When you hear defined benefit plan, a retirement plan where your employer promises a specific monthly payment when you retire, usually based on salary and years worked. Also known as a pension plan, it’s one of the few retirement systems that actually guarantees income for life. Unlike a 401(k) or ISA, where you save and invest your own money, a defined benefit plan shifts the risk and responsibility to your employer. You don’t pick investments. You don’t worry about market crashes. You just get paid — every month, for as long as you live.
This type of plan used to be common in the UK and US, especially in government jobs, teaching, and big manufacturing companies. But over the last 30 years, most employers have switched to defined contribution plans, retirement accounts where you and/or your employer put in money, but the final payout depends on how those investments perform. Why? Because defined benefit plans are expensive and unpredictable for companies. If people live longer than expected, or if the stock market tanks, the employer has to cover the gap. That’s why today, you’ll mostly find them in public sector roles — like teachers, police officers, or NHS staff — or in older workers who’ve been with the same company for decades.
What does this mean for you? If you’re lucky enough to have one, it’s a huge advantage. You get stable income, no investment stress, and often inflation protection. But if you’re in a private job, chances are you’re on a workplace pension, a defined contribution scheme where your employer matches your contributions up to a certain percentage, and you’re responsible for making sure it lasts. That’s why understanding the difference matters — one gives you certainty, the other gives you control, but with risk.
The posts below dig into real-world retirement planning — from how much you can expect from a UK pension, to what happens when companies close old pension schemes, to how to make the most of your savings if you don’t have a defined benefit plan. You’ll find clear breakdowns of what these systems actually pay out, how they affect your taxes, and what steps you can take now to protect your future income — whether you’re close to retirement or just starting out.
The average pension payout in the U.S. is around $3,500 a month when combining Social Security and other retirement income - but most people need more to live comfortably. Here's what you really need to know.
