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Defined Contribution Pensions

What is a defined contribution pension?


Defined Contribution (DC) or ‘Money Purchase’ pensions are the most common type of pension fund. They usually come in the form of a private pension or stakeholder pension that are either arranged by you directly or through your employer within your workplace pension.


Defined Contribution Pensions - Couple out shopping in retirement

Defined Contribution Pensions

Types of defined
contribution pensions:

How do defined contribution pensions grow?

A Defined Contribution pension simply put, is a long-term savings account and its growth is directly linked to the amount of funds (contributions) saved, the investment performance of the fund, minus the fees taken by the pension provider. The value of your pension pot can go up and down depending on these investments and fees taken, so it is worth keeping a close eye on how your DC pension fund is performing.


Losing track of your Defined Contribution Pensions?

Can you only have one pension?

There is no limit to the number of pensions a person can hold, and many people have multiple defined contribution pensions that they have either started directly or through old workplace schemes. When you come to retire, the size of your pension fund and retirement income you could receive will depend on many factors including:

  • How long have you saved into your pensions
  • How much you and your employer have paid (if a workplace pension)
  • How much money you may have taken out previously in a lump sum
  • How well your pension investments have performed
  • What charges have been taken out by your pension provider


Peace of mind

We work with all major UK pension providers allowing us to find the pension that helps you meet your retirement goals, and ensures your retirement is in experienced hands.

How can you access your defined contribution pensions?

There are numerous ways in which you can use your private pension savings, but not all pensions offer the same access:

  • Purchase an annuity insurance policy (taxable retirement income) that will deliver a set amount of funds regularly
  • Take 25% Tax-Free Lump Sum and leave the rest invested until required
  • Take 25% Tax-Free Lump Sum and purchase an annuity insurance policy with the rest of the funds
  • Take all of your funds in one go, although you may be penalised with higher taxes within that financial year
  • Take lump sums as, and when you need them, the first 25% of your withdrawals will be tax-free

What’s best for you
and your pension?

It is always advisable to get professional financial help when investing for your future and understanding what the best option for you is when you retire.

At Pension Works, we offer a full, independent retirement planning service, to help you get the most from your pension savings. We will assess your current defined contribution pensions for free and provide any recommendations we can to help you reach your retirement goals.

To start your free defined contribution pension assessment, please call 0808 164 2664, or start online.