This factsheet was last updated in March 2016.
What are workplace pensions?
Workplace pensions, also known as occupational pensions, are arranged by employers rather than by the state or an individual. The employer, and usually the employees, contribute to the fund.
The two main types of workplace pension are:
- Defined contribution (DC) schemes (also known as money purchase schemes) where the income on retirement depends on factors such as stock market performance, the amount of money contributed and related charges and fees.
- Defined benefit (DB) schemes (such as final salary schemes) where the income on retirement is effectively guaranteed by the employer. Many organisations with these schemes have been closing them in recent years.
There are also certain ‘hybrid’ arrangements, for example ‘cash balance’ schemes, where employers offer some limited guarantees over levels of eventual income. DC plans open to all employees are typically found in the private sector, while DB schemes are usually found in the public sector.
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