Defined Benefit Pension Transfer Advice

Pension Investment Risk and Volatility

If you are thinking about transferring your defined benefit pension scheme, there are many factors that you need to consider, not least of which is how your pension fund is invested and the associated risk.

Investment risk and volatility
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Beginners guide to Pension investment risk and volatility

Transferring a defined benefit pension to a defined contribution pension scheme, such as a personal pension, means you will be moving into an arrangement where future benefits are reliant upon investments and how much is in the “pot” rather than a guarantee based on what you were earning when you left your old DB scheme.

In other words, you are coming out of an arrangement that has guarantees and where none of the investment risk is borne by you and moving into an arrangement where there are not any guarantees and ALL the investment risk is borne by you.

Where you choose to invest (once the money has been transferred) would depend on how you feel about investment & the associated risks.

Firstly, what experience of investing have you had?

No Experience:

We need to explain the principles of risk and reward and the fact that usually the more risk you take the more money you can make but equally, the more you can lose – see Investment Volatility section below.

Within an investment, what usually controls the level of risk you take is how much your new fund invests on the stock market e.g. company shares (shares are classed as a type of asset).

You can also invest in what are broadly considered lower risk assets – the main ones are cash, bonds and property. These can still go up and down too but usually to a lesser extent than the stock market.

Some Experience:

If you have some experience – then you probably already understand these basic principles of risk versus reward.

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Investment Volatility

Volatility is the variation between the rise and fall of a chosen investment strategy. It is often referred to when describing a financial market that can experience unpredictable and sometimes sharp movements in prices.

The purpose of the investment volatility chart below is to give you a simple indication of the potential volatility of various investment categories, by looking at best and worst calendar year performance.

The period of 2008-2015 has been chosen because it includes two particularly volatile years (2008 and 2009) where historically high levels of loss and gain were recorded.

This graph aims to represent the relationship between risk and volatility moving from left to right (low to high risk). As displayed, an increase in risk usually means greater volatility:


Source: Royal London.

These returns are based on past performance, which is not a guide to the future, and actual future returns could be more or less than the best/worst years illustrated.

This general overview of how investments work should not be seen as advice, but an introduction to investments and their associated risks. By talking to us, we can assist with choosing what best suits you, there are no right or wrong options.

Pension Transfer Consultation

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Free Pension Transfer Guide & Consultation
If you would like to find out if transferring your pension or taking a cash lump sum is suitable for you, we can provide a free initial Pension Transfer Consultation known as abridged advice.

Simply complete your details below, and we will send you our Pension Transfer Consultation Pack and Enquiry Form.

As part of the consultation we will look at:

  • What existing pension plans you have in place.
  • What your plans are for retirement.
  • Your needs for flexibility and control.
  • The likely cost of more in-depth advice.

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Defined Benefit Pension Transfer Warning

Transferring away from a defined benefit pension scheme means you will lose valuable guarantees.

Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash.

If you release all your money from your pension early you will not have anything left to provide you with income in retirement.

When releasing cash from your pension, usually up to 25% is tax free, the balance is taxed at your marginal rate at the time and could change in the future.

Watch the FCA video explaining the expectations of financial advisers when advising you on defined benefit pension transfers.

Grove Pension Solutions Ltd is authorised and regulated by the Financial Conduct Authority (Reference number 465051).