Case Study: Self-Employed Pension Planning: Deferred DB, Multiple SIPPs and Retirement at 60 (2026 Guide)

If you are self-employed and also have a deferred defined benefit (DB) pension from an earlier job, the DB pension is usually the part to protect, and any tidying up is more likely to involve your personal pensions. In this illustrative example, a regulated adviser would most likely conclude that the DB pension should be kept, with the two SIPPs reviewed and possibly combined to fund retirement at 60.

At a glance

• Illustrative example: "Mark", 57, self-employed marketing consultant
• Situation: Deferred DB pension from early in his career, two SIPPs with different providers, irregular income history
• Goal: Retire at 60 on around £3,000 a month after tax, and simplify his pensions
• Pensions: Deferred DB (CETV £88,000), SIPP A (£142,000), SIPP B (£31,000)
• Likely outcome of regulated advice: keep the DB pension; review and possibly combine the SIPPs; phase income from 60

For the self-employed, pension planning often feels more complicated than it does for employees. Without an employer paying in automatically, it is easy to put the business first and leave pension saving patchy, spread across several arrangements built up over decades of mixed employment and self-employment.

This hypothetical example shows a common pattern: someone approaching retirement with a deferred DB pension from earlier employment, two personal SIPPs opened at different times, and a strong wish to simplify everything before stopping work. Mark is not a real person. The names and figures are examples only and are here for education.

Key point: The self-employed face particular pension challenges: no employer contributions, income that varies from year to year, and often several separate pots built up over a career that mixes employment with self-employment. Regulated advice can be especially useful here.

Mark's background

Imagine Mark, who is 57 and has worked as a self-employed marketing consultant for the past 19 years. Before that, he spent nine years with a large retailer that ran a defined benefit pension scheme.

He left that employer at 38 and has built his own client base since. His practice has done well. He typically earns between £65,000 and £90,000 a year, although his income has swung around at times, particularly during the pandemic years.

Mark's wife, Sarah, is 54 and works part-time as a teacher. She is a member of the Teachers' Pension Scheme and plans to work until at least 62. They have two adult children and own their home outright, having paid off the mortgage last year.

Mark's pension picture looks like this:

• Deferred DB pension (former employer's retail scheme): CETV of £88,000; projected income of £4,200 a year from age 65
• SIPP A (opened when he first went self-employed): £142,000, mostly in a default managed fund
• SIPP B (opened more recently with an online provider): £31,000, mostly cash and a global tracker fund
• State Pension: 32 qualifying National Insurance years so far, on track for the full new State Pension at 67

His total pension savings come to about £261,000 across the three arrangements, plus his future State Pension.

Mark's goals

Mark wants to retire at 60, in three years' time. His main objectives are:

1. Income of about £3,000 a month after tax (roughly £36,000 a year)
2. Simpler pension arrangements: he finds managing several pots confusing and time-consuming
3. Access to tax-free cash when he retires, to pay for some travel and home improvements
4. Passing on what is left to his children: he knows the rules on pensions and inheritance tax are changing in 2027
5. Flexibility: his consulting income may not stop overnight, and he may take on some part-time project work

Step 1: Looking at the deferred DB pension

The DB pension is the most important element to get right. If the transfer value of safeguarded benefits, such as a DB pension, is over £30,000, the law requires you to take regulated advice from an FCA-authorised firm with the pension transfer permission before the scheme will let you transfer. Mark's CETV is £88,000, so advice would be compulsory if he wanted to transfer.

Important: The FCA's starting assumption is that a transfer out of a DB scheme is unlikely to be suitable for most people. DB pensions provide a guaranteed income for life that rises with inflation, and that is very hard to replicate by investing. The starting assumption does not mean a transfer is always wrong, but the adviser has to show clearly why it would be suitable for that individual.

The key figures for Mark's DB pension are:

• CETV: £88,000
• Projected income at 65: £4,200 a year, with increases in payment linked to RPI and capped at 5%
• Spouse's pension: 50% on his death (£2,100 a year to Sarah)
• Early retirement: available from 60, with a reduction of roughly 6% for each year taken early, so the pension at 60 would be around £2,900 a year
• Scheme funding: the scheme is in surplus and is covered by the Pension Protection Fund (PPF)

As part of the analysis, a regulated adviser would look at how much investment growth a transferred pot would need to match the scheme's benefits. This is often called the critical yield or required rate of return. In this example it comes out at about 6.4% a year. Since 2018, FCA rules have also required advisers to produce an appropriate pension transfer analysis and a transfer value comparator, which shows what it might cost to buy the same income on the open market.

