RPSM09202010 - Member pages: Member benefits: Pension benefits from a defined contribution or cash balance arrangement: Overview

Defined Contribution and Cash Balance Overview

If you are a member of either of these types of arrangements, commonly referred to as money purchase arrangements, your benefits will be calculated by reference to the fund of money which has been made available on your behalf. This is sometimes known as the ‘members pot’. In a defined contribution arrangement the fund available will depend upon the level of contributions paid and the investment income achieved by the investment of those contributions. In a cash balance arrangement the size of the fund available is promised or guaranteed by the scheme employer You may be able to use this fund in a variety of ways so as to tailor the amounts of pension you, or should you die your dependants, may receive.

You should note that whilst the benefits which have been built up on your behalf may have been based on factors such as, your earnings, service with your employer and the scheme accrual rate the benefits you receive may not, or indeed need not, bear any relation to these factors. In these circumstances it is difficult to talk about specific calculations and how your personal employment history dictates what level of benefits you should receive. However the following pages give a brief breakdown on how your pension payments may look.

Finally no account of the possible lump sums you may be entitled to are taken into account in these pages.