DB vs DC Plan Calculator
Compare a defined benefit pension vs a defined contribution plan.
What this calculator does
This calculator puts a defined benefit pension and a defined contribution pot onto a common scale. It projects the DC pot forward at your expected return and converts the monthly DB pension into the capital that would be required to produce the same income at a chosen withdrawal rate, so the two can be read against each other.
The conversion matters because the two arrive on paper in incompatible formats. A scheme statement quotes an annual income, a DC statement quotes a balance, and members consistently over-weight whichever number happens to have more digits rather than the one representing more value.
When to use it
The most consequential use is deciding between roles, particularly moving from the public sector to a private employer offering a higher salary and an auto-enrolment pot. Valuing the DB accrual you would give up frequently reveals that a pay rise of several thousand pounds does not replace it.
It is also the starting point for any transfer value offer, and for choosing when to take a scheme pension. Most schemes apply early retirement factors of roughly 4 to 5 percent for each year taken before normal pension age, and expressing that reduction in capital terms makes the decision far more concrete.
Understanding the inputs
Take the expected DB pension from your annual benefit statement and note whether the figure is before or after commuting any pension for a tax-free lump sum, and what increases apply once it is in payment. A pension capped at 2.5 percent increases is worth noticeably less than one tracking CPI without a cap.
Monthly DC contribution should include your payment, the tax relief added and the employer's contribution. Keep the expected return conservative and net of platform and fund charges, because the entire point of the exercise is that only the DC side is exposed to markets; flattering it with an optimistic return defeats the comparison.
How is this calculated?
DC balance grows via compound interest. DB value is calculated as: Annual Pension / Withdrawal Rate (Equivalent Capital).
A worked example
Paying £600 a month into a DC pot for 20 years at 6 percent builds roughly £277,000. A scheme pension of £1,800 a month is £21,600 a year, worth about £540,000 at a 4 percent withdrawal rate, or roughly £617,000 at 3.5 percent, which is the fairer rate given most DB pensions increase with inflation.
So twenty years of DC contributions produce less than half the value of the pension, and the pension carries no investment risk, cannot be outlived and usually continues to a spouse. Reaching £617,000 in the same twenty years at 6 percent would require contributions of roughly £1,335 a month.
Limitations and assumptions
These are projections under fixed assumptions rather than predictions. The DC side uses a single flat return with no volatility, so it cannot show sequence-of-returns risk, which is the main danger facing anyone who must draw down a pot themselves. The pot you actually reach may differ considerably from the projection.
The DB side is capitalised at a simple withdrawal rate, which ignores indexation caps, spouse and dependant benefits, early retirement factors, commutation terms, scheme funding, and income tax on both streams. It also excludes the State Pension. Your scheme's benefit statement, and regulated advice for any transfer, are the authoritative sources.
Common Questions
- Which type of pension is better?
- They fail differently rather than one being superior. A defined benefit scheme guarantees an inflation-linked income for life with the employer carrying investment and longevity risk. A defined contribution pot is yours to invest, move and pass on, but you bear every risk. For most members, a DB scheme is the more valuable benefit by a wide margin.
- How do I compare a pension against a pot?
- Divide the annual pension by a withdrawal rate to find the equivalent capital. At 4 percent, a £21,600 pension equates to £540,000. Because most DB pensions rise with inflation, a rate nearer 3.5 percent is fairer, which values the same pension above £617,000.
- Why have defined benefit schemes almost vanished?
- Because employers could not carry the cost. Rising longevity, falling gilt yields that inflated the value of future promises, and stricter funding requirements closed nearly every private sector scheme, first to new members and then to future accrual. Meaningful DB provision now sits almost entirely in the public sector.
- What is the difference between final salary and career average?
- Final salary bases the whole benefit on your pay when you leave, so late promotions lift every year of service. Career average, or CARE, banks a slice of each year's actual salary and revalues it to retirement. Most surviving public schemes moved to CARE, with the LGPS at 1/49 and the NHS scheme at 1/54.
- Should I ever transfer out of a DB scheme?
- For most members, no. You would exchange a guaranteed inflation-linked income with spouse protection for full market risk. Transfers of safeguarded benefits above £30,000 legally require advice from an FCA-authorised specialist, and the regulator's default position is that transferring is unsuitable unless clearly demonstrated otherwise.
- What does a transfer value tell me?
- It is the scheme's price for releasing you. Multiples of 20 to 30 times the annual pension were common when gilt yields were low, so a £20,000 pension might have attracted £500,000. Higher yields have compressed those multiples considerably since 2022, which makes transferring even less attractive than it once was.
- What if my employer goes under?
- The Pension Protection Fund takes on the scheme. Members already at scheme pension age generally receive their full pension; those below it receive 90 percent subject to a cap, with more limited future increases. It is substantial protection, though not identical to the original promise.
- What does auto-enrolment give me?
- A defined contribution pot funded by a minimum of 8 percent of qualifying earnings, of which the employer must pay at least 3 percent. That is a floor rather than an adequate plan, and someone relying on the minimum throughout a career will end up with a fraction of what a DB scheme would have produced.
- Which is better for my family?
- The DC pot, generally. It passes to nominated beneficiaries and, if you die before 75, can usually be taken free of income tax under current rules. A DB pension typically continues to a spouse at 50 percent and ceases when they die, with nothing left for children.
- Can I have both?
- Many people do, and it is the strongest position. Public sector employees often hold a career average pension alongside AVCs, and long careers frequently leave a preserved DB benefit from an earlier employer plus a current DC pot. The pension covers essential spending while the pot provides flexibility.