DB Transfer Analysis
Frequently Asked Questions
What is a defined benefit pension transfer value (CETV)?
A Cash Equivalent Transfer Value (CETV) is the lump sum your defined benefit pension scheme offers if you transfer out to a defined contribution arrangement. It represents the actuarial equivalent of your guaranteed future income expressed as a cash amount today. CETV multiples have historically ranged from 20 to 40 times your projected annual pension, though rates vary significantly with interest rates and scheme funding.
Do I need financial advice to transfer a DB pension?
Yes. By law, if your DB transfer value is £30,000 or more, you must take regulated financial advice from a pension transfer specialist before you can proceed with the transfer. This is because DB pensions offer guaranteed income for life, and transferring away from this guarantee is generally considered a high-risk decision. The FCA has set strict standards for DB transfer advice.
What is a critical yield?
The critical yield is the annual investment return your CETV would need to achieve to replicate the income you would have received from your DB pension. If the critical yield is 7% and you believe you can only achieve 5% in a drawdown portfolio, the transfer is unlikely to be in your interest. A lower critical yield makes transfer more potentially attractive, but the guaranteed nature of DB income means most people are better off staying in the scheme.
What is a typical CETV multiple for UK DB pensions?
CETV multiples vary with interest rates. When gilt yields are low, multiples can reach 30 to 40 times annual pension. When gilt yields rise, multiples fall — sometimes to 15 to 20 times. The multiple also depends on your age, how many years until retirement, and the specific scheme's actuarial assumptions. As of 2026, rising interest rates have generally pushed multiples down compared to the highs seen in 2020-2022.
What are the tax implications of a DB pension transfer?
When you transfer your DB pension to a DC arrangement, normal pension tax rules apply once in the DC scheme. You can take up to 25% as a tax-free lump sum subject to the Lump Sum Allowance of £268,275 for most people from April 2024, and the remainder is taxable as income in drawdown or annuity. The transfer itself is not a taxable event. The lifetime allowance was effectively abolished from April 2024 and replaced with the Lump Sum and Death Benefit Allowance.