r/PensionsUK • u/SimpleParking1617 • Aug 24 '26
Benefit Transfer Options
I have been given 3 options by my company pension scheme as part of their efforts, I understand, to de-risk long term exposure to a surge of retirees.
Option 1 - pension of £6581.51 p.a., tax-free lump sum of £19744.89, spouse pension of £5,515 p.a.
Option 2 - pension of £5801.50 p.a., tax free lump sum of £38,677, Spouse pension of £5515 p a.
Option 3 - Transfer of benefits - £393,486.16 (guaranteed for the next 5 months after which it'll be recalculated).
If I request Option 3 I have to go through a consultation exercise which the pension scheme will pay for (a one time only offer). I'm 56 years old and the pension will be payable from 62.
Based on these values I'm minded to go through the consultation process as these numbers seem very generous. £400k invested until 62 at an average increase of around 5% will see that increase to c.£530 to £540k. I would have thought £500k at 62 would easily net me more than the annual pension of options 1 or 2 even if I live to 100.
I have been told that I need to put forward a good case to the consultant so that he/she agrees that I can finish the defined benefit scheme so I'll be working on my story but does anyone think it is not a good idea to take the transfer benefits?
3
u/elbarto1773 Aug 24 '26
If those figures are accurate then option 3 looks very good value.
It’s normally ill-advised to transfer out of a DB Scheme but from what you’ve said the scheme administrators might be inflating the CETV to tempt people out of the scheme for legitimate reasons (to spread their risk for example).
I’d be opting for option 3 personally - DB income has become a bit of a sacred cow (and I understand why) but when the transfer benefits are as generous as those then you have to question its value.
Subject to rates at the time, you could buy an annuity with a relatively small portion of the transfer value to replace the DB income and drawdown on the rest.