What is an annuity pension?
Question asked by Emma Douglas
I’m thinking about moving my pension to another pension fund and have been given a ‘pension transfer value’. Is this how much I would get?
A pension transfer value is the amount your existing pension scheme will pay to your new pension provider if you want to move your pension across to a different scheme.
For a defined benefit scheme, your pension transfer value is calculated by the trustees of your pension scheme, who convert the benefits you’ve built up over the years into a cash sum. The transfer value is sometimes also known as a cash-equivalent transfer value (CETV).
You might sometimes be offered a higher transfer value, known as a transfer incentive or an enhanced transfer value. The enhancement can only be made to the receiving scheme (previously these enhancements could be paid as an immediate cash payment to the member).
It’s important to benchmark your final salary pension transfer value against the rest of the industry to make sure you’re getting a good deal. We’ve built our Defined Benefit Pension Transfer Calculator to help with just that.
Many employers offer these incentives to encourage members to transfer out and therefore reduce the employer’s liability to scheme. It’s a good idea to seek pension advice if you’re uncertain whether to accept the transfer value you’ve been offered.
If you’re in a defined benefit scheme that’s under-funded, bear in mind that the transfer value you are offered may not be as much as you were expecting.