# Defined benefit vs defined contribution pensions — what's the difference?

> Compare · Last reviewed 26 May 2026

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## Quick answer

A defined benefit (DB) pension pays a guaranteed income based on your salary and service. A defined contribution (DC) pension builds a pot you invest yourself, and you choose how to take income at retirement.

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DB schemes were common in the public sector and older private sector employers. Most new workplace pensions today are DC. The fundamental difference is who carries the investment risk: in DB it's the scheme; in DC it's you.

## Defined benefit (DB) vs Defined contribution (DC)

| Criterion | Defined benefit (DB) | Defined contribution (DC) |
| --- | --- | --- |
| What you get at retirement | Promised income, usually inflation-linked | A pot you can use as you choose (drawdown, annuity, lump sums) |
| Who carries investment risk | The scheme / employer | You |
| Income formula | Accrual rate × pensionable service × pensionable salary | Pot value × annuity rate or drawdown plan |
| Transfer value | Cash Equivalent Transfer Value (CETV); advice required if over £30,000 | Pot value (no special advice rule for switching DC to DC) |
| Inflation protection | Usually built-in (CPI or RPI, often capped) | Depends on what you buy/draw |
| Death benefits | Often a spouse/dependant pension, capped % | Whole pot passes per nomination |
| Where common today | Public sector (NHS, teachers, civil service, armed forces) | Most private-sector workplace pensions and personal pensions |

## When Defined benefit (DB) suits

- You value a guaranteed inflation-linked income
- You don't want to manage investment decisions in retirement
- You're in the public sector or a long-tenured private DB scheme
- You want a dependant's pension built in

## When Defined contribution (DC) suits

- You want flexibility over how and when you take income
- You want to leave the remainder to family
- You want full investment choice and consolidation
- You're comfortable making decisions about drawdown levels

## Frequently asked questions

### Why is regulated advice required to transfer a DB pension?

Because you're giving up a guaranteed income for a pot whose value can fall. UK law requires regulated financial advice for any DB transfer with a value over £30,000.

### Can I have both?

Yes — many people have a DB pension from earlier employment and a DC pension from later employers and personal contributions.

### Is the State Pension a DB or DC scheme?

Neither, technically — it's a pay-as-you-go state benefit based on your National Insurance record. It behaves like a DB income (guaranteed, inflation-linked under the triple lock).

## Sources

- [TPR — Transferring your pension](https://www.thepensionsregulator.gov.uk/en/pension-scams)
- [GOV.UK — Transferring your pension](https://www.gov.uk/consumer-protection-rights/pension-transfer)
- [GOV.UK — Workplace pensions](https://www.gov.uk/workplace-pensions)

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.