Defined Benefit Pension

Defined Benefit Pension (DB Pension), sometimes referred to as a Final Salary Pension is an occupational pension that offers clients with guaranteed and safeguarded benefits.

For example, a final salary pension may be “index-linked” which means that your benefits would be guaranteed to grow at the same rate as rising prices.

What is the difference between a DB and a DC (Defined Contribution) scheme?

Although they are the two most common types of employer-sponsored pension schemes in the UK, DB schemes offer guaranteed income to be paid out to the member for the rest of their life from their normal retirement age. 

DC Schemes

DC Schemes are pension schemes whereby you and your employer make regular contributions to save for your retirement over the course of your employment.

DB Schemes 

The key difference is that a DB Scheme is safeguarded and provides a guaranteed income for life regardless of how markets are performing. With a DC Scheme, your income in retirement will vary based on performance and growth, minus the charges.

Transferring to a DB Scheme

Advantages of transferring a DB Pension are that, due to many UK Final Salary pensions being in deficit to the tune of hundreds of billions, many members of these schemes are opting to transfer their DB pension by taking a Cash Equivalent Transfer Value (CETV) and move these funds into alternative pension arrangements (such as a SIPP). 

This allows clients to have more control and flexibility in ensuring their pension will grow and be accessible as and when they need it.