Types of occupational or workplace pensions -
These are pension schemes provided for you by your work and generally there are two types:
Defined Benefit scheme (also known as a "final salary" scheme)
A defined benefit pension pays you a retirement income based on your salary, how long you've worked for your employer and a calculation made under the rules of your pension scheme.
If you are a member of a Defined Benefit arrangement then the best way to learn how it works and what benefit you will receive in retirement is to study the scheme explanatory booklet or contact the administrators of the arrangement, who will be able to provide you with additional details.
Defined Contribution scheme (also known as a “money purchase" scheme)
Members of these schemes build up a pension fund through investment of personal and/or employer contributions during their period of membership.
These contributions build up over time, along with investment returns, to provide the member with a pot of money that they later use to generate a retirement income. It is essential that you consider all the ways you can convert your pension savings into an income and then shop around for the best deal before making your final decision.
You should check whether your pension has a guaranteed annuity rate or other form of guarantee, and if you’re in any doubt ask your pension provider(s). These guarantees will often provide you with an income for life much higher than you might normally get.