Cash equivalent transfer value — explained.
A CETV is the cash value quoted for transferring pension benefits. In a defined benefit pension, it is not a normal investment pot: it is an actuarial calculation of the benefits you would give up.
- ▸A cash equivalent transfer value (CETV) is the transfer value quoted by a pension scheme.
- ▸For defined benefit pensions, the CETV is calculated on actuarial assumptions about the scheme benefits, not by looking at an investment pot in your name.
- ▸A CETV is usually valid for three months, and a DB transfer normally has to complete within six months of the guarantee date.
- ▸If safeguarded benefits are worth £30,000 or more, regulated transfer advice is required before a DB-to-DC transfer can proceed.
Short answer
A cash equivalent transfer value, usually shortened to CETV, is the cash value a pension scheme quotes if you ask to transfer benefits to another pension scheme.
For a defined contribution pension, the transfer value is usually close to the value of the invested pot, minus any permitted adjustments or exit charges.
For a defined benefit pension, it is different. The scheme is not holding a separate pot that belongs to you. The CETV is an actuarial calculation of the value of the promised benefits you would give up: lifetime income, inflation increases, spouse or dependant benefits, and any scheme-specific options.
This guide explains what the figure means. The separate question of whether to transfer is covered in our final salary pension transfer guide.
What a CETV includes
The Pensions Regulator describes a CETV as the cash value of pension benefits, calculated in accordance with legislation. For defined benefit schemes, the governing body prepares a statement of entitlement that includes the CETV.
In practice, a DB CETV can reflect:
- the pension income already built up
- the scheme's normal pension age
- expected inflation increases before and after retirement
- spouse, civil partner or dependant pensions
- any automatic lump sum or pension-commutation options
- assumptions about life expectancy and future investment returns
- the scheme's transfer-value basis and, in some circumstances, its funding position
That means two people with the same annual pension can receive different CETVs if their ages, scheme rules or benefit structures differ.
How a defined benefit CETV is calculated
For a defined benefit pension, the calculation starts with the expected cost of providing the member's benefits within the scheme. The Pensions Regulator says this value is determined on actuarial principles and requires assumptions about future events affecting the scheme and the member's benefits.
The calculation is not simply:
annual pension x a fixed multiple
A multiple can be a rough sense-check, but it is not the method. The scheme's trustees or governing body are responsible for the basis used, usually with actuarial advice.
Important assumptions can include:
- discount rates - the rate used to convert future pension payments into a value today
- inflation - because many DB pensions increase before and after retirement
- mortality - how long members and dependants are expected to receive benefits
- dependant benefits - whether a spouse or dependant pension is expected to be payable
- retirement options - for example early retirement or pension-for-lump-sum commutation options where relevant
- scheme funding - in some circumstances, transfer values can be reduced if the scheme is underfunded and the legal conditions are met
You can ask the scheme to explain the assumptions or provide the transfer-value basis, but a CETV is not a normal negotiation. If the figure looks wrong, the practical route is to query the data used: pensionable service, salary, revaluation, retirement age, spouse benefits and any missing service history.
CETV versus annual pension
A CETV can look large because it is a capital value for a lifetime promise.
Example:
| DB benefit | Quoted figure |
|---|---|
| Deferred annual pension | £10,000 a year |
| CETV | £250,000 |
| Implied simple multiple | 25x |
That does not mean the scheme is saying the pension is "worth 25 years" and nothing after that. It means the scheme has calculated a cash value for replacing a package of benefits, using its transfer-value assumptions.
The multiple can change when market conditions change. Higher discount rates usually reduce the present value of future promised income; lower discount rates usually increase it. Inflation assumptions, scheme rules and member age can also move the figure.
How long a CETV is valid
MoneyHelper says a CETV is usually valid for three months, and that the provider has up to three months to send it to you. You may have to pay if you ask for more than one CETV in a 12-month period.
The Pensions Regulator says, for DB benefits, transfers are generally measured from the guarantee date in the statement of entitlement and must be completed within six months.
The practical point: do not request a CETV too early if you already know advice will be needed. The quote can expire while you are still trying to find an adviser or a receiving scheme.
