If you have a defined benefit (DB) pension — sometimes called a final salary or career average pension — and you are considering your options at retirement, you may be offered or have requested a Cash Equivalent Transfer Value (CETV). This figure is one of the most important and most misunderstood numbers in UK personal finance.
What a CETV Is and What It Isn’t
A CETV is not the “value” of your pension in any comprehensive sense. It is the amount your scheme would pay to transfer your rights to a different pension arrangement. A £300,000 CETV does not mean your pension is “worth £300,000” in the way a DC pot is worth its balance — it means that is what the scheme is willing to accept to be released from the obligation to pay you a promised income for life.
The CETV essentially answers: “How much would it cost today to replicate your guaranteed income elsewhere?”
How CETVs Are Calculated
The actuary works backwards from your promised pension to a lump sum equivalent:
| Input | Effect on CETV |
|---|---|
| Higher promised annual pension | Higher CETV |
| Younger member (longer expected payout) | Higher CETV |
| Lower gilt yields | Higher CETV |
| Higher gilt yields | Lower CETV |
| Scheme-specific financial health | Varies |
Example of CETV in practice:
- DB pension promised: £12,000/year from age 65
- Your current age: 55
- CETV offered: £240,000 (multiple of 20x annual pension)
The “transfer value multiple” (TVM) of 20 is fairly typical. Multiples of 25-35 were common during the low gilt yield era (2015–2022); as yields have risen from 2022 onwards, multiples have compressed toward 15–25.
What the CETV Is Used For
Retirement option: If you are considering moving from a DB scheme to a DC arrangement (SIPP) for greater flexibility — for example, to access pension freedom, manage income tax, or plan an estate — the CETV is the fund you would receive.
Divorce proceedings: CETVs are used to value pension assets in financial settlements. Courts can issue pension sharing orders based on CETV calculations. All pensions should be valued and disclosed in divorce proceedings.
Trivial commutation check: When assessing whether trivial commutation applies (total pension savings under £30,000), DB pensions are valued at 20 times the annual pension — a simplified version of the CETV concept.
Should You Transfer Based on a CETV?
This is one of the most significant financial decisions you can make. Key questions to consider:
| Question | Good case for staying | Good case for transferring |
|---|---|---|
| Health | Good health; long life expectancy | Poor health; shorter life expectancy |
| Spouse/dependants | Spouse pension valuable | No dependants to provide for |
| Other income | Relying on DB for core income | Other guaranteed income sources (State Pension, other pensions) |
| Flexibility needed | Happy with fixed income | Need flexible access, estate planning |
| Investment confidence | Prefer no investment risk | Comfortable managing a pot |
In most cases for members in good health, keeping the DB pension is the better choice. The FCA found that the majority of transfer advice cases reviewed concluded that transfer was not in the client’s best interests.
Getting Your CETV
You can request a CETV from your scheme once per year at no charge. It is valid for three months. If you want to proceed with a transfer after receiving advice, you must request an updated CETV if the original has expired.