Your employer will contribute to the scheme. But you might also need to contribute – at least a minimum level.
If you decide to contribute more, your employer might decide to match your extra contributions.
Your employer decides the levels of contributions to the cash balance plan. Contributions are usually a percentage of your earnings.
The pension scheme’s rules will define what is meant by ‘earnings’. For example, some schemes don’t count extra earnings – for example, overtime, commission or bonuses.
The scheme might also only count a proportion of your weekly or monthly wage or salary. Your earnings that are used to calculate retirement benefits is often called ‘pensionable earnings’.
Your employer might be using the scheme to meet their automatic enrolment duties. If so, the law sets out what counts as pensionable earnings and the minimum contribution level that your employer must pay.
Contributions made to a cash balance scheme by you and/or your employer are invested in your individual ‘pot’. This is held in your name, in the same way as a defined contribution scheme.