What Is The Transfer Value Of A Pension?

Your pension fund value is the current value of your detailed benefit scheme. The transfer value (CETV) is the amount your provider will offer you for transferring out of your defined benefit scheme. Put simply, this means that your pension fund value will be replaced by your transfer value.  

The CETV, or transfer value, is usually expressed as a lump sum – although you won’t necessarily receive it as such. This money is essentially used to purchase a pension pot that could generate a greater income to your current defined benefit pension.  

Ultimately, your transfer value is determined by a range of factors, but there’s no guaranteed list. Some of the perceived factors include: 

• Your age 
• Your scheme’s retirement age 
• The current cost of living 
• Life expectancy 
• The current gilt values 

Say your employer does encourage you to transfer your pension, the first thing you need to do is acquire your CETV certificate. A financial adviser can help you do this. 

There have also been cases of some schemes offering incentives in the form of generous transfer values, usually because they’re struggling to honour their final salary commitments. 

Yes, depending on the rules of the scheme you’re currently in, you can largely transfer pension benefits into another scheme at any time. You should do this up to one year prior to your expected retirement date. Although in some cases, you can switch to a new scheme even after you’ve started drawing retirement benefits. 

It could be the case that your employer offers incentives for you to transfer your pension, as it reduces their liability to your scheme. In other words, they aren’t responsible for paying out when you’re ready to retire. However, if they do offer you a transfer, it’s a good idea to seek pension advice before you make a decision. 

There are fees for transferring your pension, and they depend on factors like the size of your pension pot, how many pensions you would like to transfer, and the types of scheme you currently have. The fee is determined as a percentage figure. 

Because you’ll typically need an independent financial adviser (IFA) to access funds, you should be able to combine the pension transfer charges with the adviser fee using the cash from your pension balance. In other words, you won’t need to use money from your own pocket. 

A financial advisor will be necessary to transfer any pensions above the CETV of £30,000. It is an FCA requirement to have a financial advisor (pension specialist) to give advice on your proposed DB transfer if the value is above £30,000. Not only do they explain how to transfer a pension in the UK, they also calculate the pension transfer for you. There are defined benefit pension transfer value calculators available, but these should only be used as a rough guide. 

IFAs are much more than just pension transfer value calculators though. They can explain how to transfer pensions from previous employers, help you invest lump sums of money, and support you when preparing for significant life events like retirement. As such, they’re best placed to advise if a move would cause you to lose any current benefits that might outweigh the immediate gains from a transfer. 

We take the time to understand your ambitions, including your short, medium and long-term goals. What’s more, we’re completely affordable, and are capable of offering the broadest range of products available to you. With us, you can feel confident that you’re getting the best possible service and advice on the market. 

Are you interested in hearing how we could help you? Don’t leave it to chance (or a defined benefit pension transfer calculator). Speak to a member of our team today and we’ll walk you through the pros and cons of transferring your final salary pension. You can reach us by calling 0203 432 5564, or request a call back using our online contact form.