Case Study: Should a Former Bank Manager Transfer Her £310,000 DB Pension? (2026 Guide)

For someone like Caroline, with a £310,000 transfer value, a spouse who relies on her pension and other savings to bridge an early retirement, keeping the defined benefit (DB) pension is the likely outcome of regulated advice. The investment return needed to match the guaranteed income is demanding, and the flexibility she wants can mostly be achieved without giving up the guarantees. This illustrative example walks through why.

Imagine Caroline, 57. She spent 26 years as a senior branch manager at a major UK high street bank before being made redundant in 2024 as part of a branch closure programme. Her question is straightforward: should she transfer her deferred final salary pension, with a Cash Equivalent Transfer Value (CETV) of £310,000, into a self-invested personal pension (SIPP)?

Summary of the example

• Illustrative example: "Caroline", 57
• Occupation: former senior branch manager at a high street bank
• Years of service: 26
• Scheme type: private-sector final salary (defined benefit)
• CETV offered: £310,000
• Projected DB pension at 65: £14,200 a year, plus a 50% spouse's pension
• Other DC pension: £47,000 in a group personal pension from her job after redundancy
• Target retirement age: 62
• Required return (critical yield): 6.3% a year
• Likely outcome of regulated advice: keep the DB pension

Caroline's situation

Caroline was made redundant when her bank sped up its branch closures. After 26 years, she left with a deferred pension and then built up a DC pot of £47,000 in two years at a smaller firm. Her husband, David, 60, still works part-time and has his own defined contribution pension. Caroline also has some ISA savings.

With five years to go until her target retirement age of 62, Caroline wants to understand whether moving her £310,000 CETV into a SIPP would give her more flexibility, particularly for passing money on, given the 2027 changes to how pensions are treated for inheritance tax.

What the numbers show

A regulated adviser with the pension transfer permission would carry out the FCA's required analysis, known as an appropriate pension transfer analysis (APTA), including a transfer value comparator (TVC) that compares the CETV with the estimated cost of replacing the income. Many advisers also show the required rate of return, sometimes called the critical yield: the investment return a SIPP would need to achieve each year, after charges, to match the DB scheme's guaranteed income.

In this example, Caroline's required return is 6.3% a year.

What the required return means: a figure of 6.3% means Caroline's SIPP would need to grow by 6.3% every year, after charges, just to match what her DB scheme will pay. With the extra risk of drawing an income while markets go up and down, known as sequencing risk, this is a high bar with no guarantee of being met.

Her DB pension at 65 would pay £14,200 a year, rising with inflation up to a cap of 5% a year. It would also pay a 50% spouse's pension to David if she died first. These are valuable guarantees that a SIPP cannot replicate.

The income gap: retiring at 62

Caroline wants to retire at 62, three years before her scheme's normal pension age of 65. She is already over 55, and will be over 57 when the normal minimum pension age rises from 55 to 57 on 6 April 2028, so the change doesn't affect her access to her DC pot.

Her projected income from 62 could look like this:

• Ages 62 to 65: drawdown from her £47,000 DC pot over about three years, plus ISA savings. Estimated net income of about £18,000 a year.
• Age 65: the DB pension starts: £14,200 a year, increasing with inflation.
• Age 67: the State Pension starts. The full new State Pension is £241.30 a week, about £12,548 a year, at 2026/27 rates.
• From 67: total guaranteed income of about £26,750 a year, plus David's pension.

Her scheme may also let her take the DB pension early, from 62, with a reduction for early payment, if her plans change. She could ask the scheme for those figures.

Key point: by using her DC pot and ISA to bridge the three years between 62 and 65, Caroline can retire when she wants without giving up the guaranteed income her DB scheme provides from 65.

The 2027 pension IHT question

Caroline raises a common concern. Unused pension funds and most pension death benefits are due to come into the scope of inheritance tax from 6 April 2027. She wonders whether moving to a SIPP would give her more control over how her pension passes on.

