Pension Planning - Money Purchase Pensions

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Money Purchase Pensions

Money purchase schemes are a type of 'defined contribution' (DC) scheme. All defined contribution schemes provide you with your own saving pot, and the pension that you receive depends on the following four factors;

• The amount paid into the scheme
• How well the invested payments grow
• How much is deducted in charges
• The amount of pension you can buy with your fund when you reach retirement.

The contributions made by your employer and you are invested in the stock market.

Over the long term, shares and share based investments tend to produce good levels of growth, which compensate for inflation.

However, share prices can fall as well as rise. If the stock market declined in the months leading up to retirement, your pension pot may fall in value.

To protect against this, it is common to switch to less volatile investments, including gilts, other bonds and money market deposits, as retirement approaches.