Case Study: Former Telecoms Manager’s £195,000 DB Pension — Should Tom Transfer to a SIPP? (2026 Guide)

Background: Self-Employed and Planning Ahead

Tom worked for a major UK telecoms company for just over 20 years before taking voluntary redundancy at 52. He now runs a successful freelance telecoms consultancy, earning around £45,000 per year. He has a personal SIPP worth approximately £72,000, built up through self-employed contributions, and a small defined contribution (DC) pot from a previous employer worth around £18,000.

At 58, Tom is beginning to think seriously about retirement. He would like to wind down his consultancy between the ages of 63 and 65, and he’s keen to understand all his options. His deferred DB pension from his telecoms employer has been sitting untouched for six years, and he recently received a Cash Equivalent Transfer Value (CETV) statement showing an offer of £195,000.

Tom’s primary motivation for exploring a transfer was twofold: he wanted more flexibility over how and when he took income, and he was concerned about inheritance — specifically, whether he could pass his pension to his two adult children more efficiently.

The DB Pension in Detail

Tom’s deferred DB pension is linked to his final salary at the point of leaving — adjusted for inflation in deferment. From age 65, it will pay £9,750 per year, increasing in line with the Consumer Price Index (CPI) up to a cap of 5% per year. The scheme also includes a 50% spouse’s pension for his wife, Linda, should Tom predecease her.

He has no reason to take it early, and deferring to 65 means he avoids actuarial reduction penalties that the scheme applies for early access before the Normal Pension Age.

What the Transfer Value Analysis Showed

A transfer value analysis produced a Retirement Risk Rating (RRR) of 6.4%. This means Tom’s SIPP would need to achieve consistent net annual returns of 6.4% throughout his retirement just to replicate the income his DB scheme would otherwise provide for free — guaranteed, index-linked, and for life.

Income Without Transferring

If Tom retains his DB pension and continues building his SIPP, his projected retirement income picture looks like this:

• Ages 63–65: Draw down SIPP (£72,000 + continued contributions) and DC pot (£18,000) to bridge the gap before the DB kicks in
• From age 65: DB pension £9,750/year (index-linked for life)
• From age 67: State Pension £11,502/year (2025/26 full new State Pension rate)
• Combined guaranteed income from 67: Approximately £21,252/year before tax

This guaranteed floor would cover Tom and Linda’s essential outgoings, with SIPP drawdown available on top for discretionary spending and travel.

The Inheritance Argument — Weakened by 2027 IHT Changes

Tom’s concern about passing his pension to his children is understandable, but the picture has shifted significantly. From April 2027, defined contribution (DC) pensions — including SIPPs — are set to be brought within the scope of inheritance tax for the first time. This change substantially weakens the traditional argument that transferring a DB pension to a SIPP improves the estate position.

Currently, Tom’s DB scheme would pay a lump sum death benefit (typically two to four times salary) if he died before retirement, plus a 50% spouse’s pension to Linda. These protections have genuine value and would be lost on transfer.

Key Reasons Transfer Was Not Recommended

1. The RRR of 6.4% is too high to justify taking investment risk with guaranteed income
2. Loss of index-linking — the DB scheme provides inflation protection automatically; a SIPP does not
3. Loss of spouse’s pension — Linda would lose her 50% survivor benefit, which is difficult to replicate cheaply
4. 2027 IHT changes mean SIPP assets will no longer enjoy the inheritance tax advantages they once did
5. Tom already has SIPP flexibility — his existing SIPP and DC pot already provide the drawdown flexibility he is seeking

What Tom Was Advised to Consider Instead

Rather than transferring, Tom may wish to explore maximising contributions to his existing SIPP before winding down his consultancy, taking advantage of his annual allowance of up to £60,000 (or 100% of relevant UK earnings). His Lump Sum Allowance (LSA) of £268,275 remains largely unused, meaning he can take a significant tax-free lump sum from his SIPP at retirement.

The DB pension at 65, combined with the State Pension at 67, provides a guaranteed income foundation. The SIPP sits on top as a flexible, discretionary pot — exactly the structure many people in Tom’s position find most effective.

Seeking Professional Advice

This case study is a hypothetical example for educational purposes only. Tom’s circumstances are illustrative — real transfer decisions depend on personal health, family situation, other assets, tax position, and a full transfer value analysis carried out by a qualified adviser. Every pension transfer case is different, and what applies here may not apply to your situation.

If you have a deferred DB pension from a telecoms company — or any private sector employer — and you are considering your options, speaking with a Pension Transfer Specialist is the right first step.