When might a member consider transferring a DB pension to a DC arrangement?

• A. To gain guaranteed benefits.
• B. To reduce administrative complexity.
• C. To gain portability, access to investment choice, and potential consolidated management; but potential loss of guaranteed benefits and guarantees.
• D. To increase employer sponsor assurance.

Answer: (C)

Transferring from a defined benefit to a defined contribution is mainly about balancing security with control and flexibility. In a DB pension you receive a guaranteed income in retirement based on your salary and service, with protections and inflation linkages built in. Moving to a DC arrangement shifts the focus to what you build with contributions and investment returns, rather than a set promised benefit.

The appeal of transferring is threefold. First, portability: you can take the value with you if you change jobs or want to consolidate your pots, rather than being tied to one employer’s plan. Second, investment choice: a DC scheme or personal pension lets you choose how your funds are invested, potentially tailoring risk to your preferences. Third, consolidated management: having the pension pots in one place can make it easier to see and manage your overall retirement savings.

But there is a trade-off. The guaranteed benefits and protections of a DB pension—such as the assured lifetime income and, in many cases, index-linked increases or spouse benefits—may be lost or reduced in a DC arrangement. You also assume investment risk and the income in retirement becomes uncertain, depending on how the DC funds perform and how they’re drawn down. Transfers can also involve costs and may not always be financially advantageous, so a careful value-for-money comparison is important.

So, a member might consider transferring when portability, control over investments, and the ability to consolidate savings matter more to them than the guaranteed, inflation-linked elements of a DB pension, and they’re comfortable with the associated risks.