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Information on Final Salary Pensions

A final salary pension scheme is an occupational pension providing an income upon retirement that is based on your final salary with that employer. The value of the pension is also often based on how long you have worked for the company, as well as other factors included in the scheme rules.


As the risk of the scheme is on the employer and not the employee, final salary pensions provide a valuable benefit. However, this investment risk has seen many employer schemes experience financial difficulties and has led to many final salary pensions schemes closing to new entrants, and being replaced by personal and stakeholder pensions.

Final salary pensions are also known as defined benefit pensions. Defined benefit schemes also include schemes based on average career earnings.

Other types of pension include those known as defined contribution schemes, where the pension value is dependent on the amount of contributions and performance of the pension investment. These include stakeholder and personal pensions, and Self Invested Personal Pensions (SIPP).