DB vs DC Pension Comparison
DB vs DC Comparison
DB Annual Income-
DB Transfer Ratio-
DC Annual Drawdown-
DC Tax-Free Lump Sum-
Better Option-
DB vs DC Key Differences
| Feature | Defined Benefit | Defined Contribution |
|---|---|---|
| Income | Guaranteed for life | Depends on pot size & returns |
| Inflation | Usually index-linked | No guarantee |
| Death benefits | Spouse pension (50%) | Full pot inherited |
| Flexibility | Low | High (drawdown/lump sums) |
| Investment risk | Employer bears | You bear |
Transfer Value Guide
Avg CETV Ratio
20-25x
High Ratio
30x+
Drawdown Rate
3.5-4%
Tax-Free
25% of DC
Advice Required
If DB >£30k
FCA Warning
Most should stay
How to Use This Calculator
1
Enter annual DB pension
Your guaranteed annual pension from the defined benefit scheme.
2
Enter CETV
The Cash Equivalent Transfer Value offered by your DB scheme.
3
Enter DC pot size
Your defined contribution pension pot value.
4
Set drawdown rate
4% is the standard assumption, but 3-3.5% may be more sustainable.
5
Compare the options
See guaranteed DB income vs flexible DC drawdown and death benefits.
Frequently Asked Questions
Should I transfer my DB pension?
The FCA has consistently found that transferring a DB pension is not in the best interests of most people. A DB pension provides guaranteed income for life, usually with inflation protection. However, transfer may be suitable if: you have a serious health condition reducing life expectancy, you do not need guaranteed income, you want flexibility for beneficiaries, or the transfer value is exceptionally high (30x+ annual pension).
What is a CETV ratio?
The Cash Equivalent Transfer Value (CETV) ratio is the transfer value divided by the annual pension. A ratio of 20:1 means you receive £20 for every £1 of annual pension given up. Ratios above 25:1 are generally considered generous, while below 15:1 may be poor value. The ratio helps assess whether a transfer offers fair value for the guaranteed income you are giving up.
Do I need financial advice to transfer?
Yes, if your DB pension is worth more than £30,000, you must take advice from an FCA-regulated financial adviser before transferring. The advice typically costs £3,000-£6,000. The adviser must recommend whether a transfer is suitable for your circumstances. Many advisers will not recommend transfers due to the FCA's strong guidance against them.
What is the safe drawdown rate?
The commonly cited sustainable withdrawal rate is 4% per year (the '4% rule'), but many advisers now recommend 3-3.5% for UK retirees due to different tax, inflation, and market conditions. At 4%, a £500,000 pot would provide £20,000 per year. The actual sustainable rate depends on investment returns, inflation, and how long the pot needs to last.
What happens to my DB pension when I die?
Most DB pensions provide a spouse's pension (typically 50% of your pension) for life. Some schemes also provide pensions for dependent children. Unlike DC pensions, the remaining value of a DB pension does not pass to your estate. This is a key difference — DC pensions can be passed to any beneficiary, potentially tax-free if you die before 75.
Official Sources & References
Data verified against official UK government sources. Last checked April 2026.