what is an occupational pension

An occupational pension is a type of pension provided by an employer to their employees. These pensions are also known as company or employers pension plans. Occupational pension schemes provide a regular income after retirement and some also give a lump sum payment when you retire. There are two types of occupational pensions: defined benefit schemes and defined contribution schemes. In a defined benefit scheme, the amount of pension you receive is based on your salary and the number of years you have worked for the employer. In a defined contribution scheme, the amount of pension you receive depends on how much money has been paid into the scheme and how well the investments have performed. Occupational pension schemes may be contributory or non-contributory, funded or unfunded, and a hybrid of both. Members of schemes have certain rights, for example, to information about their pension. You can get tax relief on contributions to pension schemes. Occupational pension schemes often offer other benefits such as life insurance which pays a lump sum or pension to your dependants if you die while still employed, and a pension if you have to retire early because of ill health.