Final Salary Scheme

Final Salary Schemes Explained

What Is A Final Salary Scheme?

A Final Salary Scheme is a type of Defined Benefit Scheme in which members are paid a proportion of their salary on their retirement. The Final Salary Scheme pension you receive will be a set percentage of your final salary depending on the length of your service within the company. The amount is often calculated as a sixtieth of the salary multiplied by the years of service. The risk of the final salary pension scheme will lie with the employer in their commitment to deliver you with a pension at retirement, regardless on their return on their investment.

What's The Difference Between A Final Salary Scheme And A Money Purchase Pension?

With a Money Purchase Pension Scheme the money paid out will be determined by the level of contribution made and the performance of the investment. Unlike the Final Salary Scheme the risk will lie with the employee.

Are There Any Reliable Final Salary Scheme Tips?

If you have a Final Salary Scheme and are wondering what the future of it is then it would be advisable that you keep an eye on how the scheme is doing. You will need to regularly obtain the following information from your employer and your pension provider:

• The Funds Solvency - There is a yearly report which is produced by the pension scheme's trustees which will analyse the financial risk involved.
• The Final Salary Schemes Worth - The amount that you receive at the end will be dependant on the amount you have paid in. You can request an 'annual benefits statement' which will indicate how much benefit you are entitled to.

Are Final Salary Schemes Losing Their Popularity?

Unfortunately the trend towards the looming Pensions Crisis seems to be that the financial future of the nation is now left upto the individual. That is to say that as regards the average life expectancy increases, your future pension is left upto you to sort out. Companies are to be seen more and more taking the attitude that the risk of poor investment performance should rest on the employees' shoulders rather than their own. If you are interested in learning more about Final Salary Schemes then it is always best to visit a financial adviser.