Also known as a ‘final salary’ pension or a type of workplace pension, a defined benefit pension is provided by your employer and pays you retirement income based on your salary and the number of years you worked for your employer. Although you can also contribute to the pension scheme, Its value is not based on the amount of money you contributed, instead, your employer is the one who contributes to the scheme and is responsible for making sure there’s enough money at the time you retire to pay your pension income. This type of pension pays out a secure income for life which increases each year and usually continues to pay a pension to your spouse, civil partner or dependants even in the case of death.

Although defined benefits pensions are becoming less common, if you’ve worked for a large employer or a public sector company, you might have one.

Factors that determine your defined benefit pension value