In April 2025, defined benefit (DB) pension transfer values hit some of the lowest average levels in nearly a decade — almost 50% lower than the record highs of December 2021.
Despite modest market movements, transfer values have remained subdued throughout 2024 and into 2025. While there has been some easing of economic pressure, sustained high interest rates and broader macroeconomic forces continue to hold values down.
What’s Behind the Fall in Transfer Values?
There are many factors that influence pension transfer values, but one of the biggest drivers over the past few years has been interest rates.
After holding at just 0.1% for much of 2021, the Bank of England raised rates sharply in response to high inflation — reaching a peak of 5.25% in 2023, the highest in 15 years.
Since then, we’ve seen a gradual easing:
- August 2024: Cut from 5.25% to 5.00%
- November 2024: Cut to 4.75%
- February 2025: Cut to 4.50%
- May 2025: Cut to 4.25%
While rates are no longer at a 15-year high, they are still elevated compared to historic norms, and as long as the Bank of England’s base rate stays above pre-2022 levels, transfer values are unlikely to recover significantly.
Despite early hopes of deeper rate cuts in 2025, stubborn UK inflation remains above the Bank’s 2% target — and until this eases, further reductions in interest rates seem unlikely.
Transfer Values in 2025: The Latest Figure
Transfer values have dropped significantly since their peak in December 2021:
- Average CETV in Dec 2021: £270,840
- Average CETV in April 2025: £136,600
This represents a fall of almost 50%, largely due to the sharp and prolonged rise in interest rates and gilt yields, which affect the way pension schemes calculate their liabilities.
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.
Why Does This Happen?
Defined benefit schemes are often heavily invested in gilts (UK government bonds). These are viewed as low-risk, stable investments — ideal for schemes focused on preserving member benefits.
When gilt yields rise, pension schemes assume they can achieve higher returns on their investments, which reduces the amount they need to set aside to meet future pension payments. As a result, CETVs fall.
This may not be good news for those looking to transfer, but it does signal greater financial health for many pension schemes overall.
What factors affect pension transfer values
According to consultancy firm LCP, two key factors affecting pension transfer values are
- The ‘generosity’ of the scheme – if schemes are de-risking their investments, they are more likely to offer a higher value; and
- Members’ longevity predictions – the longer its members live, the more costly the scheme is to run and transfer values tend to be more generous.
It could be that the long-term impact on life expectancy due to the covid-19 pandemic and related health crises could also play a part in reducing transfer values, although, in the UK, this is expected to be reversed in the coming years.
Several other factors can also affect pension transfer values both positively and negatively, including:
- Interest rates
- Inflation levels
- Gilt yields & stock market activity
- Member’s age in relation to scheme retirement age and
- Scheme funding position
Read more: What’s a good CETV?
Why Are CETVs Still Low in 2025?
Although interest rates have started to come down, they remain significantly higher than in the 2010s. Meanwhile, inflation is still sticky, and economic uncertainty remains.
For pension schemes, this means rising costs, particularly when it comes to providing inflation-linked benefits. In this environment, trustees must balance the need to offer fair CETVs with their responsibility to secure the scheme’s long-term future.
Lower CETVs are one way of reducing risk and discouraging outflows, helping to protect remaining members.
Is a Lower CETV a Reason Not to Transfer?
Not necessarily. While a lower transfer value might mean you’ll need to adjust your retirement income strategy, it doesn’t automatically mean transferring is the wrong decision.
People transfer for all sorts of reasons:
- To access their pension flexibly
- To take a larger tax-free lump sum
- To leave their pension to beneficiaries
Our Pension Transfer Specialist Simon Garber explains:
“If your CETV has fallen, it’s only your transfer value that has changed — the value of your pension hasn’t. In fact, DB pensions are inflation-linked, so their value is likely increasing while you remain in the scheme.”
“Your transfer value shouldn’t be seen as the ‘tail that wags the dog’. A Defined Benefit Pension Transfer has to make sense as part of a holistic financial plan. And remember, markets move in cycles. If you don’t need to transfer immediately, it may be wise to wait until the conditions are more favourable.”
The Bottom Line: Don’t Rush Your Decision
If you’re considering transferring your defined benefit pension, the key is getting the right advice. Transfer values may be lower, but your broader financial goals — and your individual circumstances — are what really matter.
Speak to a Pension Transfer Specialist
We offer a free, no-obligation introductory call with our Pension Transfer Specialist, Simon Garber. He can talk you through your options, explain the transfer process, and help you make a decision that’s right for your future. Book your free call today.
