Glossary · UK
What is Defined Benefit Transfer?
Moving the value of a defined benefit (final salary) pension into a defined contribution scheme by taking a cash-equivalent transfer value.
Full Definition
A defined benefit (DB) transfer is the process of giving up a guaranteed final salary or career average pension in exchange for a cash-equivalent transfer value (CETV) paid into a defined contribution arrangement such as a personal pension or SIPP. People may consider this for flexibility, inheritance planning, or to access pension freedoms, but it means surrendering a guaranteed, often inflation-linked, income for life. In the UK it is generally regarded as high risk, and for transfers valued over GBP 30,000 you are legally required to take regulated financial advice. The Financial Conduct Authority's starting assumption is that transferring out is unsuitable for most people. Once transferred, the money becomes subject to investment risk and the standard pension Annual Allowance of GBP 60,000 (with the Money Purchase Annual Allowance of GBP 10,000 applying if you have flexibly accessed benefits). The decision is usually irreversible, so careful, regulated advice is essential.