If a defined benefit employer pension scheme is described as integrated, this means:

• A. Scheme benefits are partly defined benefit and partly defined contribution
• B. Scheme is approved by the Revenue Commissioners
• C. Members’ anticipated entitlement to the State Pension is offset against the retirement benefits to be provided by the scheme
• D. Scheme is frozen and provides no new retirement benefits to members

Answer: (C)

Integration means coordinating the pension paid from the employer’s defined benefit scheme with the State Pension. In an integrated arrangement, the member’s expected entitlement to the State Pension is offset against the retirement benefits from the scheme. Practically, the scheme adjusts its own pension by the amount of State Pension the member is anticipated to receive, so the total retirement income reflects both sources without paying double for the same benefit.

For example, if you’re expected to receive a State Pension of a certain amount, the scheme pension is reduced by a corresponding amount. The important idea is that the two sources of retirement income are coordinated rather than simply added together. This is why the statement describing the offset of the State Pension against the scheme’s retirement benefits is the correct description of an integrated defined benefit scheme.