If you’re thinking about transferring your defined benefit (DB) pension, one of the first things you’ll look at is your transfer value — the lump sum your scheme offers if you give up your future pension income.
But why do these values change so much? And what does it mean for you?
In this article, we’ll explain the key drivers behind pension transfer values, explore the wider context of recent trends, and help you understand whether a transfer might still be worth considering — even if values have fallen.
What Is a Pension Transfer Value?
The cash equivalent transfer value (CETV) is the amount your pension scheme would pay you today in exchange for giving up your promised income in the future. It’s calculated using complex actuarial models that take into account interest rates, life expectancy, and your pension scheme’s funding position.
Why Do Pension Transfer Values Fluctuate?
Transfer values aren’t fixed. They’re sensitive to a range of economic and demographic factors. Some of the most influential include:
- Interest Rates: As interest rates rise, transfer values typically fall. This is because schemes can assume higher returns on their investments, meaning they need to set aside less money to meet future obligations.
- Gilt Yields: DB pensions are usually backed by gilts (UK government bonds). When gilt yields rise, transfer values tend to fall for the same reason as above.
- Inflation: Higher inflation expectations can increase the cost of pension liabilities — potentially pushing up or down transfer values depending on how schemes adjust.
- Longevity Assumptions: If members are expected to live longer, schemes need to pay out for longer — and this can increase transfer values. Conversely, lower life expectancy can reduce them.
- Scheme-Specific Factors: Each scheme has its own funding level and investment strategy. Some may offer more generous CETVs than others, depending on how well-funded they are and their de-risking approach.
Interest rates, gilt yields and transfer values
Most DB Schemes are invested heavily in Gilts, which have long been seen as a low risk investment, since pension trustees are more concerned with safeguarding their investment (and their members pensions) than growing it.
Our Pension Transfer Specialist Simon Garber says “We’ve seen average transfer values pretty much halve in just under 10 years, and it’s largely down to macroeconomic forces – higher interest rates, higher gilt yields both of these can negatively impact DB Pension Transfer Values”.
Gilt yields are used by pension schemes to calculate the cost of providing future pension payments. Which is a major part of the equation in calculating transfer values. Lower gilt yields tend to increase the CETV, while higher yields tend to decrease it.
Higher Gilt Yields mean the scheme needs to set aside less money to meet the promised future pension payments due to the higher interest rate, so when they’re calculating a fair cash equivalent transfer value (CETV), it will be less.
Higher Gilt Yields might mean lower transfer values, but they have also contributed to reducing long-term pension scheme deficits and improving the financial health of many schemes.
Should You Worry About Falling Transfer Values?
A lower transfer value doesn’t necessarily mean transferring is a bad idea — or that it was ever the right one.
Many people consider transferring to:
- Access a larger lump sum
- Gain flexibility over how and when they take their pension
- Pass wealth on to loved ones
None of these goals rely solely on a high CETV — they rely on having a clear plan that works for your circumstances. Yes, lower transfer values can make it harder to hit certain income goals. But timing and market conditions matter too.
For example, during the early stages of the COVID-19 pandemic, CETVs dipped. But those who transferred during that time also benefited from market recovery in the years that followed. Those who had a solid long-term financial plan benefitted most. As any long-term investor will tell you, time in the market, often beats timing the market.
As always, it’s about your wider financial goals — not just the number on the page.
Defined Benefit Pension Transfer Values: 2025 Update
The term ‘record lows’ has been used multiple times since 2021 to describe what’s been happening to defined benefit pension transfer values.
From 2016 to the peak of 2021, average CETVs steadily increased, reaching ‘record highs’. However, largely due to steep interest rate rises and a sustained period of higher rates, average transfer values plummeted from £270,840 in December 2021 to £136,600 in April 2025 — a fall of nearly 50%.
According to our Pension Transfer Specialist, Simon Garber:
“We’ve seen average transfer values pretty much halve in just under 10 years, and it’s largely down to macroeconomic forces — higher interest rates, higher gilt yields. Both of these can negatively impact DB Pension Transfer Values.”
But some people can still achieve their goals, even with a lower transfer value.
Do Transfer Values Increase With Age?
In many cases, yes. The closer you are to your scheme’s retirement age, the higher your CETV is likely to be as a percentage of the benefits you’re giving up.
Research from Royal London and LCP shows that those within 5 years of retirement tend to receive more generous transfer values, because there’s less uncertainty for schemes in predicting your likely retirement date and future income needs.
The charts below compare Transfer Values 10 years from retirement and 1 year for retirement. So if you’re a way off retirement, it might be in your best interests to wait.
What Does This Mean for You?
If you’re not planning to transfer, the CETV on your statement has no impact on the pension income you’ll receive in retirement.
But if you’re considering a transfer, timing, goals, and personal circumstances all play a role — not just the value. Falling CETVs don’t automatically rule out transferring, but they do mean that advice is more important than ever.
Speak to Our Pension Transfer Specialist
Transferring out of a defined benefit pension is a big decision — and it isn’t right for everyone.
If you’re considering it, or simply want to understand what your transfer value means for your future plans, speak to our Pension Transfer Specialist today for clear, expert, and regulated advice tailored to your goals.
