Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Final salary definition

What does Final salary mean? Final salary describes, in pensions practice, a defined benefit formula where a member’s pension (and related lump sum and survivor’s benefits) is calculated by reference to their salary at or near the date they leave pensionable service, typically: final pensionable salary × accrual rate × years of pensionable service. It is a descriptive expression; pensions legislation in the UK and Ireland uses “defined benefit” rather than defining “final salary”. Key legal features and usage: - Benefits are salary‑linked and do not depend on the member’s contributions or on investment performance. - “Final pensionable salary” is set by scheme rules (for example,...

Final Salary to Career Average in Defined Benefit Schemes: Amendment Powers, Trustee Consent, Member Consultation, Employment Law, and Limits on Retrospective Change

Published by a LexisNexis Pensions expert

Practice notes

Reducing the financial burden of defined benefit schemes on employers

In recent years, a growing number of employers have sought to avoid or curb their exposure to the increasing costs of defined benefit pension schemes and the risks inherent in running them. To achieve this, many have either restricted entry to their defined benefit scheme—so that no new members are admitted—or, in more severe instances, closed the scheme to the future build-up of benefits. Alternatively, employers may look to amend the scheme’s operating provisions so that benefits accrue on a less generous footing. Each approach aims to limit costs and the scheme risks. One approach is to redesign the scheme so members cease to accrue benefits on a 'final salary' basis (i.e. by reference to pay at, or close to, the date their pensionable service ends) and instead on a 'career average' basis (i.e. by reference to pay averaged across a defined period, typically the member’s period of active participation in the scheme). Making a change of this nature amounts to a reduction in benefits and presents challenges from both an employment law and a pensions law standpoint...

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Wyn Derbyshire

gunnercooke LLP

Wyn is a partner at gunnercooke LLP and specialises in pensions, trust and employment law in all industry sectors, dealing with the transactional, advisory and documentation aspects.He also has wide experience of the pensions implications of heavyweight corporate transactions and flotations, the issues arising from the establishment and merger of pension schemes, and sex equalisation and other discrimination issues in respect of benefits provided by pension schemes. In addition, he provides advice to pension scheme trustees generally.Recent transactions include advising Amcor on pension matters relating to the acquisition of Alcan business and the acquisition of Northern Foods PLC by Boparan Holdings.He is a co-author (with Stephen Hardy and Stephen Maffey) of TUPE: Law and Practice, published by Spiramus Press (now in its 4th edition), and co-author (with Stephen Hardy and David Wicks) of Money & Work, published by Spiramus Press in August 2007. He has also...

Web page updated on 21/05/2026

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