Defined Benefit Pension Transfer Advice

Defined Benefit Pension Transfer Values 2023

Feb 20, 2023 | DB Pension Transfer

Defined Benefit Pension Transfer Values 2023

Will transfer values go back up?

This is a question a lot of people are asking at the moment because most have seen their own transfer values reduce from where they were a year ago.

It’s important, however, to add some context.

Transfer value changes since 2021

Following a prolonged and unprecedented period of low interest rates, average transfer values hit a ‘peak’ in December 2021 and early 2022. However, from the early months of 2022 we have seen values initially level out and then in most cases drop – in some cases quite considerably, particularly following the ‘Liz Truss’ budget in September 2022.

What’s happening now?

So far, in late 2022 and early 2023, we are starting to see values stabilise and even some small increases again upon recalculation.


Reference: XPS Transfer Value Tracker

What’s going to happen in the future?

Unless interest rates fall significantly (which appears very unlikely), the chances of transfer values getting back to their peak of late 2021 are very remote – even in the very long term.

We have moved out of the period of virtually zero interest rates and minimal inflation, into a period where inflation is going to be much higher, and the corresponding interest rates will be much higher too. This will lead to transfer values stabilising where they currently are.

Why should I not worry?

A transfer value is meant to be, by definition, a fair reflection of the potential cost of buying the same level of income as the current defined benefit scheme would have provided. Despite the falls, because pension annuity rates have also increased, a transfer may not necessarily be ‘poor value’ even where it has reduced compared to its previously high point.

Should I delay transferring and wait for values to increase?

As already described, current values seem to have stabilised and are not going to be increasing for a very long time. The fact that they are lower than they were in early 2022 has little bearing on the suitability of a transfer.

Additionally, transferring any defined benefit pension is considered high risk and is only likely to be suitable for a small number of people; for example, those needing greater ‘control’ of their benefits, flexibility in how and when they are taken, and finally the decision of who might benefit in the event of their death.

Ultimately, this is an individual consideration, and the suitability of a transfer is not dependent on a previous and no-longer available value, but the current merits of the value of the transfer compared to the scheme, along with the importance of the objectives set against personal circumstances.

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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).