Defined benefit pensions have long been seen as one of the most secure ways to fund retirement. But recently, more people have started looking into whether transferring out of a DB scheme could be a better fit for their lifestyle or long-term goals.

If you’re exploring the idea, it’s worth understanding what’s involved, what’s changed in 2025, and what your options actually are.

What Is a Defined Benefit Pension Transfer?

A defined benefit (DB) pension, sometimes known as a final salary pension, pays you a guaranteed income for life. The amount usually depends on how long you worked for an employer and how much you earned.

A DB transfer means giving up that guaranteed income in exchange for a cash value, which is then moved into a defined contribution (DC) pension. That gives you more control over how your pension is invested and how you draw income from it.

It also means taking on more responsibility and risk.

What’s Different in 2025?

Transfer values have shifted over the past couple of years. When interest rates were low, many people were offered high transfer values. Now that rates have risen, those values have generally come down.

Still, there are people considering a transfer for reasons like:

• Wanting more flexibility in how and when they access their pension
• The option to pass on unused funds to loved ones
• A retirement plan that doesn’t quite align with a fixed income

At the same time, others prefer the stability that comes with staying in a DB scheme, especially with rising living costs and longer life expectancies.

There’s no “better” option, just the one that fits best with your situation.

Things to Consider Before Making Any Decisions

Here are a few key points to think about when exploring your options:

• Security vs Flexibility: A DB pension provides a steady income you can’t outlive. A transfer offers more control, but outcomes depend on investment performance.
• Tax Implications: These can vary depending on where you live and how you access your pension. It’s important to look into how a transfer might affect your tax position.
• Passing On Wealth: With a DB pension, income usually stops when you (or your spouse) pass away. A transferred pension can often be left to beneficiaries, depending on how it’s managed.
• Location and Lifestyle: If you’re living abroad or planning to retire overseas, that may influence how you view your pension options.

Most importantly, take time to compare scenarios and gather information. Understanding both the short-term impact and the long-term trade-offs can make a big difference.

The Potential Downsides of a DB Pension Transfer

While the flexibility of a transfer can be appealing, it’s important to weigh the risks and drawbacks too. Here are some things to watch out for:

• Loss of Guaranteed Income: With a DB scheme, your income in retirement is secure, no matter what happens in the markets. Once you transfer, that guarantee disappears. Your future income depends on how your investments perform, and there are no do-overs.
• Investment Risk: When you move into a defined contribution pension, you’re in charge of how the money is invested. That opens up the potential for growth, but also the risk of losses. If markets dip at the wrong time, it could affect how much you have available later on.
• Fees and Costs: Managing a transferred pension often comes with ongoing charges, for advice, fund management, or platform fees. These costs can chip away at your pension pot over time, especially if they’re not carefully monitored.
• Complexity: After a transfer, you’ll need to make regular decisions about how to invest and when to draw your income. That added responsibility isn’t for everyone and can feel overwhelming, particularly later in life.
• Inflation Protection: Many DB pensions come with built-in inflation increases, helping your income keep pace with the rising cost of living. After transferring, you may need to plan and invest specifically to match that kind of long-term protection.
• No Going Back: Once you transfer out, there’s no way to reverse the decision. Even if circumstances change later, your DB benefits are gone.

Thinking about a transfer means looking at both sides of the coin – not just what you could gain, but also what you might be giving up. A regulated financial adviser can help you explore those trade-offs in more detail, based on your personal situation.

Why Getting the Right Information Matters

Transferring out of a DB pension is a permanent decision. It can’t be reversed once it’s done. That’s why anyone with a pension worth over £30,000 is required by law to speak with a regulated financial adviser before moving forward.

Even if your pension value is below that threshold, getting informed support can help you weigh up the pros and cons more clearly.

We work with people all over the world who are trying to understand their pension options, whether that’s staying with a DB scheme or exploring what a transfer could look like.

Our aim is to help you feel more confident in your decisions by making the information easier to understand.

If you’re thinking about your DB pension, take your time, do your research, and consider speaking with someone qualified to explain all the available options.

It’s your future, and the more you understand now, the more control you’ll have later.

Want to Learn More?

If you’re exploring your pension choices and looking for more clarity, SJB specialises in working with international clients. We don’t tell you what to do; we help you understand what’s possible, so you can decide what’s right for you.