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 link in defined benefit schemes: identification, Courage-style fetters, statutory revaluation underpin, active membership, section 75 employer debt, section 67 restrictions, and winding‑up

Published by a LexisNexis Pensions expert

Practice notes

Employers running final salary pension schemes, a form of defined benefit arrangement, have sought to curb financial exposure, with many reshaping benefits, shutting to new joiners or halting future accrual. Even where future accrual stops (a ‘frozen’ scheme), members may still keep a link to their final salary. If that link remains, and pay rises are subdued, a member’s deferred, revalued preserved pension can end up higher than anticipated compared with having no final salary link, which may lessen or even eliminate the expected impact of the employer’s liability reduction plans.

This Practice Note looks at the meaning, preservation and consequences of a final salary link. For issues triggered by closing a defined benefit scheme to future accrual, see Practice Notes: Closing a pension scheme to future accrual—employer considerations and Closing a pension scheme to future accrual—trustee considerations.

What is a final salary link?

Ordinarily, when a member of a final salary scheme ceases active membership because they leave their employer’s service, or they exercise their statutory right to opt out of the final salary pension...

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Web page updated on 21/05/2026

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