What is a defined benefit pension?

What Is a Defined Benefit Pension?

A Defined Benefit (DB) pension, sometimes called a final salary or career average pension, is a workplace pension that guarantees a set income for life when you retire. The amount you receive depends on your salary and how long you’ve worked for your employer — not on investment performance.

💼 Guaranteed Income

You receive a secure income for life after retirement, based on your salary and years of service — not market conditions.

📈 Employer Funded

Your employer contributes to and manages the pension fund, taking responsibility for investment risk and performance.

🧮 Formula Based

The annual pension amount is calculated using an accrual rate (e.g. 1/60th) multiplied by your final or average salary and total years of service.

🛡️ Protected by PPF

The Pension Protection Fund safeguards members if an employer becomes insolvent, offering compensation for most of your entitlement.

Example Calculation

If your scheme offers 1/60th of your final salary for each year of service, and you worked for 30 years with a final salary of £42,000:

30 ÷ 60 × £42,000 = £21,000 per year guaranteed income for life.

Learn how this compares with other pension types in our guide: Types of Pensions Explained.

How is a defined benefit pension different from a defined contribution pension?

A defined benefit pension guarantees a fixed income for life, calculated from your salary and years of service. A defined contribution pension builds a pot of money from contributions and investment growth, so income depends on performance. Learn more in How Pension Contributions Work.

Are defined benefit pensions still available?

Most private sector DB schemes are now closed to new members, but many public sector employees still have access. Existing members continue to receive their promised benefits under the scheme rules.

What happens if my employer goes out of business?

If your employer becomes insolvent and the pension scheme can’t meet its obligations, the Pension Protection Fund (PPF) steps in to protect members, typically covering up to 90% of the expected benefits.

Can I transfer my defined benefit pension to another scheme?

It is possible to transfer a defined benefit pension to a defined contribution plan, but this decision is complex and carries risk. You must take independent financial advice if your DB pension value exceeds £30,000. See our Pension & Retirement Planning page for guidance.

Compare Your Pension Options

A defined benefit pension offers security, but it’s only one part of the bigger retirement picture. Explore how different pensions work together to build your future income.

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