Case Study: Former Aerospace Engineer's £265,000 DB Pension, Should Andrew Transfer? (2026 Guide)

For someone like Andrew, who has enough savings and a SIPP to bridge the years to his scheme pension age and a wife who would rely on his spouse's pension, a regulated adviser would be likely to conclude that he should keep his DB pension rather than take a £265,000 transfer value. His guaranteed, inflation-linked income would be hard to replace, and the 2027 inheritance tax changes weaken the case for transferring to leave money to his children. This illustrative example explains what an adviser would typically weigh.

Quick summary

• Illustrative example: Andrew, 57, former aerospace systems engineer in the West Midlands (a hypothetical person)
• Scheme: Private sector final salary DB pension with a large UK aerospace manufacturer
• CETV offered: £265,000
• Guaranteed DB income: £12,500 a year from age 65
• Likely outcome of regulated advice: keep the DB pension and don't transfer
• Possible approach: use his SIPP and savings from 57 to 65, then DB pension from 65 and State Pension from 67

Background: redundancy prompts a big pension question

Imagine Andrew, 57, who spent 24 years as a systems engineer at a large UK aerospace and defence manufacturer before taking voluntary redundancy in early 2024. He has a significant deferred final salary pension, a Self-Invested Personal Pension (SIPP) worth £72,000 and £35,000 in cash savings. Like many people in his position, he wonders whether to take the £265,000 Cash Equivalent Transfer Value (CETV) his former employer's scheme is offering.

Andrew likes the idea of controlling a large investment pot himself, and he wants to leave something to his two adult children. He has also read about drawdown and wonders whether a SIPP might suit his plans better than a defined benefit (DB) scheme. These are understandable instincts, but a careful analysis is likely to tell a different story.

Andrew's full financial position

After 24 years' service, Andrew's deferred DB pension will pay him £12,500 a year from the scheme's normal pension age of 65. The scheme also provides:

• A spouse's pension of 50%, which would pay £6,250 a year to his wife, Catherine, if he died first
• Annual increases in payment linked to CPI inflation, up to 5% a year
• A tax-free cash option at a commutation factor of 14:1 (giving up £1 a year of pension for £14 of tax-free cash)

Alongside his DB pension, Andrew has a SIPP worth £72,000 invested in a balanced global fund, £35,000 in an easy-access savings account, and a forecast of the full new State Pension from age 67. The full new State Pension is £241.30 a week (about £12,548 a year) in 2026/27.

Key point: By law, anyone with safeguarded benefits, such as a DB pension, worth more than £30,000 must take regulated advice from an FCA-authorised adviser with the pension transfer permission before transferring. With a CETV of £265,000, that applies to Andrew, and for good reason. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

What the transfer analysis might show

A regulated adviser must carry out an Appropriate Pension Transfer Analysis (APTA) and show a Transfer Value Comparator (TVC), which compares the CETV with the estimated cost of buying the same benefits in a DC arrangement. Advisers often also look at the investment return a transferred pot would need to achieve to match the DB income.

For illustration, suppose Andrew's SIPP would need to earn around 6.6% a year, after charges, to replicate his DB income over his expected lifetime. That might be possible over the long term in a portfolio with a high proportion of shares, but it is far from guaranteed. It would need to be achieved year after year, including during market falls and in the early years of retirement, when sequence-of-returns risk is at its highest.

A poor run of returns in the first few years of drawing from a SIPP can permanently damage its ability to provide income. Andrew's DB pension carries no such risk. It is backed by the scheme's assets, the employer and, if the employer became insolvent and the scheme couldn't pay, the Pension Protection Fund (PPF). The PPF generally pays 100% of the pension for members over the scheme's normal pension age and 90% for those below it.

Important: Transferring a DB pension to a SIPP passes all the investment risk to you. An illustrative return of 6.6% a year after charges would mean the SIPP had to do well consistently, with no guarantee, no certainty of keeping pace with inflation and no PPF protection if things went wrong.

The inheritance argument and the 2027 changes

One of Andrew's reasons for considering a transfer is to leave money to his children. This is a common reason people give. However, from 6 April 2027, unused pension funds and most death benefits are due to come into the scope of inheritance tax. That substantially weakens the inheritance case for moving wealth from a DB scheme to a SIPP. The detail depends on the final legislation, so check the latest position on gov.uk and see our 2027 pension IHT guide.

Andrew's DB scheme also already provides a meaningful death benefit: Catherine's 50% spouse's pension, guaranteed for the rest of her life. That protects the person most likely to depend on his pension income.

What a regulated adviser might weigh

In a case like Andrew's, a regulated adviser would typically weigh:

1. The return needed: around 6.6% a year after charges, consistently, is a demanding target
2. Sequence-of-returns risk: a poor start in drawdown could do lasting damage
3. Guaranteed, inflation-linked income: £12,500 a year for life, with PPF protection
4. Catherine's spouse's pension: a guarantee that would be lost on a transfer
5. Inheritance: the 2027 changes weaken the estate planning case
6. His other money: his SIPP and savings can bridge the years to 65 without touching the DB pension

Likely outcome of regulated advice: keep the DB pension.

Income planning: bridging the gap to 65

Rather than transferring, an adviser might discuss a phased approach using Andrew's existing money:

• Ages 57 to 65: draw from his SIPP (£72,000) and savings (£35,000), aiming for around £12,000 to £13,000 a year. By keeping taxable withdrawals within his Personal Allowance (£12,570 in 2026/27) and using tax-free cash and savings, Andrew could pay little or no income tax.
• Age 65: his DB pension starts at £12,500 a year, CPI-linked, for life. His SIPP withdrawals can then fall.
• Age 67: his State Pension starts. If he receives the full new State Pension, his secure income would rise to around £25,000 a year, a solid base for retirement.

Any money left in his SIPP at 65 could be used flexibly for holidays, home improvements or gifts, without Andrew depending on it for everyday costs.

You can check your own State Pension forecast on gov.uk. A free Pension Wise appointment can help people aged 50 or over understand their DC pension options.

Getting help

Andrew's example shows why regulated advice matters. A £265,000 CETV can look attractive on its own, but looking at the full picture, including the return needed, the guaranteed income, the spouse's pension, PPF protection, the 2027 inheritance tax changes and how income is phased, points clearly towards keeping the DB pension in a case like his.

Free, impartial guidance is available from MoneyHelper. Be wary of anyone who contacts you unexpectedly about your pension; the FCA's ScamSmart site explains the warning signs.

I don't give pension transfer advice. I offer a free, no-obligation chat that gives general information about how DB transfers and the advice process work, and if you 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 transfer values of £50,000 or more. You can book a free chat about how the process works or read more case studies.

This is a hypothetical, illustrative example for education only. Andrew and Catherine are not real people, and the figures are examples only. It is not financial advice. You should take regulated advice from an FCA-authorised adviser with the pension transfer permission before making any decision about your DB pension.