Defined Contribution (DC) schemes have been around for a long time but, until relatively recently, these schemes have mainly been used by smaller employers. In recent years, larger employers have been turning to DC schemes as a way to control, or reduce, their pension costs.
In DC schemes, the trustees decide how much, or how little, investment choice to
offer the members. Members bear the investment risk, whereas the employer bears the risk in DB schemes.
The amount of pension a member receives on retirement depends on their age and sex, the value of their personal fund and the cost of buying a pension.
When they retire, members can tailor their benefits to suit their personal circumstances. For example, members can choose whether to take some of their fund as a lump sum, or convert all of it to an annual pension; they can choose whether or not to provide for a spouse or partner after they die; and they can choose whether or not to have annual pension increases after retirement.
In many DC schemes, the employer’s responsibility for the member stops when
they retire. Pensions are usually bought from an external provider so there is no payroll administration.
The Pensions Trust's Flexible Retirement Plan
The Pensions Trust’s Unitised Ethical Plan