All Types of UK Pension Explained

The UK pension landscape is more varied than in most countries. Understanding what type of pension you have — and what types you may have accumulated over a career — is fundamental to retirement planning, especially if you are now living outside the United Kingdom.

This guide provides a clear overview of every major type of UK pension, how each works, and what each means for expats and internationally mobile individuals.

The State Pension

The UK State Pension is a government-provided pension paid to individuals who have reached State Pension age (currently 66) and have sufficient qualifying National Insurance years. The full new State Pension for 2026/27 is £241.30 per week.

The State Pension is not means-tested and does not depend on private savings or employer contributions. It is funded on a pay-as-you-go basis by current NI contributions. It is covered in detail in our UK State Pension guide for expats.

The Basic State Pension (Old System)

Before April 2016, the UK operated a two-tier State Pension system. The basic State Pension was the first tier — a flat-rate payment based on qualifying NI years. The second tier was the Additional State Pension (also known as SERPS — State Earnings-Related Pension Scheme — and later S2P, the State Second Pension).

People who reached State Pension age before 6 April 2016 receive the basic State Pension (up to £184.90 per week in 2026/27) plus any Additional State Pension they accrued. Those who contracted out of the Additional State Pension through a workplace scheme have a lower Additional State Pension but were supposed to accrue more in their workplace scheme instead.

Defined Benefit (DB) Workplace Pensions

A defined benefit pension (also called a final salary or career average pension) is a workplace pension that promises a specific income in retirement, calculated according to a formula set out in the scheme rules. The most common formula links the pension to your salary and the number of years you were a member of the scheme.

Final salary schemes calculate your pension as a fraction of your salary at, or near, the date you left the scheme, multiplied by your years of service. For example, a scheme with an accrual rate of 1/60th would give a pension equal to 1/60th of final salary for each year of service — so 30 years' service would produce 30/60ths (half) of your final salary.

Career average schemes calculate the pension based on your average salary across your entire period of membership, revalued for inflation each year.

DB pensions are largely found in the public sector today (NHS, teachers, civil servants, local government, police, fire) and among employees of older private sector firms that historically operated final salary schemes. Many private sector DB schemes have closed to new members or closed to future accrual, meaning existing members have a frozen deferred entitlement.

For expats, a deferred DB pension is a valuable but inflexible asset. It will pay a guaranteed income from the scheme's normal pension age, typically with some inflation uprating in payment. Whether or not to transfer a DB pension is one of the most consequential retirement planning decisions an expat can make — and one that requires regulated professional advice.

Defined Contribution (DC) Workplace Pensions

A defined contribution pension is a pension pot that accumulates based on contributions paid in by you and/or your employer, invested in funds you typically choose from a range offered by the scheme. The value of the pot at retirement depends on the level of contributions and investment performance.

DC pensions include:

• Workplace group personal pensions (GPPs): Arranged by an employer with an insurance company or pension provider. Each employee has an individual policy.
• Master trust pensions: Large multi-employer schemes such as NEST, The People's Pension, or NOW: Pensions, widely used for auto-enrolment compliance.
• Stakeholder pensions: A type of DC pension introduced in 2001 with capped charges and simple features, available through employers or directly from providers.

Workplace DC pensions are now the standard for private sector employees. Under auto-enrolment (introduced from 2012), employers must enrol eligible employees and make minimum contributions. The statutory minimum is 3% employer contribution and 5% employee contribution on qualifying earnings, though many employers pay more.

Self-Invested Personal Pensions (SIPPs)

A SIPP is a personal pension that gives the holder far greater investment flexibility than a standard personal pension. Rather than being restricted to a range of funds offered by an insurance company, a SIPP holder can typically invest in:

• UK and overseas equities
• Bonds and fixed income
• Investment trusts and ETFs
• Commercial property (though residential property is not permitted in most circumstances)
• Cash

SIPPs are available from a range of providers including major investment platforms. They are popular with self-employed individuals, those who want control over their investments, and expats who wish to manage their UK pension assets actively.

