Which of the following best describes a defined benefit pension benefit?

• A. A plan where retirement benefits depend on final salary and years of service
• B. A plan where benefits depend on contributions and investment performance
• C. A plan that guarantees a fixed amount regardless of service
• D. A plan that provides flexible drawdown of income only

Answer: (A)

A defined benefit pension is a retirement promise where the income is fixed by a formula tied to how long you’ve worked and what you earned, typically final salary or career-average earnings. This means the pension you’ll receive is determined in advance based on your years of service and salary, not by how much you or the scheme contributed or how investment returns perform. That specific link to final salary and years of service is what makes it a defined benefit.

The other ideas describe different concepts. A plan where benefits depend on contributions and investment performance is a defined contribution plan, where your eventual pension comes from the fund you’ve contributed to and how its investments have performed. A plan that guarantees a fixed amount regardless of service doesn’t reflect the usual formula-based calculation of defined benefit, which normally uses service length and salary. A plan offering flexible drawdown refers to how you take income in retirement, not to how the benefit is defined or calculated.