Also known as final, or average, salary schemes, these arrangements offer many employees of the state and some larger companies a pension based on their salary whilst in employment.

For example you might accrue one eightieth of your final salary for every year that you work up to a maximum of 40/80ths based on forty years at work with that employer. This takes away the pension risk from an employee – who knows exactly what they will be entitled to under this type of arrangement – and places it on an employer who must ensure the pension scheme is sufficiently well funded to meet its obligations.