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Home›UK›Pension Transfer Calculator

Pension Transfer Calculator

Analyse your defined benefit (DB) pension transfer offer for 2025/26. Calculate the transfer value ratio (CETV / annual pension), implied critical yield, compare death benefits between DB and DC pensions, and check whether FCA regulated advice is mandatory for your transfer.

Analyse your DB pension transfer offer — transfer value ratio, critical yield, and risk assessment
£
The annual pension your DB scheme promises to pay from retirement age
£
Cash Equivalent Transfer Value — the lump sum your scheme is offering to transfer out
The normal retirement age in your DB scheme rules
How your DB pension increases in payment — this affects the true value of the guarantee
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How to Use This Calculator

Transfer Analysis tab

Enter your DB pension annual amount (the income your scheme promises at retirement) and the CETV offered (Cash Equivalent Transfer Value — the lump sum the scheme will pay to transfer out). Add your current age and scheme retirement age. The calculator shows the transfer value ratio (CETV ÷ annual pension), the critical yield (investment return needed to match the DB income), and a risk assessment based on current market conditions.

Death Benefits tab

Compare what happens to your pension when you die. For a DB pension, typically only your spouse or civil partner receives a pension (usually 50%) — nothing passes to children, grandchildren, or others. For a DC pension, the entire remaining pot can pass to anyone you nominate, tax-free if you die before 75. This tab shows the full comparison including the April 2027 IHT changes.

Do I Need Advice? tab

Enter your CETV to check whether FCA regulated advice is mandatory. If your CETV exceeds £30,000, you must receive advice from an FCA-authorised pension transfer specialist before any transfer can proceed. The calculator shows the typical cost of advice and explains the insistent client route for those who wish to transfer against the adviser's recommendation.

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The Formula

Pension transfer analysis uses several key metrics to assess whether a DB to DC transfer is likely to benefit or harm the member:

Transfer Value Ratio:
TVR = CETV ÷ Annual DB Pension
Example: £300,000 ÷ £15,000 = 20x
Current market range: 15–22x (2025/26, driven by gilt yields)

Critical Yield:
The annual investment return r where:
CETV × (1+r)years to retirement = Annual Pension × ((1 − (1+r)−years in retirement) ÷ r)
A critical yield above 5% is generally difficult to achieve after charges

Sustainable Drawdown (4% Rule):
Annual income from DC = (CETV × 75%) × 4%
(75% because 25% is taken as tax-free lump sum)

DB Spouse Pension on Death:
Spouse pension = Member's pension × Scheme rate (typically 50%)
No pension to non-dependants — pension ceases on last dependant's death

DC Death Benefit (before 75):
Entire remaining pot → any nominee → tax-free
(From April 2027: included in estate for IHT, but spouse exempt)

The transfer value ratio is the simplest indicator of whether a CETV offer is generous or poor. A ratio of 20x or above was considered good before 2022; since gilt yields rose sharply, ratios have fallen to 15–22x for most schemes. The critical yield provides a more precise measure by accounting for your age, retirement date, and expected years in retirement.

FCA guidance (FG21/3) requires advisers to start from the assumption that a transfer is NOT suitable. The adviser must demonstrate clear, personalised reasons why transferring would benefit the member before recommending it.

Example

Sarah, 55 — Senior Manager, married with two adult children

Sarah has a DB pension from a former employer promising £15,000/year from age 65. She has received a CETV offer of £300,000. She wants to understand whether transferring makes sense.

Transfer analysis

DB pension£15,000/year from age 65
CETV offered£300,000
Transfer value ratio20.0x (mid-range for 2025/26)
Years to retirement10 years
Critical yield~4.8% per year
Risk assessmentModerate — achievable but not guaranteed
Sustainable DC income (4% rule)£9,000/year (vs £15,000 from DB)

The 4% rule gives Sarah only £9,000/year vs the guaranteed £15,000 from the DB scheme — a shortfall of £6,000/year. To match the DB income, Sarah would need her investments to achieve at least 4.8% annual returns after charges for 35 years.

Death benefits comparison

DB: spouse pension£7,500/year (50% of £15,000)
DB: to children£0 (no entitlement)
DC: to anyone (if die before 75)£300,000 tax-free
DC: to anyone (if die at 75+)£300,000 taxed at beneficiary's rate

If Sarah's priority is leaving wealth to her children, the DC pension offers significantly more flexibility. If she is married and her husband would rely on her pension income, the guaranteed DB spouse pension of £7,500/year for life is valuable.

Advice requirement

CETV£300,000 (above £30,000 threshold)
Regulated advice required?Yes — mandatory
Estimated advice cost£4,500 to £9,000 (1.5–3% of CETV)

Sarah must receive regulated advice from a pension transfer specialist before her transfer can proceed. The cost of advice is significant, but the FCA considers it essential protection against unsuitable transfers.

FAQ

CETVs are driven by gilt yields. When gilt yields are low, it costs more to buy the same guaranteed income, so CETVs are high. When gilt yields rise (as they did sharply from 2022 onwards), CETVs fall. The September 2022 gilt crisis (triggered by the mini-budget) caused some CETVs to drop by 30–50% in a matter of weeks. Since then, yields have remained elevated compared to the 2010s, keeping CETVs in the 15–22x range for most schemes. If yields fall in future, CETVs may rise again — so timing matters. However, you can only request one CETV quote per year from your scheme.
The British Steel Pension Scheme (BSPS) was restructured in 2017, and around 8,000 members were advised to transfer out of the scheme. The FCA subsequently found that approximately 46% of this advice was unsuitable — advisers recommended transfers that were not in the members' best interest. The FCA has ordered over £100 million in redress and has banned individual advisers involved. Of those advised NOT to transfer, 13% (~9,534 members) proceeded as insistent clients, many of whom suffered financial losses. The scandal led to the FCA banning contingent charging (October 2020) and strengthening transfer advice rules via FG21/3. Source: FCA enforcement actions on BSPS.
The Pension Protection Fund (PPF) is a statutory lifeboat that protects members of DB pension schemes if the sponsoring employer becomes insolvent and the scheme cannot pay the promised benefits. If you are at or above your scheme's normal pension age, PPF pays 100% of your pension. If you are below that age, PPF pays 90% (subject to an annual cap, currently around £44,000 for someone aged 65). If you transfer your DB pension to a DC scheme, you lose PPF protection entirely — if your DC investments perform poorly, there is no safety net. This is one of the key risks of transferring and a factor advisers must consider when assessing suitability.
Most DB pension schemes do not allow partial transfers — it is typically all or nothing. You either transfer the entire CETV to a DC scheme and give up all your DB benefits, or you keep the full DB pension. Some schemes offer a limited option called a "partial transfer" or "cash equivalent transfer value sharing" (used in divorce via pension sharing orders), but this is not the same as voluntarily choosing to transfer half your pension. If you want both guaranteed income and investment flexibility, a better approach may be to keep the DB pension and build a separate DC pension alongside it. Always check your scheme rules and seek regulated advice.
From 6 April 2027, unused DC pension funds will be included in the deceased's estate for Inheritance Tax (IHT) purposes. Currently, DC pensions are outside the estate — which has been a key advantage over DB pensions for estate planning. After April 2027, this advantage is reduced (though not eliminated, as the spouse exemption still applies). For pension transfer decisions, this means the death benefit advantage of DC pensions is less clear-cut than before. However, DC pensions still offer flexibility in who can inherit (anyone vs. spouse only for DB). The April 2027 change does not affect DB pensions directly, as DB dependant pensions are already paid from the scheme trust. Source: GOV.UK — Inheritance Tax on unused pension funds and death benefits.

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