A return of 6.4% a year is not impossible, but it would mean taking substantial stock market risk, which is a lot to ask of someone close to retirement. A balanced portfolio might aim for less than that over the long term, and with no guarantee.

Key point: The higher the growth rate needed to match the scheme, the harder it is to make a financial case for transferring. A figure like Mark's would make most regulated advisers cautious.

What would Mark give up by transferring?

If Mark transferred his DB pension, he would give up:

• A guaranteed income of £4,200 a year at 65 (or about £2,900 at 60 after the early retirement reduction)
• RPI-linked increases in payment, which protect him against inflation over a long retirement
• A spouse's pension of £2,100 a year for Sarah's lifetime
• PPF protection if the scheme ever failed

In return he would gain flexibility and the potential for investment growth. Under the rules in force until April 2027, a personal pension pot also usually sits outside your estate for inheritance tax. That is due to change (see below).

The 2027 pension inheritance tax change

From 6 April 2027, unused pension funds and most death benefits are due to come into the scope of inheritance tax. You can read the government's summary on gov.uk. This weakens one of the arguments people have used for transferring a DB pension: the idea that a SIPP pot can pass to children free of inheritance tax.

For Mark, who partly wants to leave money to his children, this makes a transfer less appealing still.

Likely outcome of regulated advice: keep the DB pension

In a case like this, a regulated adviser would most likely conclude that Mark should keep his deferred DB pension. The high growth rate needed to match it, the guaranteed income, RPI-linked increases, Sarah's spouse's pension and PPF protection, together with the weaker inheritance tax argument, all point the same way.

Mark could then take the DB pension at 60 with the early retirement reduction (about £2,900 a year), or wait until 65 for the full £4,200 a year. He can decide nearer the time, depending on his income needs and whether he is still doing some consulting.

Step 2: Reviewing the two SIPPs

With the DB question settled, attention turns to the two SIPPs.

SIPP comparison (illustrative)

Feature	SIPP A	SIPP B
Current value	£142,000	£31,000
Annual management charge	0.75%	0.35%
Fund charges	0.65% (actively managed)	0.12% (global tracker)
Total annual cost	1.40%	0.47%
Drawdown available	Yes, full flexi-access	Yes, limited reporting tools
Guaranteed annuity rate?	No	No
Exit charges	None	None

SIPP A costs noticeably more than SIPP B: 1.40% a year against 0.47%. Over time, that difference compounds. On a £142,000 pot, 1.40% a year is about £1,988 in charges, compared with about £667 at 0.47%.

Neither SIPP has a guaranteed annuity rate (GAR) or an exit charge, so moving them would be technically straightforward. If either had a GAR, that would change things: GARs can be very valuable and are lost on transfer. You can read more in my guide to guaranteed annuity rates.

What a regulated adviser might suggest for the SIPPs

In a case like Mark's, an adviser might well suggest combining both SIPPs into a single lower-cost plan with good drawdown tools. The aim would be to:

• Bring total annual charges down (for example, below about 0.60% all-in)
• Make administration simpler: one statement, one login, one drawdown plan
• Allow one coherent investment strategy suited to his attitude to risk and his retirement timeline
• Give him better reporting and planning tools for income decisions in retirement

The combined pot would be about £173,000 (£142,000 plus £31,000). With three years to go before drawdown, an adviser would typically look at a diversified multi-asset approach. Combining defined contribution pots is a separate decision from the DB pension, and the DB pension would stay where it is.

Step 3: Building the retirement income plan

With the pensions clarified, the next step is a phased income plan for ages 60 to 67 and beyond.

Key point: The normal minimum pension age is 55 today and rises to 57 on 6 April 2028. Mark is already 57, so the change does not affect him, but anyone planning to take pension money in their mid-fifties should check whether they have a protected pension age. Some people do.

Tax-free cash

Mark can usually take up to 25% of his pension savings tax-free, as a pension commencement lump sum. The overall limit is the Lump Sum Allowance of £268,275, which replaced the Lifetime Allowance when it was abolished from 6 April 2024. Mark's savings are well below the level where that limit would matter.

On a £173,000 SIPP, 25% would be £43,250, a useful sum for his travel and home improvement plans.

