PENSIONS

Occupational schemes

Company pensions are set up by employers for their staff. They can be "final salary" or "defined benefit" schemes. Either the employer or the employee or both contribute to the scheme on a monthly basis. When the employee retires he or she receives a pension based upon the number of years over which his or her contributions have been made.

Alternatively an employer may set up a "defined contribution" or "money purchase" scheme. In this case the monthly contributions are put into a fund earmarked for that particular employee who, when he or she retires, is able to take a tax free lump sum and, with the balance, buy an "annuity."

Annuities are sold by pensions providers and insurance companies and guarantee the policyholder an income throughout his or her retirement.