Do Final Salary Pensions Still Exist?

Final salary pensions still exist but are rare. Learn what happened to them, who still has one and whether they are making a comeback.

Final salary pensions, also known as defined benefit (DB) schemes, were once the gold standard of retirement planning. They promised employees a guaranteed income for life based on their salary and years of service. A dream, right? Well, like all good things, free school milk, Woolworths pick 'n' mix and affordable house prices—they are disappearing fast.

While some lucky individuals are still clinging onto these generous pension schemes, for most people, final salary pensions are as extinct as a fax machine in 2024. But do they still exist? Can you still get one? And what happened to them? Let’s dive in.

Back in the golden age of employment, companies used final salary pensions as a way to reward employee loyalty. If you stayed with the same company for decades, you could retire with a predictable, guaranteed pension based on your final salary.

It was a fantastic deal for employees but an absolute financial nightmare for employers. Companies had to guarantee payments for potentially decades after an employee retired, regardless of how the stock market performed. As life expectancy increased and pension funds struggled to keep up, many businesses closed their schemes to new members or phased them out entirely.

Today, most private sector companies have ditched final salary pensions in favour of defined contribution (DC) schemes, where you pay into a pot, and whatever it grows into is what you get. No guarantees. No promises. Just a polite "good luck" from your employer.

Do Any Final Salary Pensions Still Exist?

Yes, but they are rare and exclusive, like finding a mint-condition Game Boy or a working DVD rental shop.

1. Public Sector Pensions – The Last Stronghold

While the private sector has mostly abandoned final salary pensions, some public sector schemes still operate in a similar way. Jobs in sectors like:

  • The NHS

  • Teaching

  • The Police and Fire Services

  • The Civil Service

…still offer defined benefit-style pensions, but many of these have moved to career average revalued earnings (CARE) schemes. This means your pension is based on your average salary over your career, rather than your final salary before retirement.

2. Legacy Private Sector Schemes – The Lucky Few

Some private companies still honour their old final salary pension schemes for employees who joined decades ago. However, these are closed to new members, meaning unless you started working there when The Beatles were still together, you are out of luck.

3. Universities Superannuation Scheme (USS) – A Hybrid Approach

The Universities Superannuation Scheme (USS), one of the UK’s largest private pension schemes, recently tweaked its defined benefit offerings. It still provides some final salary-style benefits but changes have meant reduced guarantees and higher contributions for members. It is not quite as generous as the original final salary model but it is one of the few remaining schemes in the private sector with defined benefit elements.

Can You Still Get a Final Salary Pension?

In short, no, unless you already have one. Most final salary schemes are closed to new entrants, meaning younger generations will never experience the joy of a guaranteed pension.

Instead, most workers are now part of a defined contribution (DC) scheme, where:

  • You contribute a percentage of your salary.

  • Your employer may match your contributions up to a limit.

  • The money is invested in the stock market.

  • Your final pension depends on how well those investments perform.

It is a much riskier system, with no fixed payout—but for employers, it is far cheaper and easier to manage.

Will Final Salary Pensions Ever Make a Comeback?

Given the financial burden final salary pensions placed on companies, it is highly unlikely that they will return. Even the public sector is moving towards career average models and private companies simply cannot afford the liability.

However, there has been a rise in collective defined contribution (CDC) schemes, which offer some of the security of final salary pensions while reducing employer risk. These might be the future of workplace pensions but they are still a far cry from the golden days of defined benefits.

Are Final Salary Pensions a Thing of the Past?

Final salary pensions still exist but they are becoming rarer by the day. If you are lucky enough to have one, protect it like it is your most prized possession. For everyone else, defined contribution schemes are the new normal and planning for retirement requires careful saving, investment and a bit of luck.

If you want to make the most of your workplace pension, speak to a financial advisor to ensure you are saving enough for retirement. The days of guaranteed final salary pensions may be gone, but with the right strategy, you can still build a strong retirement fund.