Also known as a defined contribution scheme, but what is it?
A defined contribution pension is based on your own contributions, those of your employer and tax relief from the government, which are then invested and allowed to grow tax free. The resultant fund is yours and when you reach retirement, the money that has built up in the pension is used to purchase a pension income.
There are two main types of defined contribution pension scheme. One is a trust-based scheme, whereby a board of trustees oversee the management and investments in your pension; the second is contracted-based scheme, which means your employer has appointed a pension provider, such as an insurance company, to run your pension scheme.
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