Brief Definition Of An Occupational Pension Scheme

A pension scheme generated by a company or organisation for the benefit of its employees. In 'contributory' schemes both the employer and employee contribute to a fund which grows free of tax during the savings period. In 'non-contributory' schemes, only the employer contributes. The amount paid out to the employee on retirement will depend on the type of scheme: * with a defined contribution plan, the amount paid is calculated by reference to the contributions put in * with a defined benefit plan, the amount paid depends on the number of years service and the final salary of the employee At retirement the employee draws a pension income which is subject to tax.