Pension contributions are payments made to a retirement savings plan, which helps individuals prepare financially for their retirement years. These contributions can come from employees, employers, or both, and are typically a percentage of an employee's salary. The funds accumulated in a pension plan are invested to grow over time, providing a source of income when the individual retires. There are different types of pension plans, such as defined benefit plans, which guarantee a specific payout at retirement, and defined contribution plans, where the payout depends on the contributions made and investment performance. Understanding pension contributions is essential for effective retirement planning.