What are the different types of pension scheme?

In the UK, excluding the State Pension from the government, there are two main types of pension schemes or plans:

  • Defined contribution / money purchase / personal pensions:
    These pensions can be workplace pensions or private pensions set-up by you. The value of the pension at retirement will depend upon how much money has been paid into the pension and investment performance. Investment risk is borne by you
  • Defined benefit/final salary pensions:
    These pensions are usually workplace pensions set-up by an employer and the value of the pension will usually depend upon the number of years worked for the employer and your salary. At retirement you will receive a regular income (usually inflation linked) from the pension scheme for your life. Investment risk is borne by the employer.