Defined Benefit Pension Transfer Value Calculator

The first calculation is to give you an estimate of the transfer value range you might be offered based on your deferred pension. A deferred pension is one you are entitled to at retirement, or from a previous employer. But it must be before you have either taken the cash sum, or started the pension. If you are already receiving a defined benefits pension you can’t get a transfer value.

The transfer value will depend on your age, the level of forecast pension when you retire, your retirement date and how generous the annual increases are on your pension both in deferment and when it gets paid. The range calculated is for illustration purposes only and does not constitute advice.

1. The calculator requires that your future pension value is expressed in today’s money terms. Scheme statements will generally tell you the value of your pension on the date you left the company, which could have been many years ago. In deferment, your pension is annually ‘revalued’ by a certain percentage to help it keep pace with inflation. Sometimes, the rate by which your pension is revalued each year is recorded on the statement. If not, an estimated revaluation rate of 3% a year will give you a good idea of the likely value in today’s money terms. Sometimes, a scheme statement only provides a projection of what your pension will be at retirement age which, again, could be many years away. To work out the value in today’s money terms, discounting the projected value by 2.5% a year from the scheme’s normal retirement date to today’s date will provide a decent estimate of the value in today’s money terms.

   2. You then need to say whether your pension is payable at age 60 or 65. If it is payable at a different age, take the age that’s closest.

What it tells you

The first output is a guide to the potential Defined Benefits transfer value range. This transfer value must in the first instance go in to an HMRC registered pension scheme, Once transferred, you will be able to take advantage of the new pension rules to avoid an annuity purchase and leave pension values for the next generation.

Transfer values are individually calculated by your scheme’s actuaries and values will vary from person to person and scheme to scheme, so we have given a range within which most transfer values should fall. As a guide to where you might be in the range:

• The nearer you are to retirement the higher up the range you should be
• The more generous the annual increases to your pension in deferment and in payment and the larger the widow/er’s benefit, the higher up the range you should be
• If you are in a funded state-backed scheme, your transfer value will likely be lower down the range
• If your scheme has a large deficit, your transfer value could be significantly lower
  If you are in an unfunded state scheme, you will not be offered a transfer value.
• If you know your exact transfer value you can add this into the relevant field in the calculator; otherwise the estimated value will be used in the calculation.

Important information

The investment return rates would not be guaranteed and the cash sums and pension income you will be able to draw, and any residual value you will be able to pass on, from a transferred pension will depend on how much investment return your fund actually makes.

In a defined benefits scheme, the cash and pension payments are fixed and guaranteed by your scheme and previous employer. Both defined benefits pension benefits and transfers are relatively complex and you should always take advice about your options as you approach retirement. A transfer out of a defined benefits scheme is irreversible and can only be done after advice has been given by a qualified adviser.

If you are a member of a pension scheme with safeguarded benefits, it is likely it would be in your best interests to retain the safeguarded benefits.

Make sure you understand all the risks before investing. The value of investments and the income they produce can fall as well as rise and you may not get back your original investment. Once you transfer, you will become responsible for the management of your investments.

Tideway cannot be held responsible for any investment losses based on investment decisions made using this calculator without personalised advice from one of Tideway’s advisers.

Any information contained within this website should not be deemed to constitute investment advice and should not be relied upon as the basis for a decision to enter into a transaction, or as the basis for any financial or investment decision. Investors should always seek professional advice in regard to the suitability of any investment.