These are employer sponsored schemes with trustees who are responsible for the schemes being run properly, legally and fairly. If your employer has a scheme it is generally in your interest to join because of the employer contribution which is, in effect, a tax-efficient benefit.

Company pensions are set up by employers for their staff. They can be final salary also known as defined benefit schemes. Either the employer or the employee or both contribute to the scheme on a monthly basis. When the employee retires, he or she receives a pension based on earnings and length of pensionable employment.

Alternatively an employer may set up a “defined contribution” or “money purchase” scheme. In this case the monthly contributions are put into a fund earmarked for that particular employee who, when he or she retires, is able to use the fund to provide income – although there is also the valuable option of taking part of the fund as a tax-free lump sum. One common option would then be to purchase an “annuity” with the balance.