Benefit calculation rules

Defined-benefit (DB) schemes: the amount of pension payable is guaranteed based on the years of employment and earnings over a given period.

Defined-contribution (DC) schemes: the amount of pension benefits payable depends on the amount of contributions and the performance of the fund into which they are paid.

Hybrid schemes: both defined-benefit and defined-contribution elements are present, implying that the risk is shared between the scheme’s operator and the beneficiaries.

Schemes in transition: different provisions co-exist during a transitionary period to a new scheme.

Notionally defined-contribution (NDC) schemes: contributions (from both employee and employer) are used to finance current pensions but they are also credited to notional accounts which build up over time to finance the future pensions of current workers.

Points schemes: workers earn pension points based on their earnings and years of contributions. At retirement, the sum of pension points is multiplied by the value of a pension-point to determine the amount payable.