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Pensions glossary

Final Salary Pension (defined benefit)

A final salary pension, also known as defined benefit pension, is a retirement plan designed to provide an employee with a set income for life.

With a final salary pension the amount of money a person receives is based on the amount of money they are earning when they retire - typically someone on a final salary pension scheme will receive two-thirds of their final salary for the rest of their life.

The percentage of an employee's final salary that is paid by a final salary pension normally depends on the amount of time they have worked at a company. Final salary schemes are becoming increasingly rare, as companies struggle to fund their retired workers and people live longer.


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