DB Pension CETV Worth It Calculator

Enter the annual pension income you would receive from the defined benefit scheme at your normal retirement date. This is the gross figure before tax, as shown on your scheme benefit statement. If the scheme pays a separate spouse's pension, note that separately — it is a valuable extra benefit that the CETV must effectively buy back.

Enter the CETV figure from your most recent transfer value statement issued by the scheme. CETVs are valid for three months from the date of calculation. Request a fresh one if yours is older. The CETV must be issued within the statutory timeframe (usually three months of the application) before any transfer can proceed.

Enter your current age and the number of years to project. Most financial planners model to age 90 or beyond for retirement planning, as many people in good health at 55 or 60 will live 30+ years more. The longer the projection, the more the DB's inflation protection compounds in value.

Set the annual indexation rate for the DB pension (check your scheme rules — it is often CPI-capped at 2.5% or 5%). Enter the annuity rate you could buy with the CETV today — this represents the income a personal pension pot could provide. Current annuity rates are available from brokers such as Hargreaves Lansdown or Retirement Line.

The CETV multiple is calculated as the transfer value divided by the annual pension. For example, a £400,000 CETV against a £15,000 annual pension gives a multiple of 26.7x. Most independent advisers consider multiples above 25x to need careful scrutiny, and above 35x to carry particular complexity. The multiple alone does not tell you whether to transfer.

The chart shows projected cumulative income from the DB scheme (indexed) versus projected cumulative income from the CETV invested and drawn as an annuity. The point where the two lines cross is the break-even age — the point at which you would have received the same total income from either option. Living beyond that age makes the DB more valuable in cumulative terms.

Print or share the chart and multiple with the independent financial adviser you engage for the formal advice process. Having these figures ready helps you ask more specific questions and understand the adviser's recommendation in context.

The CETV multiple — transfer value divided by annual pension — is a shorthand for how many years of raw income the transfer value represents. A multiple of 25x means the transfer value could fund 25 years of pension income if invested at zero real return. Historically, the wider transfer market has used multiples broadly around 20–25x as a reference point, with higher multiples in low-interest-rate environments.

However, the multiple does not capture indexation, spouse's pension, death benefits, longevity risk, investment risk, or the cost of financial planning once the DB is gone. A 30x multiple that sounds attractive can still be poor value for a 55-year-old in good health with a guaranteed indexed pension.

The Financial Conduct Authority (FCA) has made clear that for most people, remaining in a DB scheme is likely to be in their best interests. The FCA expects advisers to start from a presumption that transfer is not suitable and to require strong positive reasons before recommending a transfer.

Reasons that can make a transfer suitable in some cases include: serious ill health (short life expectancy), no financial dependants, substantial other guaranteed income covering essential expenditure, very large CETV with flexible legacy planning goals, or employer insolvency risk in a scheme not protected by the PPF. These scenarios are assessed case by case in the regulated advice process.

A defined benefit (DB) pension promises a specific income at retirement, typically based on your salary and years of service. The employer bears all the investment risk and longevity risk. Once in payment, the income continues for life regardless of how long you live or how markets perform.

A defined contribution (DC) pension builds a pot based on contributions and investment returns. At retirement, the pot can be drawn down or converted to an annuity. The member bears investment risk and longevity risk. If the pot runs out or investments fall, the income falls with it. Transferring from DB to DC means taking on risks that the DB scheme currently absorbs on your behalf.