Defined benefit (pension)

A type of pension that gives you valuable guarantees: sometimes referred to as ‘safeguarded rights’. Defined benefit pensions include career average pensions, and the most well-known example, a final salary pension.

In a defined benefit pension, the amount you receive at retirement is usually based on two things: how long you were a member of the pension scheme, and your salary. This can be your salary at retirement, at the date you left the employer, or your average salary over your career.

The pension you get in retirement is guaranteed for life, and increases with inflation each year – although the scheme rules may place a cap on this. When you die, defined benefit pensions might continue to be paid to your dependants – such as your spouse or civil partner - albeit at a reduced rate and depending on the rules of the scheme.

See also: defined contribution (pension).