Case Study: DB Pension Transfer Decision for a Former Construction Manager (2026)

For a former construction manager with a healthy DB pension, a spouse who relies on it and other savings to bridge the gap to 65, transferring is unlikely to be the better option. In this illustrative example, Jonathan, 57, has a £258,000 CETV. A regulated adviser would most likely conclude that he should keep his DB pension and use his SIPP, ISA and rental income for flexibility.

At a glance

• Illustrative example: Jonathan, 57, former senior project manager at a large UK housebuilder
• Service: 22 years in the company's defined benefit (final salary) scheme
• CETV: £258,000 | DB pension from 65: £12,200 a year
• Growth needed to match the scheme (critical yield): about 6.7% a year
• Likely outcome of regulated advice: keep the DB pension

Background

Imagine Jonathan, who spent 22 years as a senior project manager with a large UK housebuilding group before taking voluntary redundancy at 55. Over his career he built up significant benefits in the company's final salary scheme, a defined benefit (DB) arrangement that pays a guaranteed income in retirement.

Now 57 and working part-time as a self-employed consultant, Jonathan wants to know whether moving his DB pension into a self-invested personal pension (SIPP) would give him more control and flexibility. His Cash Equivalent Transfer Value (CETV) is £258,000.

His wider finances include a SIPP worth £74,000, built up during his self-employed years, a stocks and shares ISA of £38,000, and around £6,000 a year of net rental income from a buy-to-let property. His wife, Patricia, works part-time and has a small workplace pension of her own.

Key point: If the transfer value of safeguarded benefits, such as a DB pension, is over £30,000, the law requires regulated advice from an FCA-authorised firm with the pension transfer permission before you can transfer. Jonathan's CETV is well above that level.

The pension position

Jonathan's DB scheme provides these guaranteed benefits:

• Pension from 65: £12,200 a year, increasing with CPI and capped at 5% a year
• Spouse's pension: 50% (£6,100 a year) for Patricia if Jonathan dies first
• Tax-free cash option: up to £42,700 as a lump sum at retirement, in exchange for a reduced pension of about £9,400 a year
• Scheme funding: around 98% funded on the scheme's technical provisions basis, a healthy position

The transfer analysis

The critical yield is the investment growth a transferred pot would need each year, after charges, to match the DB scheme's benefits. In this example it is about 6.7% a year. Since 2018 FCA rules have also required advisers to produce a transfer value comparator, which compares the CETV with the estimated cost of buying the same income on the open market.

Achieving 6.7% a year consistently over eight years, and then through retirement, is possible in theory, but it would carry substantial risk, particularly if markets fell in the early years of taking income. Jonathan has no other significant guaranteed income until his State Pension at 67, which increases the risk of running short.

Important: The higher the growth needed to match the scheme, the stronger the case for keeping it. A figure like Jonathan's would make most regulated advisers cautious.

What a regulated adviser would weigh

Several factors would point towards keeping the DB pension:

• Guaranteed income from 65: £12,200 a year gives a dependable income floor, whatever markets do
• Protection for Patricia: she would receive £6,100 a year for life if Jonathan died first, something a SIPP cannot replicate without careful and often costly planning
• Scheme health: at around 98% funded, the scheme is in good shape, and the Pension Protection Fund provides a safety net if the employer fails
• Inflation protection: CPI-linked increases (up to 5%) help protect the pension's buying power over time
• The 2027 inheritance tax change: from 6 April 2027, unused pension funds and most death benefits are due to come into the scope of inheritance tax. That weakens one of the traditional arguments for transferring to a SIPP to pass money on

In a case like this, the likely outcome of regulated advice would be to keep the DB pension. That is consistent with the FCA's starting assumption that a transfer is unlikely to be suitable for most people.

Bridging the gap from 57 to 67

With his DB pension starting at 65 and his State Pension at 67, Jonathan could use his existing savings to bridge the gap. An adviser might typically map out something like this:

• Ages 57 to 63: rental income (about £6,000 a year after costs) covers essentials, topped up by consultancy income
• Ages 63 to 65: start drawing from the SIPP (£74,000). He could take a tax-free lump sum of about £18,500 (25%) and then draw flexibly, without touching the ISA unless needed
• Age 65: DB pension starts at £12,200 a year; rental income continues
• Age 67: State Pension adds the full new State Pension (£241.30 a week in 2026/27, about £12,548 a year), bringing his guaranteed income to around £24,700 a year before rental income and any SIPP drawdown

The ISA (£38,000) stays in reserve as a flexible emergency fund that he can access tax-free at any time.

A variation: easing into semi-retirement at 60

Imagine a similar case: Paul, 58, a senior site manager for another housebuilder, with 25 years in its DB scheme. His CETV is £280,000 and the scheme will pay £13,000 a year from 65, with a 50% pension for his wife. He also has a SIPP of £60,000 and an ISA of £40,000, and wants to cut his hours from 60 to spend more time with his grandchildren.

The question is the same: flexibility now or certainty later? A regulated adviser would weigh the guaranteed, inflation-linked income, the spouse's pension and PPF protection against the investment risk of a transfer. With £100,000 in his SIPP and ISA, Paul could bridge from 60 to 65 by drawing on those savings while working fewer hours, then rely on his DB pension from 65 and his State Pension from 67. In a case like this, too, the likely outcome of regulated advice would be to keep the DB pension and use the other savings for flexibility.

Key lessons from these examples

1. A high critical yield suggests the DB pension may be worth more than its transfer value
2. Spouse's pensions in DB schemes are hard to replicate cost-effectively in a SIPP
3. The 2027 inheritance tax change reduces the appeal of transferring to pass money on
4. Rental income, ISAs and a modest SIPP can bridge the gap to DB and State Pension age, so a transfer is not always needed for flexibility
5. Compulsory regulated advice is a safeguard, not a hurdle: it exists to help people make fully informed decisions

Getting help

Jonathan's example shows why pension transfer decisions should never be based on the headline CETV alone. The guaranteed income, inflation protection, spouse's benefits and scheme health all matter a great deal, and assessing them properly is the job of an FCA-authorised firm with the pension transfer permission.

If you have a defined benefit pension from a private sector employer, free guidance from MoneyHelper and Pension Wise can help you understand your options. Be wary of anyone who contacts you out of the blue about your pension, and check the FCA ScamSmart site before acting.

If you would like a free chat about how DB transfers and the advice process work, you can get in touch. The chat gives general information, not advice. If you then want regulated advice on a transfer value of £50,000 or more, 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.

This is a hypothetical example. Jonathan and Paul are not real people and the figures are examples only. It is not advice and should not be relied on as a basis for any decision.