Final salary pension schemes (also known as defined benefit schemes) can be a good pension choice if you’re lucky enough to work for a company that offers one.  The final size of your pension is linked to the number of years you have worked for the company and your salary.

These schemes are increasingly rare because they are quite expensive for employers to provide, but if you work for the same company for a number of years, they can give you a good pension.

Pros

• The scheme is set up by your employer.
• The administration and maintenance of the scheme is performed by the trustees, all you need to do is complete a simple form and they will do the rest.
• Members of final salary pension schemes will normally receive a better pension than any other pension arrangement.
• You don’t have to make any investment decisions – the trustees do it all for you.
• Because you’re entitled to an agreed level of pension, you don’t have to worry about the risks of investing your money – it’s your employer who will have to make up any shortfall if the funds they invest in perform badly.
• You can take a lump sum at retirement as well as an income.

Cons

• You have no control over how your money is invested, the trustees make all these decisions so your money may not be going into ethical or environmentally friendly funds.
• You may not be able to pay more into your pension fund - you may need to take out an AVC, individual personal pension or stakeholder pension if you want to top up your pension provision.
• Your employer might not be able to meet their commitments under the scheme, for example if they go out of business.  Although there is some statutory protection, you may not receive your full pension entitlement if this happens.
• If you leave your employer you will need to make new arrangements for your pension, as you will not be allowed to carry on paying into the employer's scheme.

Final salary schemes are often a very good deal for long-standing employees, but they have become expensive for employers to run. For this reason, final salary schemes are now rarely offered to new employees, so if you are not already in one, it is unlikely that you will be able to join now. However, if your employer does make a final salary scheme available to you, you should seriously consider joining, as it may be a good pension, particularly if you intend to be with the company for a number of years.

If your employer offers a final salary scheme, speak to your HR representative or line manager for more information on how to apply.

Buy extra years - if you haven’t worked for long enough at a company to qualify for a decent retirement income, you may be able to pay a lump sum to ‘buy’ extra years of service to be added on to your pension. This can be expensive, but is certainly something to consider if you are in this position.

Consider an additional pension - if you would like to make the most of pension tax breaks with extra cash you’ve got, consider setting up an Additional Voluntary Contribution (AVC) pension, individual personal pension or stakeholder pension to build up an additional fund on top of your final salary scheme.

Get advice - If you are unsure about any aspects of pensions or what type may be suitable for you, it is best that you speak to a financial adviser, who will be able to assess your needs and recommend the most suitable products.

Act sooner rather than later – Many final salary schemes are closed to new entrants. If you are lucky enough to have an employer who still offers one and you want to join, you will need to consider doing so as soon as possible.