What Is a Pension Transfer Value?

If you’re planning for retirement and reviewing your pension options, one term you’re likely to come across is “pension transfer value”.

But what does it mean, and why is it important?

In this in - depth guide, we’ll explain what a pension transfer value is, how it’s calculated, what factors influence it, and how it affects your retirement planning.

Whether you’re considering consolidating pensions or transferring out of a defined benefit scheme, understanding your transfer value is key to making informed, confident decisions.

Pension Transfer Value Defined

A pension transfer value is the amount of money you’d receive if you moved your pension from one scheme to another.

This value represents the current worth of your pension benefits, calculated as a lump sum that can be transferred into another pension scheme. It’s not the amount you will receive in retirement, but the value the scheme places on your benefits today.

There are two main types of pension transfer values, depending on the kind of pension you hold:

1. Defined Contribution (DC) Pensions

With DC pensions, your transfer value is equal to your pot’s current market value. It’s simply the value of your investments, including:

• Personal contributions

• Employer contributions

• Investment returns

• Minus any charges

It fluctuates daily based on market performance.

2. Defined Benefit (DB) Pensions

For DB pensions (also known as final salary pensions), the transfer value is called the Cash Equivalent Transfer Value (CETV). It represents the lump sum the scheme calculates as equal in value to the guaranteed future income you’re entitled to.

CETVs are more complex to calculate and vary depending on many assumptions.

Why Pension Transfer Values Matter

Knowing your pension transfer value helps you:

• Assess your retirement options: Should you keep your pension where it is, or move it elsewhere?

• Consolidate pensions: If you have several pots, the transfer values help determine your total retirement savings.

• Decide between income security vs flexibility: Especially relevant when weighing DB pensions against DC options.

• Plan your legacy: A transferred pension may be easier to pass to beneficiaries than an old scheme.

Your transfer value is the starting point for making any pension transfer decision. It tells you what your current scheme is willing to offer you in return for giving up your pension rights in that scheme.

How Is a Pension Transfer Value Calculated?

For Defined Contribution Pensions

It’s straightforward: your transfer value is simply your fund’s current value, which depends on:

• Investment performance

• Contributions made

• Provider charges

• Underlying asset value (shares, bonds, etc.)

There are no actuarial calculations involved, just the value of your pension pot on a given day.

For Defined Benefit Pensions (CETVs)

CETVs are calculated using complex actuarial assumptions, including:

• Your age and expected retirement age

• Life expectancy

• Scheme rules and benefits (e.g. index-linking, spouse pensions)

• Gilt yields and interest rates

• Inflation forecasts

• The scheme’s funding position

Because DB pensions offer a guaranteed income, the transfer value must be carefully calculated to represent a fair cash equivalent.

Typically, the younger you are, the higher your CETV, because the scheme would need to fund a longer retirement income if you transfer out.

What Affects Pension Transfer Values?

Transfer values can rise or fall based on a variety of factors. Here’s what influences them:

1. Interest Rates

There’s an inverse relationship - when interest rates go down, CETVs tend to rise. That’s because pension schemes must set aside more capital to meet future liabilities when rates are low.

Conversely, when rates rise (as they have recently), CETVs often fall.

2. Inflation

High inflation can affect future pension liabilities, leading schemes to adjust CETVs accordingly.

Some may offer higher transfer values to account for increased expected payments in retirement.

3. Scheme Funding

If your DB scheme is underfunded, it may offer less generous CETVs to preserve its long-term viability. Well-funded schemes, on the other hand, might offer higher transfer values.

4. Market Performance

For DC pensions, market conditions directly impact the pot value. Strong markets mean higher transfer values, while downturns reduce them.

5. Scheme Rules

Different pension schemes use different actuarial assumptions. Some are more generous than others, there’s no industry standard for CETV generosity.

Can Pension Transfer Values Change?

Yes, they can and often do.

For DC pensions, your transfer value changes daily based on your fund’s performance.

For DB pensions, the CETV is usually calculated and guaranteed for 3 months. After that, if you haven’t proceeded with the transfer, you’ll need to request a new quote and it could be higher or lower than before.

This is why timing can matter, particularly if economic conditions are changing rapidly.

Can You Negotiate a Pension Transfer Value?

No, transfer values are not negotiable. They are calculated according to the scheme’s formula and actuarial models.

However, you can:

• Request a second CETV if you let the first one expire

• Get a different CETV based on new market conditions

• Compare offers across providers (in the case of DC pensions)

While you can’t haggle, you can improve your pension outcomes by seeking financial advice and choosing the right destination scheme.

When Might You Transfer Based on Your Transfer Value?

You might consider transferring if:

• Your DB CETV is particularly high, and you want more flexibility

• You’ve accumulated multiple DC pensions and want to consolidate

• Your current provider charges high fees

• You want to access income drawdown features

• You want to pass your pension to beneficiaries in a tax-efficient way

A high transfer value can make a pension transfer more attractive, but it must align with your retirement goals and risk appetite.

When Might You Hold Off?

There are good reasons not to transfer, even with a strong transfer value:

• You’d lose a guaranteed income for life

• You’re uncomfortable with investment risk

• Your pension offers valuable guarantees (e.g. early access, protected tax-free cash)

• You’re nearing retirement and want certainty over income

Remember: higher flexibility comes with greater responsibility for managing the money.

How to Request Your Pension Transfer Value

For DC Pensions:

• Contact your provider or log into your pension portal.

• You’ll typically see your current fund value, which is your transfer value.

For DB Pensions:

• Request a Cash Equivalent Transfer Value (CETV) statement.

• The scheme must provide one free CETV every 12 months.

• The value is usually guaranteed for 3 months.

If your CETV is above £30,000, you must seek regulated financial advice before transferring, as per FCA rules.

Should You Transfer Based on the Value Alone?

No. While the transfer value is a key consideration, it should never be the only one. You must also think about:

• Your retirement income goals

• The risk you’re willing to take

• Tax planning and drawdown strategies

• Family or legacy planning

• Overall financial security

Professional advice can help you balance these factors and make a decision that works long-term, not just today.

How Belgravia Capital Can Help with Your Pension Transfer

At Belgravia Capital Wealth Management, we work with individuals who want clarity, control, and confidence in their pension decisions.

We help you:

• Understand your pension transfer value in context

• Evaluate whether transferring makes sense

• Plan a drawdown strategy for income and legacy

• Avoid pitfalls and unnecessary tax exposure

• Navigate DB transfers with full regulatory compliance

Whether you’re just starting to explore your options or are ready to make a move, our team is here to guide you with personal, regulated advice.

Conclusion - What is a Pension Transfer Value?

A pension transfer value is a crucial number, it represents what your pension is worth today if you choose to move it. But it’s just one piece of the retirement puzzle.

Understanding how it’s calculated, what influences it, and how to interpret it can give you a real advantage as you plan for your financial future.

But don’t rely on numbers alone. Consider your lifestyle goals, family needs, and risk tolerance. And when in doubt, speak to experts who can bring clarity to the process.

Speak to a Pension Transfer Expert Today

If you’ve received a transfer value or want to explore what your pension could be worth, we can help. Belgravia Capital Wealth Management offers tailored, regulated pension transfer advice to help you make the most of your retirement savings.

Email us at contact@belgraviacapital.co.uk

Your retirement decisions matter. Let’s make them count.