e. a pension).

In a defined contribution scheme, all of the risks sit with the individual.

 

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