0808 189 0463


        0808 189 0463

        Updated: April 16, 2024

        Pension Transfer Values

        If you want to move your pension to another provider you’ll need to understand how your pension transfer value is calculated and how your circumstances can affect the amount you get.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

        1 of 2
        2 of 2 Send!

        No impact on your credit score

        There are many good reasons for wanting to transfer your pension from one provider to another, including lower costs, wider investment options or simply to bring all of your pensions under one umbrella.

        In this article we’ll look at how pension transfer values are calculated, how the type of pension you have affects these calculations and what you can do with your pension transfer value once you have it.

        What is the transfer value of a pension?

        Your pension transfer value is the amount of money that your existing pension provider would pay to your new provider, should you decide to transfer your pension fund to a different scheme. It’s not always easy to get an accurate pension transfer value as it will be calculated based on many different factors, including the type of scheme you’re currently invested in.

        What’s the difference between the transfer value and fund value?

        For a defined contribution pension pot, the pension fund value is simply the value of the pot’s investments at any given point. The transfer value is the value that would be transferred if you were to complete a pension transfer to another scheme. In most cases, these two values should equal each other. If you ask for a transfer value quote then keep in mind that it is not guaranteed – it will be an estimate and is subject to change in line with investment performance up until the date your funds are actually transferred.

        It is also important to note that, depending on your pension plan, your transfer value could take into account exit charges and/or a Market Value Reduction (MVR) which will reduce the transfer value when compared to the fund value. However, some schemes offer final bonuses (also known as terminal bonus)’ which increase the value of your transfer value. It is important to examine the transfer value of your pension carefully and to fully understand why it does or doesn’t match your fund value.

        Is it the same as the cash value?

        No, not as such – this term is referred to more in relation to final salary pensions. For defined benefit schemes, where your pension on retirement is based on your salary and time in employment, it’s a little more complex. You won’t have a pension pot in the same way as you would under a defined contribution scheme – instead you are paying in every month on the promise of a guaranteed income for life when you retire.

        As such, your pension transfer value can’t simply be a reflection of the fund value at any point in time, it has to be calculated as a cash equivalent transfer value – sometimes called a cash value or CETV. The CETV is the amount that your current provider would pay into your new scheme should you decide to transfer and is an estimate of how much you would need to generate the equivalent income on retirement.

        NOTE: this is not a guarantee. With a defined benefit pension you are protected from fluctuations in the stock market, but once you transfer out into a defined contribution scheme and start investing in, you expose your pension fund to risk.

        As long as you are not still an active member of the scheme, the CETV is guaranteed for three months, so you have time to consider your options without the risk of the transfer value going down in the meantime.

        Speak to an expert today

        How is a pension transfer value calculated?

        If you have a defined contribution pension you can ask for your pension transfer value from your provider at any time, or look at a recent pension statement. The transfer value will be calculated based on the value of the fund at the point of transfer.

        For a defined benefit scheme, the calculation of the CETV (cash equivalent transfer value) is more complex. Because the value of your pension isn’t based on the value of investments, there are a lot of factors that need to be considered to estimate the value of the fund. These include specifics to your scheme, such as levels of employer and employee contributions, the scheme’s retirement age, and how long you contributed for. They also include personal lifestyle factors such as:

        • Your marital status
        • Your age
        • Your life expectancy

        Wider economic factors can also play a part, for example the interest rate hikes of 2022 caused a big drop in average transfer values. As a result, a basic pension transfer value calculator isn’t really appropriate for this type of retirement scheme. The smart move is to speak directly with a pensions advisor who has experience in this area first.

        Incentives for transferring out of your defined benefit pension

        You may also find that the motivations and funding position of your current provider can affect the transfer value you’re offered. Many defined benefit schemes, worried about having the finances in place to support payouts, offer transfer values much larger than the fund value as an incentive for members to transfer out.

        This is sometimes called an enhanced transfer value or transfer incentive, and these high offers led to a surge of people transferring out of their final salary schemes over recent years. Make sure to consult a pensions advisor, even if your offer seems very high, as it still might be better for you to stay in the scheme and take the longer term benefits. It is also important to note that depending on the transfer value of your defined benefit pension, you may be legally obliged to seek advice.

