Occupational pension plans: the main points

In the private sector, occupational pension schemes are normally funded. Contributions are paid into a trust so that funds are held separately from company assets. In the public service, arrangements are often unfunded and employers pay pensions as they fall due rather than establishing a fund in advance. There is no concern that the employer - the State - would be unable to meet its commitments.

Occupational schemes generally fall into two categories - defined benefit or defined contribution - although some schemes may combine features of both.

Such schemes are regulated by the 1990 Pensions Act and monitored by the Pensions Board. The schemes must be set up under trust and trustees must be appointed.

Trustees must:

register the scheme with the Pensions Board;

ensure that contributions are paid;

invest the funds appropriately;

ensure that benefits are paid;

provide information to members;

treat men and women equally; and

ensure that the assets are dealt with correctly if the scheme is wound up.

Defined These schemes set out exactly how your benefits will be calculated, when they will be paid and what contributions, if any, you will be required to make. The pension payable on retirement is usually calculated according to a formula, e.g. the pension might be determined according to length of service and level of pay before retirement.

These schemes often provide pensions and/or lump sums to your dependants in the event of your death. Defined The majority of occupational schemes established in the past few years have been defined contribution schemes. The level of employer and employee contributions to these schemes is fixed in advance.

Each member has his or her own account in the scheme into which contributions are paid. Benefits at retirement depend on the amount of contributions paid into the scheme and on investment returns earned on these contributions.

These schemes also often provide pensions and/or lump sums to dependants in the event of your death.