What pension schemes are referred to as defined benefit?
Where the rules of a pension scheme specify the benefits to be paid at normal pension age (NPA), then this is known as a defined benefit scheme. Defined benefit schemes are offered only by employers as part of their occupational pension scheme, are commonly known as final salary pensions and are governed by the Occupational Pensions Regulatory Authority (OPRA). The benefits paid at retirement age are based on the number of years of service and the final salary of the scheme member. These schemes were started by most ‘blue chip’ companies to help retain the best employees as the benefits to the members from a final salary pension are much greater than from a private pension. However, due to the high cost of operating these schemes most employers are replacing them with occupational money purchase scheme, group personal pension (GPP) or group stakeholder pension. Through public service schemes the government provides a final salary pension to the civil service, NHS, teachers, fire, polic
