Defined Benefit Pension Schemes

DEFINED BENEFIT SCHEMES are schemes where the pension benefits are accrued according to salary and length of service. They are most commonly found in the Public Sector and in some large companies. They are also known as Final Salary Pension Schemes.

Defined Benefit Schemes are becoming less common as many employer organisations – including Public Sector organisations – are finding them harder to finance in the long term. This type of scheme guarantees specific benefits on retirement, whatever market conditions prevail.

If you would like to find out more about the entitlements you have already accrued and how your future pension benefits are calculated, please contact us. We can explain the implications of leaving the organisation before completing the qualifying years of service, of moving jobs during your service and of taking early retirement.

You may be able to transfer your pension entitlements from your Defined Benefit scheme to a Defined Contribution (Personal Pension) scheme. If this is something you’d like to consider, it is imperative that you take advice before taking any decision. Many of these schemes have valuable benefits that cannot be replicated in a Personal Pension arrangement. Each transferable pension fund will have a transfer value which may sound substantial but in many cases the income you could generate from an annuity or flexible drawdown contract would not match the income being offered under the scheme pension.

We will explore the options you have available to you and make sure that you understand the implications of transferring your benefits, if you are looking to follow that route. In many cases, we may recommend that you stay put in your Defined Benefit Scheme but there are scenarios and pension funds where a transfer will be suitable.

Contact us if you would like to explore your options.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The tax treatment of investments depends on individual circumstances and is subject to change.

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