Should I Transfer My DB Pension? CETVs, Advice and the Risks

01 What a DB pension actually gives you

What that buys you is four things at once, and it is worth naming them individually because a transfer gives up all four. A guaranteed income for life, however long you live. Inflation protection, usually with a statutory minimum increase each year. A survivor's pension, commonly 50% of yours, paid to a spouse for the rest of their life. And Pension Protection Fund cover, so that if the employer fails you still receive a substantial proportion of the promised benefits.

Nothing you can buy with a transfer value replicates that combination. An annuity gets closest and costs considerably more than most transfer values would fund, because an insurer prices the same guarantees commercially.

The income also requires nothing of you. There is no investment decision, no withdrawal rate, no sequence risk and no possibility of running out. For most people that is the single most valuable feature and the hardest to appreciate before retirement, when a large cash figure feels more real than an income promise decades long.

A defined benefit (final salary or career-average) pension promises you a specific income in retirement, calculated from your salary and years of service, and that promise sits with the scheme — not with the markets. The income is paid for the rest of your life however long you live, it usually rises each year with inflation (within limits), and it typically continues paying a portion to your spouse or civil partner after you die. You don't manage any investments and you carry none of the risk: the employer and the scheme do. That combination of guarantee, inflation protection and survivor benefit is extraordinarily expensive to buy anywhere else, which is the single most important thing to hold in mind before considering a transfer.

Source: MoneyHelper — Transferring out of a DB scheme

02 What a transfer means

Transferring out means giving up your guaranteed defined benefit entirely in exchange for a cash equivalent transfer value (CETV) paid into a defined contribution pension — typically a personal pension or SIPP. From that point on, the money is yours to invest, draw and pass on, but every risk transfers to you too: investment risk if markets fall, sequence risk if they fall early in retirement, and longevity risk if you live longer than your pot is built to support. There is no going back: once you've transferred, the guaranteed income is gone for good.

03 The CETV and what the multiple means

The useful test is what it would cost to buy the second thing. Ask what an inflation-linked annuity with a 50% survivor's pension, at your age, would pay on the transfer value offered. If it pays less than the pension you are giving up — which it usually does — the transfer is buying flexibility at a measurable cost, and you can decide whether that cost is worth it with an actual number rather than an impression.

Shows: the transfer-value multiple, and the rough income a transferred pot might safely support at a chosen withdrawal rate. Ignores: inflation-linking, the spouse's pension, tax, investment returns and scheme-specific terms — illustrative only.

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The comparison that matters isn't "£300,000 vs £10,000" — it's "an invested pot that might support a similar, non-guaranteed income that could fall" versus "£10,000 guaranteed, rising with inflation, with a spouse's pension attached." Framed that way, the guarantee usually wins.

A large multiple is widely read as evidence that a transfer is good value, and it is evidence of something else entirely. The CETV reflects what it costs the scheme to discharge the liability, which moves with gilt yields — so the same pension for the same person could be offered at half the figure eighteen months later without anything about the promise having changed.

The CETV is the lump sum your scheme will pay to take your pension off its books. People often express it as a multiple of the annual pension — for example, a £10,000-a-year pension with a £300,000 CETV is a multiple of 30. A high multiple feels generous, but it mostly reflects how costly it is, in a low-yield environment, to fund a guaranteed inflation-linked income for decades. The multiple tells you the price of the guarantee, not whether you're getting a deal.

04 When a transfer might make sense

A transfer suits a minority, and usually for reasons that have little to do with the headline number:

• Serious ill health with a materially shortened life expectancy, where a lifetime guarantee is worth less and passing on the fund matters more.
• No spouse or dependants who would benefit from the survivor pension, combined with a strong wish to leave the money to other heirs.
• Ample guaranteed income already — if the State Pension and other secure income comfortably cover your essentials, you can afford to take risk with this slice.
• Specific, evidenced flexibility needs that the DB scheme genuinely can't meet.

Serious ill health with a materially shortened life expectancy is the clearest. A defined benefit pension pays while you live and then a reduced amount to a spouse; a transferred pot passes in full to whoever you nominate. Where longevity is genuinely in question, the arithmetic can reverse.

No spouse or dependants removes the value of the survivor's pension, which is a significant part of what a transfer gives up. Someone single with adult children they wish to leave money to is comparing different things than someone whose partner would depend on the income.

A genuine need for flexible timing — retiring several years before the scheme's normal retirement age, or wanting a large one-off sum for a specific purpose — can also justify it, though early retirement factors within the scheme sometimes achieve the same thing without a transfer.

Very large defined benefit entitlements can raise lifetime allowance and lump sum allowance considerations that change the calculation, and estate planning objectives occasionally point the same way.

Timing against the State Pension matters too, since a scheme paying from 60 and a State Pension from 67 fund different parts of a retirement. Even in these cases the decision belongs with a qualified adviser modelling your whole position — not with a general guideline, and certainly not with a multiple.

05 The advice requirement and scam risk

If your DB pension is worth more than £30,000, you are legally required to take regulated financial advice before you can transfer, and the adviser must hold specific pension-transfer permissions. This rule exists because DB transfers have been a magnet for poor advice and outright scams. Be especially wary of anyone who approaches you unprompted, promises guaranteed high returns, offers "free pension reviews", or pressures you to act quickly — these are classic scam signals.

Source: FCA — Transferring your defined benefit pension

06 How to approach the decision

Start from the default that you keep the defined benefit pension, and make any transfer prove itself. That is not conservatism; it is where the regulator starts and where the evidence points.

Separate the emotional pull of a large number from what that number actually has to do. A £300,000 transfer value has to replace a guaranteed, inflation-rising, survivor-protected income for the rest of two lives — and to do it through markets you cannot control, at a withdrawal rate you must choose correctly for thirty years.

Test the decision against the bad case rather than the expected one. If markets fall 30% in your first two years of drawdown and you live to 95, does the plan still work? The defined benefit scheme answers that question with a yes by construction. A transferred pot answers it with an assumption.

Ask specifically about your spouse. A survivor's pension continues for their lifetime; a transferred pot continues only while it lasts. Where one partner would be substantially dependent on the income, that alone frequently settles it.

And be honest about why the transfer is attractive. If the answer is flexibility over when income starts, or a genuine health reason, or an estate purpose, those are real arguments to test with an adviser. If the answer is that the number is large, that is the number doing exactly what a transfer value is designed to do.

Start from the default that you keep the DB pension, and make the transfer prove itself. Separate the emotional pull of a big number from the financial reality of what that number has to do — replace a guaranteed, rising, survivor-protected income for the rest of two lives. Map your essential spending against your other guaranteed income first; if there's a gap, the DB pension is likely filling it and shouldn't be given up lightly. Then, and only then, take regulated advice that models your actual retirement rather than a generic comparison.

07 What you give up, and what you get

A transfer swaps one set of features for another. Setting them side by side is more useful than any multiple.

Only the last two rows favour transferring. They are genuine advantages and they are the reason a minority should transfer — but five of the seven rows describe protections that are difficult and expensive to rebuild once given up.

Source: MoneyHelper — Defined benefit pension transfers