Case Study: Planning Retirement With Mixed DB and DC Pensions (2026)

If you have a mix of defined benefit (DB) and defined contribution (DC) pensions, the planning usually starts by keeping the DB pensions as your guaranteed income base and making the DC pot work harder around them. In this illustrative example, transferring the DB pensions was either impossible (the NHS scheme can't transfer to DC) or unlikely to be suitable, so the useful work was reviewing the DC pot, tax-free cash and the order in which to draw income.

Quick summary

• Illustrative example: "Margaret", 62, a former NHS administrator
• Situation: three separate pensions from 30 years with different employers
• Goal: simplify her retirement income and keep some flexibility
• Likely outcome: keep both DB pensions. Review the DC pot's charges and investment strategy, and plan the order in which to draw income.
• Result in this example: lower charges on the DC pot and a clear, tax-aware income plan

This illustrative example shows how a 62-year-old with several pensions might approach retirement planning. Margaret is hypothetical and the figures are examples only. Everyone's circumstances are different, so take regulated financial advice before making pension decisions.

Margaret's Pensions

Imagine Margaret. After a 30-year career with three employers, a local council, an NHS trust and a private healthcare company, she is approaching retirement with a patchwork of pensions:

• Pension 1, Local Government Pension Scheme (LGPS): a DB pension from 8 years' service. Projected income: about £4,200 a year.
• Pension 2, NHS Pension Scheme: a DB pension from 12 years' service. Projected income: about £7,100 a year.
• Pension 3, private company DC scheme: a pot from 10 years in the private sector, worth about £68,000 and invested in a default lifestyle fund.

Normal pension ages differ between schemes and sections, and for some members they are linked to State Pension age. In this example we assume both DB pensions can be paid in full from 65.

On paper, Margaret is in a reasonable position. But she feels confused and overwhelmed: three providers, three sets of statements, and no clear picture of what her combined income will be or whether she is making the most of her options.

Key point: Having several pensions is very common in the UK, and many people have pots from previous jobs that they have lost track of. The government's Pension Tracing Service can help you find them. Combining pensions isn't always the right answer, but understanding your options is the essential first step.

First Observations

Looking at Margaret's position as a whole, a few things stand out straight away:

• Her two DB pensions give her substantial guaranteed income, with protections she would permanently lose if she transferred out. And the NHS pension can't be transferred to a DC pension at all.
• Her £68,000 DC pot is in a default lifestyle fund that has been steadily moving into lower-risk assets, which may not match how she plans to use it.
• She hasn't checked the charges on her DC pot. In this example they are 0.95% a year, which is higher than many modern alternatives.
• She has no plan for when and how to draw from each pension to manage her income tax.

So, while transferring her DB pensions is unlikely to be appropriate, there is plenty of scope to review her DC pot and build an overall retirement income plan.

Should Margaret Transfer Her DB Pensions?

This is often the first question people ask when they have DB pensions: could transferring out give more flexibility or a bigger lump sum?

For Margaret, there are two separate answers.

The NHS pension can't be transferred to a DC pension. The NHS Pension Scheme is an unfunded public sector scheme. Since April 2015, members of unfunded public sector schemes, including the NHS, Teachers', Police, Firefighters', Civil Service and Armed Forces schemes, cannot transfer to a DC pension. Our guide to public sector pensions explains this.

The LGPS pension could be transferred, because the LGPS is funded. But a regulated adviser would be very likely to conclude it should be kept.

Important: The FCA's starting assumption is that a DB transfer is unlikely to be suitable for most people. Transferring means giving up valuable guarantees permanently, and an adviser can only recommend it if a detailed, personal analysis clearly shows it is in your best interests. If your safeguarded benefits are worth more than £30,000, the law requires you to take advice from an adviser with the pension transfer permission before you can transfer.

Margaret's DB pensions together give about £11,300 a year of guaranteed income. Buying a similar inflation-linked income from an insurance company would typically cost a six-figure sum, and the transfer value of the LGPS pension alone would not replace what she would lose.

Both the LGPS and the NHS Pension Scheme offer:

• Increases in line with CPI in retirement under the Pensions Increase rules
• Pensions for a surviving spouse, civil partner or eligible partner or dependant
• Guaranteed income, whatever happens in investment markets

In an example like this, the likely outcome of regulated advice is to keep both DB pensions and focus on the DC pot and the income plan.

Reviewing the DC Pot

The £68,000 DC pot gives the most scope for change. A review might look at several areas.

1. Charges and Fund Choice

Margaret's existing DC scheme has a limited fund range and a charge of 0.95% a year. Moving to a personal pension or SIPP with a wider fund range and lower charges could reduce costs, which matters over a retirement that could last decades.

Switching providers has its own costs and risks. Check for exit charges, any guarantees or protected benefits in the old plan, the time the money is out of the market during the transfer, and that the new provider is FCA-authorised. A DC to DC transfer doesn't legally require advice, but taking it can help you avoid losing valuable features.

2. Investment Strategy

Margaret's default lifestyle fund has already moved much of her money into cash and bonds, in preparation for buying an annuity at retirement. That approach was designed for a time when most people bought annuities. If Margaret plans to use drawdown and leave money invested for many years, that defensive position may not suit her.

A review would consider how much investment risk she is willing and able to take, how long the money may need to last (possibly 25 to 30 years) and how a diversified approach might fit her needs.

