Defined benefit, or final salary pensions: These schemes provide a guaranteed income for life at retirement, using a special formula to calculate your retirement income, which is based on a proportion of your final year’s pay, multiplied by the number of years you’ve belonged to the scheme.
It’s usually wise to leave a final salary pension where it is rather than transfer it to another pension scheme, as you may risk losing valuable benefits by doing so (see more below). Read more about how defined benefit pensions work in our article What is a defined benefit pension?
Defined contribution, or money purchase pensions: With a defined contribution pension, your benefits at retirement depend on how much you (and your employer if it’s a company scheme) have paid into the pension by yourself and your employer, alongside investment growth. These types of pensions may be moved to another scheme if you wish, depending on the charges you are paying and investment options, and whether you are happy with these alongside performance (see more below). Read more in our article What is a defined contribution pension?
If you’re unsure what type of pension you have, ask your employer/previous employers before checking your options. They should be able to clarify the details, alongside useful information such as current values, charges, underlying investments and projected retirement income.
In addition to your workplace pension, you may also have savings in private, or personal pensions, such as a self-invested personal pension (SIPP), and/or other savings such as individual savings accounts (ISAs). Being made redundant will not have any impact on your private pensions and savings, although you may not have enough spare money to pay into these for a period of time, until you find other work.