How final salary works
A final salary scheme is set up under a trust, so it's impossible for the funds to be used for any other purpose. Each scheme is different, with trust deeds and rules written specifically for the individual needs of the scheme and its members.
Rules
The rules can be complex, covering areas such as:
- the way benefits are calculated
- eligibility conditions
- contribution levels
- retirement ages
- death benefits
Contributions
The contribution rates are set at a level which should ensure there's enough money in the fund to pay all the benefits due. External factors such as salary rates, inflation and investment returns obviously affect this. Therefore, each scheme must be reviewed at least every three years to ensure it has adequate funds. If necessary, your contributions are adjusted to compensate for any predicted shortfall or surplus.
