Pension Basics

What are ‘defined benefit’ and ‘defined contribution’ pensions?

Most pensions available today are defined contribution pensions. In this type of pension, the amount contributed is known (so ‘defined contribution’) but the outcome is not – the pension you get at retirement depends on how much has been paid in, the performance of the investments over time and the charges you pay.

You may have a defined benefit pension if you work in the public sector or for a large company.

The benefit you get at retirement is defined by how long you’ve been part of the scheme and how much you earn (so ‘defined benefit’) and it is the employer that’s responsible for making sure there is enough money in the pension to pay each member the amount promised.

It’s worth noting we can only transfer any pensions from the first category, as we’re unfortunately unable to process any defined benefit pension transfers.

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It's important you know

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest.

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