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What scheme type do you have?

What does it all mean?

Defined Benefit (DB)

This is a type of pension scheme and examples include 'final salary' or 'career average related earnings'. The amount you get at retirement is based on a formula which takes into account a number of things, including your earnings and how long you have been a member of the pension scheme. In most schemes, when you retire you can take some of your pension as a tax-free cash lump sum. The rest you get as a regular income, on which you might pay tax.

Defined Contribution (DC)

These are also known as 'money purchase' schemes. This is a scheme where your contributions (and those your employer makes for you) are invested. The amount available to provide benefits at retirement is based on how much has been paid in and how well the investments have performed.