Occupational Pensions Schemes and Benefits

The benefits provided by an occupational pension schemes may be calculated by reference to the amount of contributions paid by or on behalf of an employee. These are called defined contribution schemes. The benefits may be fixed by reference to an employee’s salary. These are called defined benefit schemes.

The principal benefit a member receives from an occupational pension scheme is a pension at normal pension date, usually 65 years.

A lump sum may be payable in addition to a pension, or alternatively there will be an option to commute part of the pension benefit to a lump sum.

A large number of schemes are integrated with the state retirement pension and benefits are reduced to take account of that.

There may also be provision for benefits to be paid on death in service, some schemes make provision for benefits on death in retirement. These benefits are payable to dependants, normally a spouse or children.

Some schemes make provision for indexation such that pensions will be increased in retirement to take account of inflation. A member of a scheme who leaves service may have his benefit preserved and be entitled to a deferred pension. A deferred pensioner may have the value of his deferred pension transferred into another pension scheme, this is called a transfer payment.