Providing an income in retirement

With a Defined Contribution (DC) pension, you build up a pot of money that you can then use to provide an income in retirement. Unlike Defined Benefit schemes, which promise a specific income, the income you might get from a DC scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.

What is a Defined Contribution pension?
DC pensions build up a pension pot using your contributions and your employer’s contributions (if applicable) plus investment returns and tax relief.

If you’re a member of the scheme through your workplace, then your employer usually deducts your contributions from your salary before it is taxed. If you’ve set the scheme up for yourself, you arrange the contributions yourself.

While you are working
The fund is usually invested in stocks and shares, along with other investments, with the aim of growing it over the years before you retire. You can usually choose from a range of funds to invest in. Remember though that the value of investments can go up or down.

When you retire
You can access and use your pension pot in any way you wish from age 55.

What you need to think about
If your work gives you access to a pension that your employer will pay into, staying out is like turning down the offer of a pay rise. The amount your employer puts in can depend on how much you’re willing to save, and may increase as you get older.