Case Study: Should a Former Automotive Worker Transfer His £238,000 DB Pension to a SIPP? (2026 Guide)

For someone like Peter, with a £238,000 transfer value, a wife who would rely on his spouse's pension and enough other savings to bridge the gap to 65, keeping the defined benefit (DB) pension is the likely outcome of regulated advice. He doesn't need to take investment risk with his core pension to retire comfortably, and the 2027 inheritance tax changes weaken the case for a SIPP. This illustrative example explains the reasoning.

Quick summary

• Illustrative example: "Peter", 60, former production line supervisor at a West Midlands automotive parts manufacturer
• DB pension: £11,200 a year from 65 (22 years' service), with a 50% spouse's pension
• CETV offered: £238,000
• Required return (critical yield): 6.2% a year in this example
• Other assets: DC pot £52,000 and cash ISA £31,000
• Likely outcome of regulated advice: keep the DB pension

Peter's situation

Imagine Peter, 60. He spent 22 years as a production line supervisor at a West Midlands automotive parts manufacturer, before taking voluntary redundancy at 58 when the plant restructured as supply chains shifted towards electric vehicles. He now works part-time as a technical trainer at a local engineering college, earning around £14,000 a year.

Peter is a deferred member of his former employer's final salary (defined benefit) scheme. His pension is £11,200 a year, payable from 65, with a 50% spouse's pension for his wife Janet, who is 57. The trustees have sent him a Cash Equivalent Transfer Value (CETV) of £238,000, and he wants to understand whether moving the money into a self-invested personal pension (SIPP) could make sense.

Important: 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. Peter's CETV of £238,000 is well above that level.

Running the numbers

An adviser with the pension transfer permission would carry out the FCA's required analysis, including a transfer value comparator (TVC) that compares the CETV with the estimated cost of buying the same income on the open market. Many advisers also show the required rate of return: the steady yearly investment return a SIPP would need, after charges, to match the guaranteed income Peter's DB pension provides from 65.

In this example, Peter's required return is 6.2% a year, after all charges. That's not impossible, but it isn't guaranteed and would need to be sustained for many years. A run of poor returns early in retirement, known as sequencing risk, could permanently deplete a SIPP. The DB pension, by contrast, pays £11,200 a year for life whatever happens in the markets.

The CETV of £238,000 is about 21 times the annual pension. On its own, that figure doesn't make a strong case for transferring, given the guarantees attached to the income. Our guide to the transfer value of a pension explains how CETVs are worked out.

Bridging the income gap

Peter's priority is covering the five years between now and 65, when his DB pension starts. His DC pot of £52,000 and cash ISA of £31,000 give him £83,000 of flexible money. Drawing £12,000 to £14,000 a year from these, alongside his part-time earnings, would comfortably support him until the DB pension begins.

From 65, the DB pension of £11,200 a year starts. From 67, Peter expects the full new State Pension, which is £241.30 a week (about £12,548 a year) at 2026/27 rates. Together with any remaining DC or ISA money, his own income from 67 would be roughly £24,000 to £26,000 a year, before Janet's State Pension and any pension of her own. He can check his forecast on gov.uk.

Key point: Peter doesn't need to take investment risk with his DB pension to fund his retirement. His DC pot and ISA already bridge the gap to 65, and the DB pension then provides a secure, guaranteed base.

The spouse's pension and the 2027 IHT changes

Janet is three years younger than Peter and, statistically, likely to outlive him. The DB scheme provides a 50% spouse's pension of £5,600 a year, payable for the rest of Janet's life if Peter dies first. That is not easy to replicate in a SIPP.

A SIPP could pass a drawdown pot to Janet, but the rules around pensions and inheritance are changing. Unused pension funds and most pension death benefits are due to come into the scope of inheritance tax from 6 April 2027. Money passing between spouses is generally exempt, but the change still materially weakens the inheritance argument for moving out of a DB scheme, which is one of the most common reasons people give. In this context, Peter's guaranteed spouse's pension for Janet is all the more valuable. Our article on the 2027 pension IHT changes explains more.

The Pension Protection Fund safety net

Peter mentions that his former employer has faced financial pressure. An adviser would explain that if the company became insolvent and the scheme couldn't pay benefits in full, it could enter the Pension Protection Fund (PPF). Broadly, members below the scheme's normal pension age receive 90% of their pension as compensation, although yearly increases are usually lower than the scheme would have paid. The PPF's old compensation cap no longer applies. That gives meaningful protection, which a SIPP can't offer against falling markets. Our article on what happens if your employer goes bust explains more.

Likely outcome of regulated advice

In a case like Peter's, the likely outcome of regulated advice would be to keep the deferred DB pension. The main reasons an adviser would typically weigh up:

• a required return of 6.2% a year is not low enough to justify giving up a guaranteed lifetime income
• the 50% spouse's pension protects Janet for life
• PPF cover provides a safety net if the employer fails
• his DC pot and ISA already give him the short-term flexibility he needs
• his income from 67 meets his needs without taking investment risk on his core pension

Getting regulated advice and help

Peter's example shows why DB transfer decisions need careful, individual analysis. A CETV of £238,000 represents decades of guaranteed income, which carries on regardless of markets for as long as Peter, and then Janet, live. If your safeguarded benefits are worth more than £30,000, the law requires you to take advice from an adviser with the pension transfer permission before transferring. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

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, such as Peter's £52,000 pot. If anyone contacts you out of the blue about your pension, check the FCA's ScamSmart pages before doing anything.

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. You can see more examples in our case studies.

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This is an illustrative example. Peter and Janet are hypothetical, and all figures are examples only, based on assumptions and 2026/27 figures 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.