Key point: The "lifestyle" approach built into many default workplace funds was designed for people who would buy an annuity. Since the pension freedoms in 2015, many people use drawdown instead, which may need a different investment approach. The right answer depends on how you plan to take your money.

3. Tax-Free Cash

Margaret can usually take up to 25% of her DC pot as tax-free cash, known as a pension commencement lump sum (PCLS). Since the Lifetime Allowance was abolished on 6 April 2024, tax-free cash is limited by the Lump Sum Allowance (LSA) of £268,275 for most people. From her £68,000 pot, that is about £17,000.

Her DB pensions also let her give up some pension in exchange for a tax-free lump sum at retirement, using each scheme's commutation terms.

Taken together, the tax-free cash available could be substantial. But taking the maximum isn't always best, because giving up DB pension for cash reduces her guaranteed income for life. Modelling a few different options helps find the right balance.

Planning the Order of Income

One of the most useful parts of Margaret's planning is deciding which pensions to draw from, and when, to manage her income tax.

A possible approach (illustrative only):

1. Ages 62 to 65 (before her DB pensions and State Pension): draw modestly from the DC pot. Keeping taxable withdrawals within the personal allowance (£12,570 in 2026/27) where possible can mean little or no income tax.
2. Age 65: her DB pensions start, giving about £11,300 a year of guaranteed income.
3. Age 67 onwards: her State Pension starts. The full new State Pension is £241.30 a week (about £12,548 a year) in 2026/27, so with her DB pensions her guaranteed income could be more than £23,000 a year. You can check your own State Pension age and forecast on gov.uk. The DC pot can then top up her income flexibly or be kept in reserve.

Important: 2027 pension IHT changes. From 6 April 2027, unused pension funds and most pension death benefits are due to come into the scope of inheritance tax. That may change how much sense it makes to leave DC pension money unspent as an inheritance. The right approach depends on the size of the estate, other assets and who the beneficiaries are.

Lessons From Margaret's Example

Margaret's example shows several principles that apply to many people with a mix of pensions.

DB Pensions Are Usually Worth Keeping

The guaranteed income, inflation protection and survivor benefits in most DB schemes are hard and expensive to replace. The FCA's starting assumption that a transfer is unlikely to be suitable reflects that. And for unfunded public sector schemes like the NHS, a transfer to DC isn't possible anyway.

DC Pots Deserve Regular Review

Default funds, charges and provider features should be reviewed from time to time. A pot that suited you when you joined a scheme years ago may not be the best option now.

The Order of Income Matters

Drawing from the right pensions in the right order can reduce the tax you pay over your retirement.

The Whole Picture Matters

Pension decisions don't sit in isolation. State Pension, inheritance tax, health, family and attitude to risk all feed into a retirement plan.

Questions to Ask an Adviser

If you have a mix of DB and DC pensions and want regulated advice, you can check any firm on the FCA Register. Useful questions to ask include:

• Is your firm FCA-authorised, and does it hold the pension transfer permission if I want advice on a DB pension?
• Will I get a written suitability report for any recommendation?
• How are your fees worked out, and what will I pay if I decide not to go ahead?
• Can you look at all my pensions together and explain how they fit?

Getting Regulated Advice and Help

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. Be wary of anyone who contacts you out of the blue about your pension, and 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. Below that, MoneyHelper is a good place to start.

Frequently asked questions

Can I consolidate my DB pension with my DC pension pots?

You can usually combine DC pots fairly freely, though it's worth checking for exit charges and valuable guarantees first. Transferring a DB pension is different. If your safeguarded benefits are worth more than £30,000, you must take advice from an FCA-authorised adviser with the pension transfer permission first. Unfunded public sector schemes, such as the NHS and Teachers' schemes, can't transfer to a DC pension at all. DB pensions carry valuable guarantees that are lost permanently on transfer, and the FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

What is a Cash Equivalent Transfer Value (CETV)?

A CETV is the lump sum a DB scheme offers in exchange for you giving up your right to a guaranteed pension. The scheme's actuary works it out, and it can change significantly with gilt yields, scheme funding, your age and your benefits. A CETV is usually guaranteed for three months from its guarantee date. Our page on the transfer value of a pension explains more.

How much tax-free cash can I take from my pension?

Since the Lifetime Allowance was abolished on 6 April 2024, you can usually take up to 25% of a DC pension as tax-free cash, up to the Lump Sum Allowance of £268,275 for most people. The rest is taxed as income when you take it. DB schemes usually provide tax-free cash by letting you give up some pension in exchange for a lump sum.

What is pension income sequencing and why does it matter?

It means drawing from different pensions in a planned order to manage your income tax. For example, drawing from a DC pot before your DB pensions start may let you stay within the personal allowance and pay little or no tax. Once DB and State Pension income begins, DC withdrawals can be timed to avoid moving into a higher tax band.

Do I need a pension transfer specialist to consolidate my pensions?

For DC pensions, you can usually transfer without regulated advice, though advice can help you avoid losing valuable features. For DB pensions where your safeguarded benefits are worth more than £30,000, advice from an FCA-authorised adviser with the pension transfer permission is legally required. You can check any firm on the FCA Register.

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This is an illustrative example. Margaret is 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. Please read our important information.