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Defined Contributions Scheme

The Defined Contributions Scheme (‘DCS’) is a money purchase arrangement that offers an interesting alternative to unit-linking. 

The DCS is a with-profit deferred annuity arrangement.  It enables organisations to provide pension and death benefits whilst enabling the employer to control costs.  At the same time, the scheme is relatively unusual in that it offers some guarantees with regard to the pension the members build up.

Contributions are paid by the employer (and the member if so agreed) and used to purchase a guaranteed amount of pension from the member’s normal date of retirement.  Contributions are based on an agreed percentage of the member’s pensionable salary.

Each year, the Board as trustee takes advice from the appointed actuary and considers the financial position of the DCS.  If there are sufficient resources, the Board will declare a bonus which is usually expressed as a percentage of the pension earned to the date of the review.  Once added, the bonus is guaranteed.

All members, deferred pensioners and pensioners are entitled to receive the bonus.  In the case of pensioners, the pension in payment is increased in line with greater of the statutory increase required or the amount of pension increase resulting from the bonus declaration.

For further details or information, please Contact the Pensions Department.