Defined Contribution (Money Purchase) Pension

This is a type of pension where the eventual benefits payable to the member are dependent upon the value of the fund that has been accumulated. The fund will usually be invested in accordance with the individual's attitude to risk, with the intention of growing the pension fund size as much as possible.


When it comes to drawing benefits, there is normally an entitlement to a Pension Commencement Lum Sum (tax free cash). The remainder of the fund is usually used to provide a taxable income, either by way of an Annuity, or through Drawdown.


Upon death of the member, the residual fund is usually paid to the member's nominated Beneficiary.


The main alternative to a Defined Contribution (DC) pension is a Defined Benefit (DB) pension.

Last updated:

2 November 2022, 18:32:45

Disclaimer

This glossary definition has been deliberately kept as simple as possible to give a brief outline of the term to assist with general financial knowledge. It is not intended to give a detailed explanation. Please refer to our Legal Declarations.