Occupational pensions

Also known as a company pensions, occupational pensions are private pension schemes run by some employers for their employees.

There are various types of occupational pension and the ones offered will depend on your company. However, generally, they are likely to be one of two types – a salary related or money purchase scheme.

Salary related pension schemes are related to the amount you earn and the number of years you have been in the scheme – find out more in final salary schemes. These are a type of defined benefit arrangement.

In contrast, a money purchase scheme is a type of defined contribution arrangement. It is based on how much has been paid into the scheme and how well the money has been invested. Once you have retired, your fund is used to provide your pension, often through buying an annuity.

Occupational pensions are paid on top of any basic State Pension. These pension schemes work under a different set of rules to a personal pension.

Before you sign up to an occupational pension you will need to find out how much you need to contribute to it and whether your employer is also contributing.

Under new rules that will be phased in from 2012, all employers will have to offer and contribute to a pension scheme. All employees will automatically be enrolled in the scheme, unless they choose to opt out.

Find out more about auto-enrolment in our pension contributions section.