Case Study: Former Insurance Company Underwriting Manager's £295,000 DB Pension, Should Margaret Transfer? (2026 Guide)

For someone like Margaret, who wants flexibility and to leave money to her children but already has DC savings and an ISA to bridge the years to 65, a regulated adviser would be likely to conclude that she should keep her DB pension. The 2027 inheritance tax changes weaken the inheritance argument for a transfer, and her guaranteed, inflation-linked income and spouse's pension would be hard to replace. This illustrative example sets out what an adviser would typically weigh.

Quick summary

• Illustrative example: Margaret, 59, former senior underwriting manager at a large UK insurance group (a hypothetical person)
• Pension: Deferred DB pension with a CETV of £295,000 (projected £13,500 a year from age 65)
• Likely outcome of regulated advice: keep the DB pension
• Possible approach: draw on DC savings and an ISA from 59 to 65, then guaranteed DB income from 65 and State Pension from 67

Margaret's background

Illustrative example: Margaret spent 27 years as a senior underwriting manager at a large UK insurance group before taking voluntary redundancy in 2021. She and her husband Colin, 61, live in Cheshire and are planning their retirement together. Colin already receives a company pension of £8,400 a year, and they have no mortgage.

Margaret has a deferred defined benefit (DB) pension from her former employer's final salary scheme. She also has a DC pension worth £62,000, invested in a balanced managed fund, and a stocks and shares ISA worth £28,000.

Having read about pension flexibility online, Margaret wonders whether transferring her DB pension to a Self-Invested Personal Pension (SIPP) could make sense. She wants flexibility, the chance to pass money to her adult children and more control over when she retires.

The CETV and the transfer decision

Margaret's scheme quotes a Cash Equivalent Transfer Value (CETV) of £295,000. If she keeps the DB pension, she will receive a guaranteed income of £13,500 a year from age 65, increasing each year in line with CPI up to 5%. If she dies first, Colin would receive a 50% spouse's pension of £6,750 a year.

Because her DB benefits are worth more than £30,000, the law requires Margaret to take regulated advice from an FCA-authorised adviser with the pension transfer permission before she can transfer. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

Key point: what return would she need?

A regulated adviser must carry out an Appropriate Pension Transfer Analysis (APTA) and show a Transfer Value Comparator (TVC), which compares the CETV with the estimated cost of buying the same benefits in a DC arrangement. Advisers may also look at the return a transferred pot would need to achieve to match the DB income. For illustration, suppose Margaret's SIPP would need to earn about 6.8% a year after charges. Achieving that consistently over decades, while managing sequence-of-returns risk, is a high bar, especially for someone close to retirement.

What a regulated adviser might weigh

In this example, the analysis suggests the CETV is below the estimated cost of replacing Margaret's benefits, and that her pot would need to grow by around 6.8% a year after charges and withdrawals to match the DB income. At 59, with only a few years before she needs the income, that is an ambitious target that brings significant investment risk.

An adviser would typically stress-test the alternatives. For illustration, in a poor-returns scenario where the pot earned 4% a year on average, Margaret's SIPP might run out by her late 70s, well before she could reasonably expect to live. The DB scheme, by contrast, pays for life regardless of markets, inflation or how long she lives.

Margaret's wish to pass money to her children would also need careful thought. From 6 April 2027, unused pension funds and most death benefits are due to come into the scope of inheritance tax. That weakens the inheritance argument for transferring to a SIPP, which used to be one of the reasons people most often gave. The DB scheme's 50% spouse's pension for Colin already provides a meaningful benefit on death without a transfer.

Important: 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. This removes much of the advantage people once saw in transferring from a DB scheme to a SIPP for estate planning. The detail depends on the final legislation and HMRC guidance, so check the latest position on gov.uk and see our 2027 pension IHT guide.

Taken together, an adviser would be likely to weigh:

1. The return needed: around 6.8% a year after charges is a demanding target
2. The stress tests: in poor markets, a transferred pot could run out in her late 70s
3. Inheritance: the 2027 changes weaken the case for a transfer on estate planning grounds
4. The spouse's pension: Colin would lose a guaranteed, inflation-linked income if Margaret died first
5. Her existing flexibility: her DC pension and ISA already give her flexible money for the years before 65

Likely outcome of regulated advice: keep the DB pension.

An income approach an adviser might discuss

Rather than transferring, an adviser might discuss a phased approach along these lines:

• Ages 59 to 65 (bridge years): draw on her DC pension (£62,000) flexibly, perhaps taking the 25% tax-free cash (£15,500) first and then around £5,000 to £6,000 a year from the rest, topped up from her ISA (£28,000) as needed. ISA withdrawals are tax-free and don't count as income for tax purposes.
• Age 65: her DB pension starts at £13,500 a year. The scheme also offers tax-free cash at a commutation rate of 14:1 (£14 of cash for each £1 a year of pension given up). An adviser would help her judge whether that is good value for her; at 14:1, many people find it gives up a lot of secure income.
• Age 67: her State Pension starts. Based on her National Insurance record, she is on track for the full new State Pension, which is £241.30 a week (about £12,548 a year) in 2026/27.
• From 67: her DB pension and State Pension together would give Margaret around £26,000 a year of secure, inflation-linked income, with Colin's £8,400 company pension and, once he reaches State Pension age, his own State Pension on top. Her tax-free cash would be well within the Lump Sum Allowance (£268,275) and the Lump Sum and Death Benefit Allowance (£1,073,100).

You can check your own State Pension age and forecast on gov.uk. If Margaret wants help understanding her DC options, a free Pension Wise appointment is available to people aged 50 or over.

Getting help

Margaret's example illustrates a common situation: a private sector DB member who is attracted by flexibility and the idea of leaving money to family, and considers a transfer, but whose guaranteed income turns out to be far more valuable on analysis. Because a transfer can't be reversed, regulated advice is a legal requirement where DB benefits are worth more than £30,000, and it is genuinely important for making an informed decision.

If you have a deferred DB pension and are exploring your options, free, impartial guidance is available from MoneyHelper. Every case is different, and the right answer depends on your full financial picture, health, attitude to risk and retirement goals. Be wary of anyone who contacts you out of the blue about your pension; the FCA's ScamSmart site explains the warning signs.

I don't give pension transfer advice. I offer a free, no-obligation chat that gives general information about how DB transfers and the advice process work, and if you 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 transfer values of £50,000 or more. You can book a free chat about how the process works or read more case studies.

This is a hypothetical, illustrative example for education only. Margaret and Colin are not real people, and all figures are examples only. It is not financial advice. You should take regulated advice on your own circumstances before making any pension transfer decision.