Transferring a defined benefit (DB) pension isn’t for everyone. While a transfer could give you more control and freedom over your pension, you could also be giving up valuable benefits and guarantees that can't be replaced.
A DB pension transfer can’t be reversed. Once you've transferred you can't change your mind and get back the guaranteed income your scheme would've paid. Our guide to transferring out of your pension highlights the main reasons for and against transferring. A financial adviser can help you understand your options.
The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) say “it will be in most people’s best interests to keep their DB scheme”1
What is a defined benefit pension?
Defined benefit (DB) pensions are a type of pension where your employer promises to pay you a set amount of income when you retire. There are two main types of DB pension:
Final salary pension
A final salary pension is based on:
- Your salary when you leave your employer.
- How long you’ve been a member of the scheme.
Career average pension
A career average pension is based on:
- Your average earnings throughout your time in the scheme.
- How long you’ve been a member of the scheme.
Both types provide a regular income in retirement, although the amount you receive is calculated differently.
Can I transfer my DB pension?
Whether you can transfer out of your DB pension depends on the scheme you're in. For example, you usually can’t transfer out of a public sector scheme, like the NHS, Armed Forces, Teachers or Civil Service pension schemes.
You may be able to transfer from other schemes, including private sector DB pensions and the Local Government Pension Scheme (LGPS).
If you can transfer, and choose to do so, your existing scheme will work out your cash equivalent transfer value (CETV). This is the amount they’ll offer you if you decide to transfer to a defined contribution (DC) pension.
Even if your scheme allows transfers out, it's usually not possible if you’re within one year of the scheme’s normal pension age.
Remember:
A high CETV might look appealing, but it doesn’t always mean good value. You could still be giving up a guaranteed income and valuable benefits that can’t be replaced.
Should I transfer my defined benefit pension?
The pros and cons at a glance
While a transfer can offer greater flexibility and control over how you access your pension, it also means giving up valuable guarantees and benefits that you can’t get back.
Pros
- More overall flexibility when taking your pension money
- Potential access to more tax-free cash
- More investment choice
- More options for passing money on.
Cons
- Loss of guaranteed income
- Loss of valuable benefits
- Investment risk
- Loss of inflation protection
- Loss of guaranteed pension for dependants.
What are the differences between a DB and DC pension?
Defined benefit and defined contribution pensions work in different ways. They offer different levels of guarantees, options at retirement, flexibility, and control. That's why it's important to understand exactly what could change before deciding whether to transfer from a DB to a DC pension.
| Feature | Defined Benefit | Defined Contribution |
| Guaranteed income | Yes | No |
| Investment risk | Owned by the scheme | Owned by you |
| Inflation protection | Often included | No |
| Flexibility | Lower | Higher |
| Tax-free cash | Your scheme's rules will explain how much tax-free cash you're entitled to | 25% of pension savings subject to maximum of £268,275 |
| Death benefits | Your spouse, partner or eligible dependants may receive a pension or lump sum, depending on scheme rules and when you die | Any remaining pension savings can be passed to your chosen beneficiaries |
Reasons not to transfer your DB pension
You get a guaranteed income for life
Your pension pays a guaranteed income for as long as you live, so you don’t have to worry about your money running out. If you transfer to a defined contribution pension, you'll need to manage withdrawals to make sure your pension savings last as long as you do.
You're protected from investment risk
Investment ups and downs won’t affect your pension income. The scheme must pay you your pension at retirement and they carry the investment risk.
Your income is often protected against inflation
Many DB pensions include inflation protection, helping your income keep its spending power over time. How much protection your DB pension offers depends on the rules of the scheme. It also depends on when you became a member.
Example:
Your starting DB pension is £150 a week.
Inflation runs at 2% a year.
| Time | Weekly pension |
| After 5 years | £166 |
| After 10 years | £183 |
| After 20 years | £223 |
Your loved ones could be looked after when you die
Your DB pension will usually provide a pension and possibly a lump sum for your spouse, partner or other eligible dependants when you die.
What gets passed on depends on your scheme's rules and your personal circumstances. This is a valuable benefit to consider when deciding if transferring is right for you, as you could lose these survivor benefits if you transfer elsewhere. For more information read our what happens to your pension when you die guide.
