Should I transfer my defined benefit pension — what are the rules?

A defined benefit (DB) pension — sometimes called a final salary pension — promises a guaranteed income for life, usually based on your salary and years of service. Transferring it means giving up that guarantee in exchange for a cash transfer value that you move into a personal pension, typically a self-invested personal pension (SIPP).

The rules are strict because the stakes are high. If your transfer value is £30,000 or more, you are legally required to take regulated financial advice before you can proceed — the scheme cannot transfer the money without evidence that advice has been taken. This rule exists because giving up a guaranteed income is irreversible and often not in the member's interest.

An adviser assessing a DB transfer must be specifically authorised by the FCA (Financial Conduct Authority, the UK regulator) to give pension transfer advice. They will produce a transfer value analysis comparing what the guaranteed income is worth against what you might realistically achieve by investing the transfer value yourself.

Factors that typically come into consideration include: the size of the transfer value, your health, other retirement income sources, how much flexibility matters to you, and — from April 2027 — the fact that unspent pension funds will be brought into the estate for inheritance tax purposes, which changes the estate planning picture for some people.

The FCA has historically found that staying in a DB scheme is in most people's best interests, though individual circumstances vary considerably.

A regulated IFA with DB transfer permissions can assess whether a transfer makes sense for your specific situation.