How to transfer out of a defined benefit pension

Most people are better off keeping a defined benefit pension, according to the Financial Conduct Authority (FCA) and the Pensions Regulator (TPR). 

This is because defined benefit pensions offer guaranteed benefits that you cannot get back if you transfer out.

If you transfer a defined benefit pension into a defined contribution scheme, you’ll lose the promise of guaranteed retirement income based on your salary. 

Instead, the amount you’ll get in retirement depends on how well your invested money performs – so there’s a risk you could get a lot less. You might also have to take less to make sure it lasts.

A defined contribution pension will usually allow you to take money in different ways, including taking the money in one go. This might help if you do not want to take your pension as guaranteed and regular income for life. 

For example, if you have a short life expectancy and no dependants, you might be able to access more of your pension money transferring to a defined contribution scheme.  

For more information, see our guide Should I transfer or combine my pensions?

The steps in this guide will also help you work out if transferring out is right for you. 

You can use our tool to find out your pension types or ask your pension providers. 

This guide explains how to transfer a defined benefit pension into a defined contribution pension.

For other types of transfer, see our guides about:

• defined benefit to defined benefit transfers

• defined contribution pension transfers and consolidation. 

If you’ve lost track of a pension, find step-by-step help in our guide How to find old or lost pensions.

Defined benefit pensions work differently to defined contribution schemes, so it’s important to know what you might be giving up. 

For example, as well as guaranteed income, your defined benefit pension will usually pay: 

• a regular guaranteed income to your dependants after you die – called death benefits 

• annual pension increases after it starts paying out, so the cost of living does not reduce your income over time.  

Defined benefit pensions also have no charges for you to pay. Defined contribution pensions will take fees from your pot to cover their investment costs. 

For more information, see our guide Defined benefit pension schemes: final salary and career average explained.

Switching to a defined contribution pension will mean:

• your income is based on how well your invested money performs minus any fees – there’s a chance this could be higher than your defined benefit pension, but it could be much lower 

• you get the option to choose how your pension is invested

• you can decide how you’d like to take your money – like multiple lump sums or a regular income 

• any money left in your pension can usually be inherited tax-free if you die before age 75.

For more information, see our guide Defined contribution pension schemes explained.

Many defined benefit schemes allow transfers out, but not all do. You can ask your current provider for their rules.

For example, you often cannot transfer away within a year of your normal retirement date or after your pension has started paying out.

Most public sector pension schemes will also not allow a transfer to a defined contribution arrangement.

To find out how much your pension is worth, ask your existing provider for a cash equivalent transfer value (CETV). 

This is how much the new scheme would receive and usually includes other information required for a transfer.

A CETV is usually valid for three months and your provider has up to three months to send it to you. You might have to pay for a CETV if you request more than one in a 12-month period. 

This means it’s often a good idea to find a financial adviser before requesting your CETV, to avoid it expiring.

If your defined benefit pension is worth over £30,000, you must get financial advice before you’re allowed to transfer it to a defined contribution scheme. 

This can often cost thousands of pounds. You must pay for the advice unless your employer has offered you a financial incentive to transfer out, then your employer must pay. Your current pension provider will tell you if this applies to you. 

Abridged advice might be cheaper and will tell you if a transfer is not suitable – but you’d need full advice for a positive recommendation or to go ahead with the transfer. 

You can give your current scheme's CETV to the potential new scheme or your financial adviser and ask them to explain the benefits this will buy you. 

For example, they could estimate how much retirement income your transferred pension could give you – based on predictions of the investment growth it might gain. You can then compare this to your current provider’s estimates.   

You should also check:

• how your money will be invested 

• the charges that will be taken, including an annual management fee

• if you can choose your own investments

• the age you can claim your pension, called the normal pension age – this might be older than your existing scheme. 

If you’re happy to transfer your pension, ask your existing and new schemes what you need to do. 

This typically means completing transfer forms. If advice is required, you’ll need to submit confirmation from your financial adviser that this has happened.

If your CETV is over three months old, you’ll need to request a new one from your existing scheme. If the value has changed and you need to get advice, your adviser will usually need to check the recommendations still apply to the new figures.

The two schemes will then: 

• arrange to transfer the money across

• confirm when the transfer is complete

• send you updated benefit statements.

A transfer often takes between two and six weeks, but your provider has up to six months to action your request.  

If your pension provider is slow to act, you can complain. For step-by-step help, see our guide How to complain about delays to your pension. 

When you ask to transfer your pension, your current provider must make several checks to see if there’s a risk of you being scammed.

This includes checking the type of scheme you’re transferring to, how it’s regulated, its fees and how your money would be invested.

If your provider is worried the new scheme might be a scam, they can decide to:

• stop your transfer if they have serious concerns

• delay your transfer until you’ve had a free Pension Safeguarding Guidance appointment.

For more information, see our guide What to do if your pension transfer is stopped or delayed.