A pension review can cover any of the pension types, such as defined contribution pensions (DC), defined benefit pensions (DB), personal or executive pensions, and others. Most frequently, the people seeking independent reviews are those in a DC or DB pension. This is because, by definition, a self-employed person who takes out a personal pension is usually actively involved in the pension type as they are sole traders or company owners.
Contributory pension holders don’t have to be as actively involved and so often lack key knowledge about their pension. However, for those making additional voluntary contributions into a personal retirement savings account (PRSA) as part of a contributory scheme, it’s very likely that they will need to be actively involved if they want the best outcome for their pension investments. A pension review will highlight whether the investments being made within such accounts are suitable to the individual’s current circumstances and future goals.
A Defined Contribution pension (DC) is one in which you share the payments with your employer. For example, you might pay 6% of your salary into your pension pot each month and your employer supplements this with an additional payment, usually of a higher percentage such as 14%. This is entirely dependent on the company you work for.
A Defined Benefit pension (DB) is one whereby you are given a set value that you will receive at pension age. This is usually based on years in service and salary level throughout your career.
People on a DC or DB pension scheme have had their fund managed by their employer and its scheme trustees and therefore they have been at a distance from the scheme management throughout their careers. As we move closer to retirement or early retirement it is advantageous for those on a DC or DB pension to take independent pension advice to make sure the pension type is still suitable for their personal circumstances.