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Defined benefit or defined contribution: which have you got?

Look at your annual statement. A figure in pounds per year means one thing, a fund value that moves means another, and nearly every later decision follows from which.

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The short answer

A defined benefit pension promises an income for life based on salary and service, and the employer carries the risk. A defined contribution pension builds a pot you invest and later turn into income, and you carry the risk. Statements make it clear: pounds per year means defined benefit, a fund value means defined contribution.

Two typesEvery workplace pension is one or the other
£30,000Transfer value above which advice is required by law
For lifeWhat defined benefit promises
Your riskWho carries it under defined contribution
What is on this page
  1. There are only two kinds of pension
  2. What defined benefit really gives you
  3. What defined contribution gives you
  4. Why transferring out of defined benefit is so heavily regulated
  5. Most people have both
  6. How to work out what you have
  7. The expensive misunderstandings

There are only two kinds of pension

Every workplace pension is one of two types. Knowing which you have changes almost every decision that follows.

Defined benefit

Final salary or career average

The scheme promises you an income for life, worked out from your salary and years of service. The employer carries the investment risk.

Defined contribution

A pot of money

You and your employer pay in, the money is invested, and you end up with a pot. You carry the investment risk and decide what to do at the end.

If your annual statement shows a pension in pounds per year at a retirement age, it is defined benefit. If it shows a fund value that moves, it is defined contribution.

What defined benefit really gives you

A defined benefit pension pays a set income from your scheme's normal retirement age until you die. It usually rises each year, and it usually pays a reduced amount to a spouse afterwards.

  • Income for life, whatever markets do
  • Increases most years, often linked to inflation
  • A survivor's pension, commonly half the member's amount
  • No investment decisions for you to make
  • Protection from the Pension Protection Fund if the employer fails

That package is worth far more than most members think. Replacing it privately would cost a very large sum, which is exactly why transfer values look big.

What defined contribution gives you

A defined contribution pension gives you money and choice. What it does not give you is certainty.

Defined benefit Defined contribution
What you are promised An income for life A pot of money
Who carries the investment risk The employer You
What the statement shows Pounds per year A fund value that moves
Can it run out? No Yes, if you draw too hard
Can it pass on? Usually a reduced survivor's pension Usually the whole remaining pot
Do you make decisions? Almost none Every year

If you have both, the defined benefit scheme is the floor and the pots are the flexible layer on top.

You can see the potA number on a screen feels real in a way a promised income does not. That is psychologically powerful and sometimes misleading.
You choose the endingDrawdown, annuity, lump sums or a mix. Nobody forces a single route on you.
It can pass onWhat is left when you die can usually go to whoever you nominate. Most unused pension funds will be brought into the scope of Inheritance Tax from 6 April 2027.
It can run outThe pot has no promise attached. Poor returns, high withdrawals or a long life can empty it.

Why transferring out of defined benefit is so heavily regulated

Giving up a defined benefit pension means giving up a guaranteed income for life. The regulator's starting position is that this is usually a bad idea.

If the transfer value is over £30,000 you must take advice from a firm holding a specific pension transfer permission. That is the law, not a preference.

We do not advise on pension transfers. If that is what you need, we introduce you to a separately authorised firm and tell you who they are first.

A transfer value of £480,000 looks life changing next to a promised £16,000 a year. Draw that income for 30 years with increases and the promise is usually worth more. The number is not the value.
A retired woman gardening

Not sure what is on your statement?

Send us the top line and we will tell you which type it is and what that means. No charge, and no pressure.

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This goes to a separately authorised firm we have vetted. The introduction costs you nothing. If you go ahead, we may be paid a fee by that firm.

Most people have both

A typical working life now leaves someone with one older defined benefit scheme and several small defined contribution pots. That mix is normal and it is not a problem to solve.

The defined benefit scheme becomes the floor. The pots become the flexible layer on top. That is a good structure, not an accident to be tidied away.

Combining the small pots can still make sense for cost and admin. Never fold a defined benefit scheme into that exercise. Our pensions page covers what we can help with.