        What can you do with your pension transfer value?

        Once you understand your pension transfer value, you cannot simply cash in your pension transfer value and have the money in the bank, you have to use it to either purchase a new pension or, if you are ready to start taking an income, set up a pension drawdown scheme.

        Whichever type of pension you had originally, you will normally have to transfer into a defined contribution scheme. You cannot transfer from a defined contribution scheme into a defined benefit scheme.

        The new scheme could be:

        • A standard personal pension
        • A self-invested personal pension (SIPP)
        • A stakeholder pension
        • A different workplace pension

        If you are transferring more than one pension at the same time, you might choose to combine them into one new pot, or you might opt to transfer a single pension into another existing scheme in order to simplify your investments.

        It’s worth noting that in the majority of cases it makes most financial sense NOT to transfer out of a defined benefits pension scheme. The benefits attached to these pensions, sometimes known as final salary schemes, are excellent compared to defined contribution schemes, guaranteeing you an income for life rather than drawing an income from a finite fund.

        It’s really important that you take proper advice before you make a transfer, as you can’t change your mind once you’ve proceeded. In fact, if the value of your defined benefits is calculated as more than £30,000, you are legally required to take regulated financial advice and to provide evidence of this to a new provider.

        Speak to a pension transfer advisor

        Understanding the transfer value of your pension is a complex business and it’s a big decision to consider moving to a different scheme, especially transferring out of a defined benefit pension. You may like the idea of streamlining all of your pensions into one pot, but there is a lot more to consider than ease of management.

        Fortunately you don’t have to do this work by yourself. A pensions advisor can review all of your current pension schemes and help you weigh up the pros and cons of each, and the benefits to be gained by transferring. Give us a call on 0808 189 0463 or make a quick online enquiry and we can match you with an expert pensions advisor who will be able to carry out a free pension review and help you make the best decision for you.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

        1 of 2
        2 of 2 Send!

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

        Continue Reading

        Pension Transfers Overview

        A Complete Guide to Pension Transfers

        Mis-Sold Pension Transfers

        Pension Transfer Values

        TUPE Transfer Pensions

        A Guide to Nest Pension Transfers

        A Guide to Pension Transfer Options

        A Guide to Police Pension Transfers

        A Guide to Protected Rights Pension Transfers

        Brexit and Pension Transfers

        Bulk Pension Transfers

        Can I transfer my pension into property?

        Can I Transfer My Pension Myself?

        Can I Transfer my Pension to Another Person?

        Civil Service Pension Transfers

        Deferred Pension Transfer

        Defined Benefit Pension Transfers

        Final Salary Transfer

        Getting the Best Pension Transfer Deals

        Guaranteed Minimum Pension (GMP) Transfer

        How Long Should a Pension Transfer Take?

        How to transfer a British Steel pension

        How to Transfer An ISA Into a Pension

        New Zealand Pension Transfers

        NHS Pension Transfers

        Occupational pension transfers

        Pension Protection Fund Transfers

        Pension Risk Transfer

        Pension Transfer Advice

        Pension Transfer After Divorce

        Pension Transfer Fees & Charges

        Pension Transfer Ireland

        Pension Transfer Rules

        Pension transfers from UK to Spain

        Pension Transfers India

        Pensions transfers upon death

        Private Pension Transfers

        QROPS Pension Transfers

        SERPs Pension Transfers

        Should You Transfer Your Pension?

        Stakeholder Pension Transfer

        State Pension Transfer

        Teacher Pension Transfer

        Transfer Army Pension

        Transfer Local Government Pension

        Transfer Overseas Pension To The UK

        Transfer Pension Abroad

        Transfer Pension From Previous Employer

        Transferring a Pension into an ISA

        Transferring a Pension to a New Provider

        Transferring a Pension to Another Provider

        Transferring a Section 32 Pension

        Transferring a UK pension to France

        Transferring Defined Contribution Pensions

        Transferring Pensions Into One

        Transferring Small Pension Pots

        Transferring Workplace Pensions

        UK pension transfer to Canada

        UK Pension Transfer to Australia

        UK Pension Transfer to USA Providers

        Where Can You Transfer Your Pension To?

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.