Cash Equivalent Transfer Value

A Cash Equivalent Transfer Value is the equivalent lump sum transfer payment you can withdraw from your Defined Benefit scheme. In return, you will give up a claim to future benefits from the scheme.

Therefore, essentially a Cash Equivalent Transfer Value is the full amount you could withdraw. This is if you have decided to transfer your pension to a Defined Contribution scheme.

This sum must then be placed into one of the following schemes:

Many people lament the inflexibility of a Defined Benefit scheme.

One of the main reasons for transfers out to a Defined Contribution scheme is to allow the recipient more control over their pension fund.

Many value the importance of their ability to increase or decrease payments, manage their own investments or take out lump sums as and when needed. This could be for ad hoc events such as a house extension, or a large holiday.

You can request this figure once every 12 months. It is calculated by the Scheme provider taking into account factors such as inflation, investment forecasts and longevity calculations.

Transfer Value Comparator

A Transfer Value Comparator is a way to visually represent the difference between the Cash Equivalent Transfer Value against the equivalent cost of income and benefits in a Defined Contribution scheme.

It helps the recipient identify easily any drop in income they will suffer as a result of the transfer.

An example is below. It outlines the transfer value offered by a Defined Benefit Scheme provider versus the replacement cost for the same level of benefits outside of the scheme.

As you can see it shows a clear deficit. Although this is only estimated, it is one of the risks associated with transferring out of a Defined Benefit scheme.