Pension guide
What is a defined contribution pension?
A defined contribution pension builds up a pot of money for retirement. The eventual value depends on what is paid in, how the investments perform, the charges paid and how and when benefits are taken.
The basics
You build a pension pot over time.
Defined contribution pensions are sometimes called money purchase pensions. Contributions are paid into the scheme and invested, with the intention of building a fund that can support you later in life.
They can be workplace pensions arranged by an employer or personal pensions that you arrange yourself.
Workplace pensions
Your employer may contribute alongside you.
In many workplace defined contribution schemes, contributions are deducted from salary and the employer also pays into the pension. The exact contribution basis depends on the scheme and employment arrangement.
If you are considering reducing contributions, leaving a workplace pension or transferring benefits elsewhere, first check whether employer contributions would be lost or affected.
Investment
The pension money is invested, so its value can change.
MoneyHelper explains that pension contributions are invested and can go up or down in value until benefits are taken. Many workplace pensions use a default investment fund unless you make your own investment choice.
Default fund
Designed for members who do not want to select investments themselves. The strategy may change as retirement approaches.
Self-selected funds
Some schemes let you choose from a range of investment funds, with different levels of risk and asset exposure.
The value of your pension can fall as well as rise. The amount eventually available depends partly on how the investments perform over time.
Using the pension later
Defined contribution pensions usually offer a range of retirement options.
Depending on the scheme, you may be able to leave the money invested, take tax-free cash, use flexi-access drawdown, buy an annuity, take lump sums or combine different approaches.
The normal minimum pension age is currently 55 for most people and is due to rise to 57 from 6 April 2028, subject to protected pension ages and limited exceptions.
What affects the eventual value?
Several moving parts determine what the pension can provide.
Contributions
How much you and any employer pay in over time.
Investment performance
How the underlying investments rise or fall.
Charges
Platform, fund, administration and advice charges where applicable.
Time
How long contributions remain invested before benefits are taken.
Withdrawal decisions
How much is taken, when it is taken and whether the remainder stays invested.
Inflation
The future purchasing power of the pension matters as much as the nominal balance.
A useful pension review
Do not look only at the current balance.
A defined contribution pension review should consider the contribution rate, employer contribution, charges, investment strategy, retirement options, guarantees or protected rights, and how the pension fits with other retirement income.
A defined contribution pension can include protected tax-free cash, guaranteed annuity rates or protected pension ages. Those features should be understood before transfer or consolidation.
Personal pension advice
Want to understand whether your pension is on track?
A personal review can bring together contributions, investments, charges, retirement options and the income you may need later.
Book a conversationThis guide is for general information only and is not personal financial, investment or tax advice. Pension and tax rules can change and investments can fall as well as rise. Content checked against current MoneyHelper and GOV.UK guidance on 15 September 2026.