In practice, this argument carries less weight than many people assume. The changes cover unused pension funds and most death benefits, so a SIPP is not a way round them. Money passing between spouses is generally free of inheritance tax anyway. And her DB scheme's 50% spouse's pension gives David a guaranteed income for life, which no drawdown plan can match with certainty. Our article on the 2027 pension IHT changes explains more.

The legal requirement for advice

Because Caroline's safeguarded benefits are worth more than £30,000, the law requires her to take regulated financial advice before she can transfer. The advice must come from an FCA-authorised firm with the pension transfer permission, and be given or checked by a qualified pension transfer specialist. It is not a formality. It is an important protection that makes sure people understand what they would be giving up.

In a case like this, the adviser's analysis would look at the DB scheme's benefits in detail, test how a SIPP might perform under different investment scenarios, and weigh the guaranteed income against the flexibility of a SIPP. Since 1 October 2020, most firms have not been allowed to charge only if the transfer goes ahead (contingent charging), apart from limited exceptions for serious ill health or serious financial hardship.

The tax-free cash question

Caroline also asks about tax-free cash. Her DB scheme lets her take a tax-free lump sum at retirement by giving up some of her pension, known as commutation. Schemes set their own commutation factors. In this example the factor is 12:1, so giving up about £3,550 a year of pension would produce a lump sum of about £42,600, leaving a pension of around £10,650 a year. That is well within her Lump Sum Allowance of £268,275.

Taking some tax-free cash from the DB scheme doesn't need a transfer, and it keeps most of her guaranteed income alongside her DC pot. It's worth remembering that commutation factors are often less generous than the true value of the pension given up, so the trade-off needs thinking through.

Likely outcome of regulated advice

After a full suitability assessment, the likely outcome of regulated advice in a case like Caroline's would be clear: keep the DB pension and don't transfer.

The main reasons an adviser would typically weigh up:

• A required return of 6.3% a year is demanding, particularly given the sequencing risk Caroline would face drawing income from a SIPP from 62.
• The DB pension's inflation-linked increases and 50% spouse's pension are guarantees a SIPP can't replicate.
• The income gap between 62 and 65 can be bridged with her existing DC pot and ISA savings.
• The 2027 IHT changes don't create a compelling reason to transfer in her circumstances.
• Keeping the DB pension protects David's financial security whatever happens to investment markets.

Lessons from Caroline's example

1. The required return is a useful guide, not the whole answer. The higher it is, the more investment risk you would take just to match what the DB scheme already guarantees. Advisers look at it alongside the TVC and your full circumstances.
2. A spouse's pension has real value. It's easy to underestimate how much a guaranteed survivor's income is worth.
3. You don't need to transfer to retire early. Using DC pots and ISAs, or taking the DB pension early with a reduction, can bridge an income gap without giving up lifetime guarantees.
4. The 2027 IHT change is not a silver bullet. It covers most pension death benefits, not just DB schemes, and rarely justifies a transfer on its own.
5. Advice is a legal requirement for a reason. If your safeguarded benefits are worth more than £30,000, you must take regulated advice before transferring.

Getting regulated advice and help

Every pension transfer decision is different. What applies to Caroline may not apply to someone in different circumstances, for example someone in poor health, with no spouse, with an unusually high CETV relative to the pension, or with a strong wish to pass money on. The numbers are only part of the picture. Your own priorities matter too.

The FCA's starting assumption is that a transfer is unlikely to be suitable for most people. If you have a deferred final salary pension from a bank, a manufacturer, a utility company or any other private-sector employer, it's worth understanding your options fully before making any decision. 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 Caroline's £47,000 pot. If anyone contacts you out of the blue about your pension, check the FCA's ScamSmart pages first.

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. Caroline and David are hypothetical, and all figures are examples only, based on assumptions that may not apply to you. Nothing in this article is advice or a recommendation to transfer or keep any pension. If you transfer out of a DB scheme, you could end up worse off than if you had stayed. Please read our important information.