About the Pension Transfer Value (CETV) Calculator
This CETV calculator helps you judge a cash equivalent transfer value (CETV) offered by a defined benefit (final salary or career average) pension scheme. Enter the yearly pension you would give up and the transfer value, and it shows the transfer multiple, the investment return you would need to buy the same income back at retirement (the critical yield), and the income the pot might provide through an annuity or drawdown.
It is meant for members comparing a transfer quote with staying in the scheme, and for anyone who wants to understand why multiples of 20–40 times the pension are common. A higher multiple means the scheme is paying more for each £1 of pension you give up, but it does not by itself make a transfer a good idea: the DB pension is guaranteed for life, usually rises with inflation and often includes a spouse’s pension.
All figures are in today’s money if you enter real (after-inflation) rates, or in future pounds if you enter nominal rates — just be consistent. The annuity rate should be for a comparable inflation-linked, joint-life annuity, which is typically far lower than a level single-life rate. This is an illustration, not advice; in the UK you must take regulated financial advice before transferring safeguarded benefits worth more than £30,000.
With the default inputs, the transfer value multiple is 25 × pension. Change any value above to recalculate instantly.
How to use the pension transfer value (cetv) calculator
- 1Enter the yearly pension shown on your scheme statement and the CETV from your transfer quote.
- 2Enter the years to the scheme’s normal retirement age and how the deferred pension is revalued.
- 3Set an expected investment return after all charges.
- 4Enter an inflation-linked annuity rate and a drawdown rate you would be comfortable with.
- 5Compare the critical yield with realistic returns before speaking to a regulated adviser.
Formula and method
The transfer multiple divides the transfer value by the yearly pension you would give up. To compare outcomes at retirement, the calculator grows the pension by the revaluation rate c and the transfer value by your expected net investment return g over the n years to the scheme’s normal retirement age.
The pot then buys an income at the annuity rate a, or supports withdrawals at the drawdown rate you choose. The critical yield is the yearly return the transferred pot must earn so that, at retirement, it is just big enough to buy the same pension at that annuity rate — a widely used benchmark for whether a transfer gives up value. It ignores tax-free cash, death benefits and spouse’s pensions, which can differ significantly between the two options.
- P
- Yearly DB pension given up
- c
- Yearly revaluation of the deferred pension
- g
- Expected investment return after charges
- a
- Annuity rate (yearly income ÷ pot)
- n
- Years until normal retirement age
Worked examples
£20,000 pension, £500,000 CETV, 10 years to go
The offer is 25 times the pension. Revalued at 2.5% for 10 years the pension is about £25,602 a year; to buy that at a 5% annuity rate you need £512,034, so the pot only has to grow about 0.24% a year. At 5% growth it would reach roughly £814,447 and buy about £40,722 a year — though an inflation-linked annuity rate would usually be much lower than 5%.
Low multiple at retirement age
At retirement a £270,000 transfer is 18 times a £15,000 pension. An annuity at 4.5% would pay only £12,150 (81% of the pension) and 4% drawdown £10,800, so staying in the scheme gives more guaranteed income.
Realistic inflation-linked annuity rate
A 30× multiple looks generous, but the £10,000 pension grows to about £14,483 by retirement. Buying that at 3.5% needs £413,799, so the pot must earn about 2.17% a year after charges just to break even.
Frequently asked questions
What is a CETV?+
A cash equivalent transfer value is the lump sum a defined benefit pension scheme will pay to another pension if you give up your guaranteed pension. Schemes calculate it from the expected cost of paying your pension, so it moves with gilt yields, inflation expectations and the scheme’s funding.
What is a good transfer value multiple?+
Multiples of around 20 to 40 times the yearly pension have been common, with higher multiples when gilt yields are low. A higher multiple means more money per £1 of pension, but you need to compare it with what that money would buy — usually through the critical yield or annuity comparison.
What is critical yield?+
Critical yield is the yearly investment return a transferred pot would need to earn, after charges, to buy the same benefits at retirement as the pension you are giving up. The higher it is compared with realistic returns, the more likely you are to be worse off by transferring.
Do I need financial advice to transfer a DB pension?+
In the UK, if your safeguarded benefits are worth more than £30,000 you must get advice from an FCA-authorised adviser with pension transfer permissions before the scheme will let you transfer. The regulator’s starting assumption is that a transfer is unsuitable for most people.
How long is a CETV guaranteed?+
A guaranteed statement of entitlement is usually fixed for three months from its guarantee date. If you do not complete the transfer in that time, the scheme recalculates the value, which can be higher or lower.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.