How to work out what you have

1

Find every statement

Old employers, old addresses, old paperwork. All of it.

2

Read the top line

A figure in pounds per year means defined benefit. A fund value means defined contribution.

3

Note the normal retirement age

Defined benefit schemes usually have a fixed age. Taking it earlier reduces it, sometimes sharply.

4

Check for guarantees on the pots

Older personal pensions occasionally carry guaranteed annuity rates. These are valuable.

5

Write it down in one place

Scheme, type, value or promised income, and the age it starts. One page is enough.

The expensive misunderstandings

  • Treating a transfer value as if it were savings in a bank account
  • Assuming a defined benefit pension dies with you, when most pay a survivor's pension
  • Taking a defined benefit pension early without checking the reduction
  • Combining everything into one pot for tidiness and losing a guarantee
  • Ignoring a small deferred scheme because the annual figure looks trivial
  • Believing an unsolicited caller who says your scheme is at risk
Older friends out walking their dogs

Who this suits, and who it does not

This page is for you if
  • You have paperwork from more than one employer
  • Someone has offered to review a final salary pension
  • You are weighing up whether to combine pots
  • You want to know what your partner would receive
You need a specialist if
  • You are actively considering transferring out of a defined benefit scheme
  • Your transfer value is over £30,000
  • You have been contacted out of the blue about your pension
  • You are in a public sector scheme with an unusual option

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Questions people actually ask

How do I know which type of pension I have?
Look at the statement. A defined benefit scheme quotes an income in pounds per year at a set retirement age. A defined contribution scheme quotes a fund value that changes with markets.
Is a final salary pension the same as defined benefit?
Final salary is one kind of defined benefit. Career average is the other common kind. Both promise an income rather than a pot.
Can I transfer a defined benefit pension?
Sometimes, but not from most unfunded public sector schemes. Where a transfer is possible and the value is over £30,000, you must take advice from a firm with the specific pension transfer permission.
Why does the transfer value look so large?
Because replacing a guaranteed, inflation-linked income for life is expensive. The size of the number reflects the value of what you would give up, not a windfall.
Should I combine all my pensions?
Combining several small defined contribution pots often cuts cost and admin. A defined benefit scheme should almost never be folded in. Check for guarantees on older personal pensions first.
What happens if my old employer goes bust?
Defined benefit schemes are backed by the Pension Protection Fund, which pays compensation subject to limits. Defined contribution money is held separately from the employer, so it does not disappear with them.
Can I take a defined benefit pension early?
Usually yes, from the scheme's earliest allowed age, but the income is reduced for every year you take it before normal retirement age. The reduction is permanent.
Do I still get the State Pension as well?
Yes. Workplace pensions sit on top of the State Pension. If you were contracted out before 2016 your State Pension may be lower, so check a forecast.
How do I check broadband speed at a property?
Use Ofcom's free broadband and mobile checker at checker.ofcom.org.uk. Enter the property's postcode and choose the address to see which broadband speeds and mobile coverage are available before you make an offer.

Where to go next

State Pension explainedWhat the government part pays and when.Pension drawdown explainedWhat you can do with a defined contribution pot.Annuities explainedBuying a promise with a pot of money.Find a lost pensionThe free government tracing service.What happens when you die?How each type passes on, and the tax.Combining old pensionsWhat we can help with, and what we cannot.
Where these figures come from

Figures checked on 1 September 2026 and correct for the 2026/27 tax year. Rates change, so check the source before you act on a number.

Pension advice goes to a separately authorised firm we have vetted. The introduction costs you nothing. If you go ahead, we may be paid a fee by that firm.

Last reviewed September 2026.

Find out what you actually have

Knowing the type is the first step. We will point you at the right kind of firm for whatever comes next.

Start a conversation

Prefer WhatsApp? Message us there. We are open Monday to Saturday, 9am to 8pm.

This goes to a separately authorised firm we have vetted. The introduction costs you nothing. If you go ahead, we may be paid a fee by that firm.