For expats, a SIPP offers the flexibility of drawdown from abroad, and the tax treatment of withdrawals for non-residents is governed by the relevant double taxation treaty. However, non-residents generally cannot make new contributions unless they have relevant UK earnings.

Group Personal Pensions (GPPs)

A Group Personal Pension is a collection of individual personal pension plans arranged by an employer on behalf of employees. Each employee has their own individual policy with the pension provider, but contributions are collected through payroll. GPPs sit somewhere between individual personal pensions and occupational schemes in terms of flexibility and governance.

If you have an old GPP from a former employer, it will continue to grow (or remain invested) even after you have left that employer, and you can take it with you by consolidating it into a SIPP or QROPS when the time comes.

Small Self-Administered Schemes (SSAS)

A SSAS is an occupational pension scheme typically set up by a company for the benefit of its directors and senior employees. SSAS schemes are highly flexible — they can invest in commercial property, lend money back to the sponsoring company (within HMRC limits), and hold a wide range of assets.

SSAS schemes are relatively uncommon compared with SIPPs but are used by business owners seeking maximum flexibility and the ability to integrate pension planning with business strategy. They are regulated by the Pensions Regulator and must have a professional trustee or internal trustees who understand their obligations.

QROPS — Qualifying Recognised Overseas Pension Schemes

A QROPS is an overseas pension scheme that has satisfied HMRC's requirements to receive transfers from UK pension schemes. QROPS are designed for UK nationals who have emigrated permanently and wish to move their UK pension assets to an overseas pension in the country or jurisdiction where they now live.

The main potential advantages of a QROPS include:

• Pension income in the local currency, eliminating exchange rate risk
• Possible escape from UK income tax on pension income (depending on treaty position)
• Greater estate planning flexibility in some jurisdictions
• Consolidation of UK pensions into a single overseas vehicle

The main risks and downsides include:

• The Overseas Transfer Charge (a 25% charge that may apply — see our OTC guide)
• Regulatory compliance obligations in both UK and the QROPS jurisdiction
• The loss of UK consumer protection schemes (FSCS does not cover QROPS)
• Potential for scams and mis-selling in unregulated jurisdictions

QROPS transfers from DB pensions above £30,000 require regulated advice from an FCA-authorised Pension Transfer Specialist. This is covered in more detail in our QROPS guide.

Annuities

While not strictly a type of pension scheme, annuities are a way of converting a pension pot into guaranteed income for life. An annuity is a contract with an insurance company: you hand over your pension pot (or part of it) and in return receive a guaranteed income, typically payable monthly, for the rest of your life.

Since the pension freedoms reforms of 2015, annuity purchase has become much less common. Many retirees now opt for drawdown instead. However, annuities remain appropriate in certain circumstances — particularly for those who value certainty of income or who are concerned about outliving their savings. Enhanced annuities (available to those with health conditions or certain lifestyle factors) can provide significantly better rates.

Bringing It Together: What Expats Typically Have

A UK national who has worked for several years in the UK before emigrating might typically have a combination of:

• State Pension entitlement — based on UK NI years, claimable at 66 from anywhere in the world
• One or more old workplace pensions — either DB (if they worked for an older employer with a final salary scheme) or DC (workplace GPP or master trust)
• A SIPP — if they have been self-employed or have consolidated older pensions
• Overseas pension entitlements — if they have worked in their country of residence and contributed to a local system

Understanding what you have, where it is held, and what options you have for each component is the starting point for effective expat pension planning.

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This guide is for general information only and does not constitute financial, tax, or legal advice. Pension rules are complex and subject to change. Seek regulated advice before making decisions about your pension.

How Global Investments Can Help

Global Investments specialises in helping internationally mobile clients understand their UK pension entitlements across multiple scheme types. Whether you need a pension audit to identify what you have, advice on how to structure your assets across different pension types, or guidance on QROPS and other transfer options, our advisers can help you bring clarity to your retirement planning.

Contact us to arrange a pension review with one of our specialists.