Final Salary Pension vs SIPP Calculator

A final salary (defined benefit or DB) pension pays a guaranteed income for life based on your salary and years of service. A defined contribution (DC) or SIPP pension builds a pot you then draw income from — the amount is not guaranteed.

Almost never. The guaranteed income from a final salary pension is extremely valuable, especially with index-linking and spouse's pension. The Pensions Regulator and FCA require financial advice for DB transfers over £30,000.

DB transfer values are typically 20-30× the annual pension income (CETV). A £20,000 annual pension might have a CETV of £400,000-£600,000, which must then be invested to replicate that income.

The '4% rule' suggests withdrawing 4% annually from your pot is sustainable for 30 years. This is a guideline, not a guarantee. Your actual sustainable rate depends on investment returns and inflation.

Most public sector DB pensions increase in line with CPI or RPI each year. Private sector DB pensions often have caps (e.g., max 2.5% or 5% annual increase). This inflation protection is very valuable.

DB pensions typically pay a reduced pension to your surviving spouse (50-67%). DC pensions can pass the entire remaining pot to beneficiaries free of inheritance tax if under 75.

Yes. Many workers have a DB pension from a previous employer plus a DC/SIPP from their current employer or personal contributions. They complement each other well.

DB pension accrual uses the annual allowance. The input amount is calculated as (16 × annual increase in pension benefit) + any lump sum increase. This can be complex and may require a pension statement.

Yes. A frozen (deferred) DB pension is still guaranteed income for life from retirement age. The annual pension is fixed at the point of leaving but typically increases with inflation (capped).

The Cash Equivalent Transfer Value (CETV) is what the scheme will pay to transfer your benefits. It represents an actuarial calculation of the cost to replicate your DB benefits in a DC environment.

For the vast majority of people, taking the DB pension is better. Only very specific circumstances (terminal illness, large DC pot already, very high transfer value) might make a transfer appropriate.

DB pension transfers over £30,000 require regulated financial advice from a pension transfer specialist (FCA-authorised). Many advisers now decline to recommend transfers due to risk.