5.1 Defined benefit pension
A defined benefit (DB) pension will pay you a regular income for the rest of your life. For defined benefit pensions you can:
- take a tax-free lump sum of up to 25% of the value of your pension benefits
- take a pension income which is based on the number of years you worked for the organisation and your final pay or average pay during your time in their pension scheme.
You can opt to turn your defined benefit pension into a defined contribution pension – but this is very rarely a good choice as you’re unlikely to be able to match the level of annual income offered by the defined benefit pension. If you are considering this, you should talk to a financial adviser. Certainly, you are required to receive advice for defined benefit pensions whose value, if converted into a lump sum, is £30,000 or more. However, even for a smaller sum, you should talk to a financial adviser as you may also lose other benefits by transferring.