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

In this illustrative example, a 57-year-old with a £245,000 transfer value and a guaranteed, inflation-linked pension of £11,500 a year would most likely be advised to keep her defined benefit pension. The growth needed to match her guaranteed income is high, the inheritance tax changes due in 2027 weaken the case for a transfer, and her other savings already give her flexibility.

Meet Emma

Illustrative example: imagine Emma, 57, who spent 23 years as a supply chain manager at a large UK food and drink manufacturer before taking voluntary redundancy in 2022. Her former employer runs a well-funded defined benefit (DB) pension scheme, now closed to new benefits, which offers Emma a deferred pension of £11,500 a year from age 65, or a cash equivalent transfer value (CETV) of £245,000.

Emma now works part-time as a logistics consultant. She is wondering whether transferring her CETV to a self-invested personal pension (SIPP) might give her more flexibility, a better inheritance position and more control in retirement. Her husband John, 58, works full-time and they have two adult children.

Emma's pension and financial profile

• DB scheme type: final salary (1/60th accrual)
• Years of service: 23
• Deferred pension from age 65: £11,500 a year (inflation-linked)
• Cash equivalent transfer value (CETV): £245,000
• Spouse's pension on death: 50% (£5,750 a year for John)
• DC workplace pension (current employer): £65,000
• Stocks and shares ISA: £32,000
• State Pension: both expect the full new State Pension

Why Emma is considering a transfer

Emma has three reasons for looking at a transfer:

1. Inheritance. Emma and John want to leave something to their children. Her DB scheme would pay John a 50% spouse's pension, but nothing passes to the children. A SIPP has often been passed on outside the estate for inheritance tax. But unused pension funds and most death benefits are due to come into the scope of inheritance tax from 6 April 2027, which changes this significantly.
2. Flexibility. Emma would like control over when and how much she withdraws, rather than a fixed income from 65 whatever her circumstances.
3. Investment growth. Emma hopes that a professionally managed £245,000 SIPP might do better than the £11,500 a year guaranteed income over a retirement of 25 years or more.

The analysis: required rate of return

A regulated adviser would carry out an appropriate pension transfer analysis, as the FCA requires. Many advisers also show a required rate of return, sometimes called the critical yield. It is the investment return a transferred SIPP would need to achieve every year, after all charges, to provide the same benefits as the DB scheme, including the spouse's pension and inflation increases.

In this example, Emma's required rate of return comes out at 6.5% a year.

What 6.5% really means: Over a retirement of 25 to 30 years, a diversified portfolio would need to return 6.5% a year after charges, on average, to match the DB income. Poor returns in the first few years of retirement, known as sequence of returns risk, could permanently reduce the SIPP's ability to provide the same income.

The adviser must also give Emma a transfer value comparator (TVC). In this example it shows that the £245,000 transfer value is worth about 72p in the pound compared with the cost of buying the same benefits on the open market. In other words, it might cost around £340,000 to buy an annuity that matches what the scheme already promises, so Emma would be giving up around £95,000 of value by transferring.

Likely outcome of regulated advice: keep the DB pension

In a case like Emma's, the likely outcome of regulated advice would be to keep the defined benefit pension.

The scheme provides a guaranteed, inflation-linked income of £11,500 a year from 65, with 50% continuing to John if she dies first. That certainty is very hard to match without taking significant investment risk, and a 6.5% required return is a high bar.

Key point: Emma's scheme is backed by a solvent employer and is well funded. Even if the employer did fail, the Pension Protection Fund would usually pay compensation. Because Emma has not reached the scheme's normal pension age, that would generally be 90% of her deferred pension, with more limited yearly increases. See what happens to your DB pension if your employer goes bust.

On inheritance, the 2027 changes mean unused pension funds are due to count towards the estate for inheritance tax. The argument that a SIPP is a tax-efficient way to pass on money is much weaker than it was. With Emma's DC pot and ISA already providing flexible, accessible money, keeping the guaranteed DB income looks the stronger option in this example.

How Emma's retirement income might be structured

Instead of a transfer, a regulated adviser might typically look at building Emma's retirement around what she already has. In this example:

• Age 57 to 63: Emma's consulting income and John's salary cover their living costs. Emma keeps paying into her DC pension and ISA.
• Age 63 to 65: drawing from her DC pot (£65,000) and ISA (£32,000) provides a bridge income of about £12,000 a year while her DB pension is still deferred.
• Age 65: her DB pension of £11,500 a year starts, guaranteed and inflation-linked.
• Age 67: her State Pension starts, so her guaranteed income is her DB pension plus the full new State Pension.
• Household income from 67: in this example, potentially in the region of £35,000 to £40,000 a year once John's State Pension and his own savings are included.

An adviser would also look at the scheme's commutation terms. In this example, Emma could take a tax-free lump sum by giving up £1 of yearly pension for every £12 of lump sum (a 12:1 commutation factor). Her tax-free cash across all her pensions would be well within the Lump Sum Allowance of £268,275. However, a factor of 12:1 for an inflation-linked pension is often seen as poor value, so an adviser might suggest she weighs up using her ISA for any lump sum she needs rather than giving up guaranteed income.

Key lessons from this example

1. A 6.5% required return is a high bar. It might be achieved, but it is not guaranteed, and falling short in retirement has serious, irreversible consequences.
2. The 2027 inheritance tax changes weaken the inheritance case for transfers. Anyone considering a transfer mainly to leave money to family needs to look at this again.
3. Flexible savings elsewhere reduce the need to transfer. With a £65,000 DC pot and a £32,000 ISA, Emma has accessible money without giving up her guaranteed income.
4. Commutation factors matter. Low factors, such as 12:1, can mean giving up a lot of guaranteed income for each pound of cash.
5. The PPF provides meaningful protection. People worried about their employer's future often underestimate the Pension Protection Fund.

About this example

This is a hypothetical example showing the kind of analysis a regulated adviser with the pension transfer permission might carry out for someone in similar circumstances. Emma is not a real person, and the names and figures are examples only. Everyone's situation is different.

The FCA's starting assumption is that a transfer is unlikely to be suitable for most people. If your safeguarded benefits are worth more than £30,000, you are legally required to take regulated advice from an FCA-authorised adviser with the pension transfer permission before you can transfer. Read more about what a pension transfer specialist is and how transfer values work.

For free, impartial guidance, contact MoneyHelper. If you have defined contribution pensions and are 50 or over, you can also book a free Pension Wise appointment. Be wary of anyone who contacts you out of the blue about your pension, and check the FCA ScamSmart site before dealing with any firm.

If you would like to understand how DB transfers and the advice process work, you can book a free chat about how the process works. It is general information, not advice. You can find more illustrative examples in our case study section.

This is a hypothetical, illustrative example. The figures are examples only and are not a forecast. It is not financial advice and should not be relied on for any decision about your pension.