Defined Benefit Scheme
A pension scheme, usually arranged by an employer, where the benefits payable are calculated by reference to the scheme's rules rather than the value of contributions and investment returns — often based on salary and length of service. The employer, rather than the member, bears the investment risk.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
GOV.UK's guidance on private pension types identifies two main categories, describing 'defined benefit' as 'usually a workplace pension based on your salary and how long you've worked for your employer', in contrast to a defined contribution pension pot 'based on how much is paid in'. It explains that defined benefit pension schemes 'are usually workplace pensions arranged by your employer' and are 'sometimes called "final salary" or "career average" pension schemes.'
The defining feature is that what a member receives does not depend on investment performance. GOV.UK states that 'How much you get depends on your pension scheme's rules, not on investments or how much you've paid in,' with workplace schemes 'usually based on a number of things, for example your salary and how long you've worked for your employer,' and that 'The pension provider will promise to give you a certain amount each year when you retire.' As with other pension types, a member can usually take up to 25% of the built-up amount as a tax-free lump sum, and when the pension can be taken depends on the scheme's rules, 'usually 55 at the earliest.'
Related terms
Official sources
This explanation is drawn from the official sources below; every substantive statement is verified against them. For advice on a specific matter, see our find help page.