Case Study: Former Food Industry Supply Chain Manager’s £245,000 DB Pension — Should Emma Transfer? (2026 Guide)

Emma is 57 and spent 23 years as a Supply Chain Manager at a large UK food and beverage manufacturer, before taking voluntary redundancy in 2022. Her former employer ran a well-funded defined benefit (DB) pension scheme, now closed to new accrual, which offered Emma a deferred annual pension of £11,500 from age 65 — or a Cash Equivalent Transfer Value (CETV) of £245,000.

Now working part-time as a logistics consultant, Emma came to us wondering whether transferring her CETV to a Self-Invested Personal Pension (SIPP) might give her greater flexibility, a better inheritance position, and more control in retirement. Her husband John (58) remains in full-time employment and the couple have two adult children.

Why Emma Was Considering a Transfer

Emma raised three reasons for exploring a transfer:

1. Inheritance concerns: Emma and John want to leave something for their adult children. Her DB scheme pays John a 50% spouse’s pension but nothing passes to the children. A SIPP, by contrast, could historically be passed on free of inheritance tax. However, from April 2027, unused pension pots will fall within the estate — which significantly changes this calculation.
2. Flexibility: Emma wanted control over the timing and size of withdrawals, rather than a fixed income from 65 regardless of circumstances.
3. Investment growth: Emma hoped that professional investment management of a £245,000 SIPP might outperform the £11,500/yr guaranteed DB income over a 25-year retirement.

The Analysis: Retirement Risk Rating (RRR)

The cornerstone of DB transfer analysis is the Retirement Risk Rating (RRR) — sometimes called the critical yield. It represents the investment return a transferred SIPP would need to achieve, every year and after all charges, to replicate the lifetime value of the DB benefits including spouse’s pension and inflation-linking.

Emma’s RRR came out at 6.5% per annum.

Emma’s Transfer Value Comparator (TVC) showed that the transfer value of £245,000 represents approximately 72p in the pound relative to the cost of replicating her DB benefits in the open market. In other words, she would need to invest around £340,000 today in a guaranteed annuity to replicate what the scheme already promises — she would be giving up £95,000 of value by transferring.

Our Recommendation: Retain the DB Pension

We recommended that Emma retain her defined benefit pension.

The scheme provides a guaranteed, inflation-linked income of £11,500 per year from age 65, with a 50% continuation for John. That certainty is genuinely difficult to replicate without material investment risk — and at a 6.5% RRR, the hurdle is high.

On the inheritance question: the 2027 pension IHT reform means unused SIPPs will count toward the estate from April 2027 onwards. The tax-efficiency argument for transferring to a SIPP has substantially diminished. With Emma’s DC pot and ISA already providing flexible, accessible capital, retaining the DB income guarantee was clearly the better outcome.

Emma’s Retirement Income Plan

Rather than transfer, we structured Emma’s retirement around her existing assets:

• Age 57–63: Part-time consulting income + John’s salary cover living costs; Emma pays into her DC pot and ISA to build capital.
• Age 63–65: DC pot drawdown (£65,000) and ISA drawdown (£32,000) provide a bridge income of approximately £12,000/yr while both DB pensions are deferred.
• Age 65: DB pension of £11,500/yr begins (guaranteed, inflation-linked).
• Age 67: Emma’s State Pension of £11,973/yr (2025/26 rate) commences, bringing her personal guaranteed income to £23,473/yr.
• Combined household income from 67: Potentially £35,000–40,000/yr once John’s State Pension and remaining DC assets are factored in.

We also assessed the DB scheme’s commutation option: Emma could take a lump sum at 12:1, surrendering £1 of annual income for every £12 of lump sum. With the Lump Sum Allowance set at £268,275 from April 2024, Emma’s total tax-free cash position across all her pensions was well within her allowance. However, a 12:1 commutation ratio is generally considered poor value — we recommended she not commute and instead draw her ISA for any lump-sum needs at retirement.

Key Lessons From Emma’s Case

1. A 6.5% RRR is a high bar. Achievable in theory, but not guaranteed — and the consequences of underperformance in retirement are severe and irreversible.
2. The 2027 IHT changes reduce the inheritance case for transfers. Clients considering a transfer primarily for legacy reasons need to reconsider their analysis.
3. Flexible capital elsewhere reduces the need to transfer. With a £65,000 DC pot and a £32,000 ISA, Emma has plenty of accessible capital without surrendering her guaranteed DB income.
4. Commutation ratios below 20:1 are generally poor value. The 12:1 offered here is well below that benchmark.
5. The PPF provides meaningful protection. For private sector DB schemes, the Pension Protection Fund backstop is often underappreciated by clients worried about employer solvency.

Seeking Professional Advice

This case study is a hypothetical illustration of the type of analysis a Pension Transfer Specialist undertakes with clients in similar circumstances. All names and figures are anonymised examples. Every client’s situation is unique and no two DB pension decisions are the same.

Under FCA rules (COBS 19.1), if your defined benefit pension CETV exceeds £30,000, you are legally required to take regulated financial advice before transferring. A Pension Transfer Specialist holds the advanced FCA qualification specifically required for this analysis.