When advice is required
For a transfer from a DB scheme or other safeguarded benefits to a defined contribution arrangement, the £30,000 threshold matters.
The Pensions Regulator says scheme members must take appropriate independent advice when transferring benefits valued at £30,000 or more from a DB scheme to a DC arrangement. The governing body must check that the member has received appropriate independent advice before the transfer proceeds.
MoneyHelper gives the same consumer-facing rule: if your defined benefit pension is worth over £30,000, you must get financial advice before transferring it to a defined contribution scheme.
This is not just box-ticking. The FCA says transferring out of a DB pension is a big decision, is not right for everyone, and cannot be reversed. It also says the FCA and TPR believe it is in most people's best interests to keep their DB pension.
Why the CETV is not the whole decision
A high CETV can be tempting, but it is only one side of the comparison.
If you transfer, you may give up:
- guaranteed lifetime income
- inflation-linked increases
- spouse or dependant pensions
- protection from running out of money in retirement
- Pension Protection Fund protection where the scheme is eligible
In exchange, a transfer may provide:
- flexible drawdown access
- investment choice
- different death-benefit planning
- the ability to consolidate with other pensions
Those trade-offs belong in the full transfer decision. The CETV only tells you the cash amount on offer.
What to check on a CETV statement
Before relying on the number, check:
- The guarantee date and expiry date.
- The annual pension being valued.
- Whether inflation increases are shown correctly.
- Whether spouse or dependant benefits are included.
- Whether any automatic lump sum is included.
- Whether the quote is a statutory cash equivalent or a non-statutory transfer value.
- Whether any reduction has been applied because of scheme funding.
- Whether the receiving scheme will accept the transfer.
- Whether advice is required under the £30,000 rule.
- Whether the scheme allows the transfer at all.
Some schemes, especially public sector schemes, may restrict transfers to defined contribution arrangements. MoneyHelper notes that most public sector pension schemes will not allow a transfer to a defined contribution arrangement.
FAQ
What does CETV stand for?
CETV stands for cash equivalent transfer value. It is the cash value quoted for transferring pension benefits to another scheme.
Is a CETV guaranteed?
For DB benefits, the transfer value can be guaranteed for a period. MoneyHelper says a CETV is usually valid for three months. The statement should show the guarantee date and expiry date.
Can I ask for another CETV?
Usually, yes, but MoneyHelper says you might have to pay if you ask for more than one CETV in a 12-month period. The new figure can be higher or lower.
Why has my CETV changed?
Because the actuarial assumptions and market conditions used to value future pension promises can change. Member data corrections, scheme rule changes, inflation assumptions, discount rates and funding adjustments can all affect the number.
Is a CETV taxable?
The CETV itself is not paid to you as taxable income if it is transferred directly to another registered pension scheme. Tax questions arise later when money is withdrawn from the receiving pension, or if a transfer is not an authorised pension transfer.
- ▸For a DB member, the statement of entitlement includes the cash equivalent transfer value, and the governing body must usually provide it within approximately three months of the request. [The Pensions Regulator]
- ▸For defined benefit members, the CETV represents an actuarial calculation of the member's benefits within the scheme. [The Pensions Regulator]
- ▸The Pensions Regulator says a CETV represents the expected cost of providing the member's benefits within the scheme. [The Pensions Regulator]
- ▸MoneyHelper says a CETV is usually valid for three months and that a provider has up to three months to send it. [MoneyHelper]
- ▸Appropriate independent advice is required when transferring DB benefits valued at £30,000 or more to a DC arrangement. [The Pensions Regulator]
- ▸The FCA says transferring out of a DB pension cannot be reversed and that the FCA and TPR believe keeping the DB pension is in most people's best interests. [FCA]
- •This guide explains CETV mechanics. It does not say whether a transfer is suitable.
- •DB transfer advice is a regulated specialist area. If the advice requirement applies, the adviser must have the correct pension transfer permissions.
- •CETV calculations are scheme-specific. Always check the statement of entitlement and ask the scheme to confirm any assumptions or reductions you do not understand.
This is factual information, not financial advice. A defined benefit transfer can be irreversible and can involve giving up valuable guarantees.