All you need to know about a Defined Benefit Pension.
A Defined Benefit Pension Scheme gives you a specified retirement pension, as well as a lump sum commutation, based on factors such as how long you have been with your company, your age at retirement and your earnings history. You might have a Defined Benefit Pension Scheme if you work for a large employer or are in the public sector.
The scheme pays out a secure income for life, which increases each year. Your employer contributes to the scheme and is responsible for ensuring there’s enough money at the time you retire to pay your pension income. It is sometimes called ‘final salary’ or ‘career average’ pension scheme.
Essentially, the difference between a Defined Benefit Pension and a ‘normal’ personal pension (often known as a Defined Contribution Pension) is that, with a Defined Benefit Pension Scheme, you will know the output in advance, while a personal pension pot is based on how much is paid in – meaning it’s up to you to make the decisions that determine the pot at the end.
Some people consider transferring their Defined Benefit Pension Scheme when they get to retirement. However, there are pros and cons to doing this, and this is where our advice can support you in deciding what to do next.
We will help you look at the factors you’d be giving up as a result of transferring out of your Defined Benefit Pension Scheme, and also consider whether or not you want to take on the risk of running your own pot of money, in order to make sure you have enough funds to support you throughout your later life.