Deciding whether to transfer out of a Defined Benefit (DB) pension scheme in 2025 is one of the most critical financial choices UK pension holders will face. The landscape for pension transfers has become increasingly complex, with regulatory changes, market fluctuations, and personal financial goals all playing a role. Understanding the pros and cons of transferring your DB pension is essential before deciding, as it will impact your financial future.
In this article, we’ll explain why most pension holders are advised to stay in their DB scheme, the key factors that might make a transfer beneficial, and why accessing regulated pension transfer advice is becoming increasingly difficult.
Why Most People Will Be Advised to Keep Your DB Pension?
DB pensions offer a guaranteed, inflation-linked income for life, something that’s hard to beat, especially in uncertain market conditions. Unlike Defined Contribution (DC) pensions, which rely on investment performance, DB pensions provide stability, making them a safer choice for most people.
While the S&P 500 has averaged around 10% growth annually over the past 30 years, markets can also go through prolonged periods of poor performance. A “lost decade” could drastically impact pension pots without guaranteed growth, making DB schemes a more secure option.
Why Do People Still Transfer DB Pension?
Despite the security of DB pensions, some individuals still choose to transfer. Personal circumstances often play a key role in this decision. Some clients want more flexibility and control over their income especially if they aim for early retirement.
For example, a client who worked night shifts for over 30 years could not retire early under his DB scheme due to income restrictions. After transferring his pension (worth around £500,000) and drawing less than 4% annually, he was able to retire early and enjoy a better quality of life. Under his DB scheme, he would have had to wait several more years.
While DB pensions provide security, they lack flexibility. If early retirement, health concerns, or unique family circumstances are priorities, a transfer may be worth considering. However, financial advisers must rely on hard facts rather than emotions, making the process strict and regulated.
The Role of the Pension Transfer Specialist
At Cameron James, All Defined Benefit (DB) pension transfer enquiries involving safeguarded benefits are handled by an independent, FCA-regulated Pension Transfer Specialist (PTS) firm. This means we provide pension and investment advice under the two-adviser model but do not assess DB transfer suitability. The PTS firm operates independently, and clients fall under its regulatory jurisdiction. This provides all our clients with enhanced security over their pension assets.
Interestingly, most clients who go through this process already expect to be advised against transferring. However, many still proceed, making them what the industry calls “insistent clients.” On the other hand, some change their minds after seeing detailed annuity comparisons and financial projections, leading to more informed decisions.
Should You Wait for Higher CETVs?
Some pension holders are delaying their decision, hoping that Cash Equivalent Transfer Values (CETVs) will rise if UK base rates fall. However, this assumption can be risky.
CETVs aren’t driven by the Bank of England base rate. Instead, they are largely based on 20- and 30-year UK gilt yields. While there’s a general relationship between base rates and gilts, it's not a reliable one, especially in today’s political and economic environment.
With both the UK and US governments signalling increased borrowing and fiscal expansion, long-term gilt yields have been rising. This means CETVs are unpredictable, and waiting could mean missing out on potential opportunities.
Is DB Transfer Advice Becoming Harder to Access?
Another growing concern is the shrinking availability of Defined Benefit transfer advice. Increasing regulatory compliance costs are forcing many Pension Transfer Specialists out of the market. This means fewer professionals are available to give advice, and the costs for those remaining are rising.
In 2016, DB transfer advice reports cost around £500. Today, the average fixed DB advice report costs £3,500 and continue to climb. While this cost may be manageable for large pension holders, it creates a barrier for many clients.
As a result, if you’re considering DB Advice, it may not be the best idea to wait too long. Costs may increase further, or access to regulated advice may become even more limited.
Final Thoughts
Transferring a DB pension isn’t just a financial decision, it’s a life decision. While data and regulations often advise staying put, personal circumstances may justify a transfer. That’s why consulting a qualified adviser is essential. Even if you choose to keep your Defined Benefit scheme, making an informed decision will give you confidence in your retirement planning.
At Cameron James, initial consultations are free, whether via phone, Zoom, or email. If you’re ready to explore your options, now is the time to take action.
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Disclaimer: All Defined Benefit (DB) pension transfer enquiries involving safeguarded benefits are handled by an independent, FCA-regulated Pension Transfer Specialist (PTS) firm. We provide pension and investment advice under the two-adviser model but do not assess DB transfer suitability. The PTS firm operates independently, and clients fall under its regulatory jurisdiction. This provides all our clients with enhanced security over their pension assets.