Your pension might be protected by the Pension Protection Fund
The Pension Protection Fund (PPF) (opens in a new window) protects members of eligible DB schemes if their employer goes out of business and can’t pay their pension. Public sector schemes like the NHS, Teachers and Civil Service pensions are not protected by the PPF but are instead protected by the government. Our guide has more information on how your pension is protected.
Reasons you might consider transferring out of a DB pension
Potential access to more tax-free cash
You might be able to take a larger tax-free cash lump sum from a DC pension than from a DB pension. That’s because you can normally take 25% of your DC pension tax-free.
DB schemes also allow you to take tax-free cash, but the amount available will depend on your scheme's rules. For example, it could be based on a multiple of your annual pension income, or you give up annual income for more tax-free cash.
More flexibility over how you take your money
A transfer to a defined contribution pension can give you more choice over when and how you take your retirement income, giving you greater control. For comparison, if you take your DB pension before the scheme’s normal pension age, your annual income will normally be reduced.
More options for how you pass on your pension savings
A defined contribution pension can offer greater flexibility for passing pension savings to a wider range of beneficiaries when you die, for example leaving money to relatives who aren’t your dependants, friends or a charity.
If you die and still have money in your DC pension, your beneficiaries can usually choose to take this out as cash, move the money into drawdown or buy an annuity. For more details read our what happens to your pension when you die guide.
More control over your investment
Transferring gives you the freedom to choose how your pension is invested, but you'll also take on the investment risk and risk of having enough money in retirement.
Remember:
Transferring a defined benefit pension means giving up guaranteed income for life.
When might transferring out of a DB pension be right for you?
If you’re in ill health
If you're in ill health, transferring might appeal to you as the value offered for your DB pension is usually based on an average life expectancy. This might be especially true if you aren’t in a relationship and don’t have any children as on your death, your DB pension comes to an end.
You want to leave money to a wider range of beneficiaries
If leaving money to people who may not be entitled to benefits from your DB pension is important to you, a transfer to a DC pension could offer more flexibility.
Important information:
Pension inheritance tax (IHT) rules are changing from 6 April 2027. Any unused DC pension savings may form part of your estate for inheritance tax purposes. DB Pensions for a dependant won’t be subject to IHT but lump sums from a DB pension may form part of your estate.
What do I need to do before transferring my DB pension?
1. Find out your cash equivalent transfer value (CETV)
A cash equivalent transfer value (CETV) is the amount your scheme offers if you decide to transfer. It’s based on factors like your projected income, age, life expectancy, interest rates, inflation and survivor benefits.
2. Understand how much financial advice will cost you
If you’re thinking about financial advice, make sure you know how much it’ll cost. Your adviser’s fee should be the same whether or not you decide to transfer.
3. Speak to a financial adviser
Transferring a defined benefit pension is complex. A financial adviser can help you understand if it’s right for you.
Watch out for DB pension transfer scams
Scammers often target defined benefit pensions because of their high transfer value. Knowing the risks can help you protect your pension.
Common warning signs include:
- Unexpected contact about your pension – cold calling about pensions is illegal in the UK.
- Offers of a free pension review – scammers may use these to access to your personal information.
- Promises of early access to your pension – you can't usually access your pension before age 55 (rising to 57 in 2028), except in certain circumstances like ill health.
- Promises of high or guaranteed returns – be wary of investments that sound unrealistic or suspicious.
Before transferring your pension, check that any adviser or firm is authorised by the Financial Conduct Authority (FCA).
1Financial Conduct Authority, Considering a pension transfer: DB | FCA
Frequently asked questions
Should I transfer my final salary pension?
For most people, keeping a final salary or career average pension where it is makes the most sense, as it provides a guaranteed income for life. You might consider transferring if you want more flexibility and control or death benefit planning purposes. Speak to a financial adviser to explore your options.
Can I transfer a DB pension without financial advice?
Yes, if your DB pension CETV is worth under £30,000 you can transfer without advice. If it's worth more than £30,000, you must take financial advice.
What happens to my DB pension if my employer goes bankrupt?
Eligible defined benefit schemes have protection through the Pension Protection Fund (PPF) (opens in a new window), meaning if your employer goes out of business, the PPF will pay you instead. Public sector pensions, for example the NHS, aren’t protected by the PPF but by the government.
Can I transfer my DB pension if I’ve started taking money from it?
No, once you’ve started taking a defined benefit pension you can’t transfer it.
