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Types of pensions

There are three main types of non-State pension. They are:

  • occupational salary-related schemes - offered by some employers;
  • occupational defined contribution schemes (also called money purchase pensions) - offered by some employers; and
  • stakeholder pensions and personal pensions - offered by some employers, or you can start one yourself. You may also be offered a group personal pension at work. These are also money purchase pensions.

Pensions at work

If you work for a business with fewer than five employees, your employer does not have to offer you access to a pension scheme. You should still check what’s available, as some small employers may offer a scheme anyway.

The government is planning changes that will mean all employers will have to offer and contribute to a pension in future. Employers who haven't offered an occupational pension in the past may set up their own scheme, or may pay pensions into a new central scheme that is being set up. The Pensions Advisory Service website has more information – see Related links.

What are the benefits?

Although you don’t have to join any pension scheme offered through your job, it’s usually a good idea to join an occupational pension scheme if it’s available because:

  • your employer normally contributes; and
  • often you also get other benefits, such as:
    • life insurance which pays a lump sum and/or pension to your dependants if you die while still in service;
    • a pension if you have to retire early because of ill-health; and
    • pensions for your spouse and other dependants when you die.

Not all pensions offered by employers are occupational pensions. Your employer may offer a stakeholder pension or a personal pension through a group personal pension arrangement. These pensions are not called occupational pensions even though the employer may contribute.

Top tips

  1. Find out whether your employer offers a pension scheme, what type it is and when you can join it.
  2. Don't delay starting or joining a pension scheme - you could end up with a much smaller pension.