Case Study: Should James Accept an Enhanced Transfer Value Offer From an Engineering Firm? (2026 Guide)

An enhanced transfer value (ETV) offer increases the amount your former employer's scheme will pay if you transfer out, but it doesn't change what you would be giving up: a guaranteed, inflation-linked income for life. In this illustrative example, even a 118% offer still needs a 6.9% a year investment return to match the pension, so the likely outcome of regulated advice is to decline the offer and keep the defined benefit (DB) pension. Declining doesn't affect the pension you already have.

Imagine James. He receives a letter from his former employer's pension trustees and almost dismisses it as routine. Reading more carefully, he realises it isn't. The engineering group he worked for over a 20-year career has launched an enhanced transfer value exercise, offering him 118% of his standard Cash Equivalent Transfer Value (CETV) if he chooses to leave the final salary scheme. The enhanced figure is £289,000.

Is this a generous windfall? Or is there a reason the company would like him to leave?

James is hypothetical. This example is for general education only and is not financial advice.

James's circumstances

Snapshot

• Illustrative example: "James", 54, West Midlands
• Former employer: a precision engineering group (private-sector DB scheme, closed to future build-up in 2017)
• Service: 20 years, building up 1/60th of final salary for each year
• Deferred pension: about £10,800 a year from 65, increasing with RPI (capped at 5%)
• Standard CETV: £245,000. Enhanced offer: £289,000
• DC workplace pension (current employer): £61,000
• State Pension forecast: the full new State Pension from 67, which is about £12,548 a year at 2026/27 rates
• Target retirement age: 62. Mortgage paid off

Why do companies offer enhanced transfer values?

When a company sponsors a DB scheme, the cost of paying future pensions sits on its balance sheet, and that cost can swing sharply as interest rates and inflation change. To reduce the risk, some companies offer members a higher-than-normal transfer value to encourage them to transfer out. The company expects to save money overall by removing the long-term promise. Members are offered a bigger lump sum than they could otherwise get.

Exercises like this are expected to follow an industry Code of Good Practice on Incentive Exercises. Among other things, it says members should get clear information, should not be pressured, and should be offered access to independent advice, normally paid for by the employer. If you receive an offer, check what support the employer is providing.

Key point: an enhanced transfer value exercise is entirely voluntary. Saying no has no effect on your deferred pension. You keep your full benefits if you choose not to transfer. Any deadline applies only to the enhancement, not to your membership of the scheme.

How a regulated adviser would analyse the offer

If your safeguarded benefits are worth more than £30,000, the law requires you to take advice from an FCA-authorised firm with the pension transfer permission before you can transfer. An adviser would carry out the FCA's required appropriate pension transfer analysis (APTA), including a transfer value comparator (TVC), which compares the transfer value with the estimated cost of buying the same income on the open market.

Many advisers also show the required rate of return, sometimes called the critical yield: the investment return a transferred pot would need to achieve, after charges, year after year, simply to replicate the scheme's guaranteed income.

In this example, even using the enhanced figure of £289,000, the required return is 6.9% a year. At the standard CETV of £245,000, it would be 7.4% a year.

Important: a required return of 6.9% a year means James's pot would need to grow at that rate, after charges, throughout a retirement that could last 30 years or more, through market downturns, periods of high inflation and years of withdrawals, just to match what the scheme pays automatically. That would need a portfolio taking significant investment risk, with no guarantee of success.

Likely outcome of regulated advice: decline the offer

The enhancement lowers the required return, but it doesn't change the basic picture. In a case like James's, the likely outcome of regulated advice would be to decline the offer and keep the DB pension. The reasons an adviser would typically weigh up:

• Inflation protection is genuinely valuable. RPI-linked increases, capped at 5%, help James's pension keep its value over a long retirement, which matters more the longer he lives.
• Longevity. James's family history suggests he may live a long time. A guaranteed income he can't outlive has a clear advantage over a pot that can run down.
• Sequencing risk from 62. Retiring three years before the DB pension starts means James will already be drawing on his DC pot. If he transferred, he would be drawing on a much larger invested pot during the riskiest early years of retirement, when a run of poor returns can do lasting damage.
• The enhancement is not "free money". It exists because the company expects to save more by removing the promise than the uplift costs. The offer itself is a sign that the guaranteed income is valuable, not a reason to give it up.

A possible income plan without transferring

With the offer declined, an adviser might map out a phased income plan along these lines:

• Ages 62 to 65 (bridge): drawdown from the £61,000 DC pot, including some tax-free cash, together with part-time consultancy work. Total income of roughly £18,000 to £22,000 a year.
• From 65: the DB pension starts at about £10,800 a year, increasing with RPI up to the cap. With some DC drawdown, total income of around £22,000 to £26,000 a year.
• From 67: the State Pension adds a further guaranteed layer. Total guaranteed income rises to about £23,350 a year (DB pension plus full new State Pension at 2026/27 rates), before any DC drawdown.

Figures are illustrative, in today's money, and depend on investment returns and future increases.

Questions worth asking about an enhanced transfer value offer

If you receive an offer like James's, these are useful questions to put to the scheme, the employer or an adviser:

1. What is my standard CETV, and how much is the enhancement worth on top?
2. Is the employer paying for independent advice, and who provides it?
3. What is the deadline, and what happens to my pension if I do nothing? (Usually, nothing changes.)
4. What would I give up, including spouse's pension, inflation increases and early retirement terms?
5. How does the transfer value compare with the cost of buying the same income elsewhere?
6. Can I take part of the offer as a partial transfer, or take tax-free cash from the scheme instead?

Getting regulated advice and help

The legal requirement to take advice exists for situations exactly like this. An offer with a deadline can make the decision feel more pressing than it really is. For most people with a private-sector DB pension, the guarantee remains the most valuable feature, and an enhancement rarely makes up for giving it up. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

Every situation is personal. An adviser would look at your health, family, other income and plans, and could reach a different conclusion for someone else. Take the time you need. The deadline only affects the enhancement, and your pension stays the same if you say no.

Free, impartial guidance is available from MoneyHelper, and if you're 50 or over you can book a Pension Wise appointment about your DC pensions. If anyone other than your scheme or employer contacts you about a transfer offer, be cautious and check the FCA's ScamSmart pages. Our guide to the transfer value of a pension explains how CETVs are worked out.

I don't give pension transfer advice. If it would help, you can book a free, no-obligation chat about how DB transfers and the advice process work. It's general information, not advice. If you then want regulated advice, I can introduce you to an FCA-authorised firm that holds the pension transfer permission. Arthur Browns may receive a fee from the firm we introduce you to if you become their client. Introductions are for UK residents with a transfer value of £50,000 or more.

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This is an illustrative example. James is hypothetical, and all figures are examples only, based on assumptions that may not apply to you. Nothing in this article is advice or a recommendation to transfer or keep any pension. Please read our important information.