Also known as a money purchase scheme, with a defined contribution scheme the member (and employer if appropriate) makes contributions to a pension fund. This fund should grow through the contributions and investment returns on the fund. When the scheme member retires, he or she uses their accumulated pension fund to buy an annuity. The amount of pension received in retirement depends on the level of contributions, the investment return of the pension fund and the annuity rate used to convert the pension fund into an annuity.

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