Phase 1: ages 60 to 62 (before Sarah retires)

From 60, Mark stops full-time consulting, though he may take the odd project. In this phase:

• SIPP drawdown: about £20,000 to £22,000 a year, adjusted for any consulting income
• Tax: with little other income, his personal allowance (currently £12,570) covers the first slice, and he stays within the basic rate band
• DB pension: still deferred; at 60 Mark decides whether to take the reduced pension (about £2,900 a year) or keep waiting for the full amount at 65

Phase 2: ages 62 to 65 (Sarah retires, before State Pensions)

When Sarah retires at around 62, her Teachers' Pension starts paying a guaranteed income, which takes some pressure off Mark's SIPP.

• Mark may draw less from his SIPP to preserve the pot
• If he is still deferring the DB pension, he is now only a few years from the full £4,200 a year

Sarah's Teachers' Pension is an unfunded public sector scheme, which means it cannot be transferred to a defined contribution pension at all. My public sector pensions guide explains why.

Phase 3: age 65 and over

At 65, Mark's DB pension starts at the full rate of £4,200 a year. His State Pension follows at 67, based on the current State Pension age, which could change in future.

• DB pension at 65: £4,200 a year, rising with RPI and capped at 5%
• State Pension at 67: the full new State Pension is £241.30 a week in 2026/27, about £12,548 a year. Mark needs 35 qualifying years and has 32, so three more years of self-employment should get him there
• SIPP drawdown: reduced to top up the guaranteed income to his target, so the pot has to work less hard

Projected retirement income (illustrative)

Age	Source	Amount (approx.)
60 to 65	SIPP drawdown only	about £20,000 to £22,000 a year
65	DB pension starts	plus £4,200 a year
67	State Pension starts	plus about £12,548 a year (full new State Pension, 2026/27 rate)
67 and over	DB, State Pension and SIPP top-up	target of about £36,000 a year met with lower drawdown

All figures are illustrative. Investment growth, inflation, tax thresholds and future policy changes will affect actual outcomes.

Step 4: The self-employed pension gap

Mark's example also shows what is sometimes called the "self-employed pension gap". Over 19 years of self-employment, his contributions were irregular: generous in good years, small when cash flow was tight. Imagine he paid in about £95,000 in total. With investment growth, his two SIPPs have reached £173,000.

Important: Self-employed people get no employer contributions and no automatic enrolment. Saving for retirement is entirely down to them. Those with a deferred DB pension from earlier employment face exactly the same transfer rules as everyone else.

Mark's position highlights several risks that are common for the self-employed:

• Irregular contributions: business cash flow can derail good intentions and leave pots smaller than planned
• Scattered pots: opening SIPPs at different stages without an overall plan adds complexity and cost
• Relying on the business or property: many self-employed people expect to fund retirement by selling a business or property, and those plans do not always work out
• National Insurance gaps: self-employed years need checking to make sure they count towards the State Pension

Checking National Insurance

Mark has 32 qualifying years and needs 35 for the full new State Pension. With three more years of consulting planned, he should reach 35 naturally.

Since April 2024, self-employed people with profits above the small profits threshold no longer pay Class 2 National Insurance but still get a qualifying year. Those with lower profits can choose to pay voluntary Class 2 contributions. Class 4 contributions continue to be paid through self-assessment.

It is still worth checking. You can check your National Insurance record and get a State Pension forecast on gov.uk, and see whether filling any gaps with voluntary contributions would increase your State Pension.

Getting help

Mark's example shows why self-employed people approaching retirement often benefit from regulated advice. A deferred DB pension, several personal pensions, an uneven income history and a specific income target all need looking at together.

A regulated financial adviser can help with:

• How to draw from personal pensions in a tax-efficient way
• When to take tax-free cash, and in what order
• Building a sustainable income from the State Pension, DB income and SIPP drawdown
• Managing investment risk in the years just before and after retirement

If you are thinking about transferring a DB pension, that advice must come from an FCA-authorised firm with the pension transfer permission, and it is a legal requirement if the transfer value is over £30,000. For free, impartial guidance on your options, try MoneyHelper or, if you are 50 or over, Pension Wise. 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. Mark is not a real person and the figures are examples only. It is not advice and should not be relied on as a basis for any decision.

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Frequently asked questions

Can a self-employed person transfer a DB pension from a previous employer?

Yes. A deferred DB pension from an earlier job can be transferred by someone who is now self-employed, under the same rules as anyone else. If the transfer value is over £30,000, regulated advice from an FCA-authorised firm with the pension transfer permission is legally required first. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

Should a self-employed person combine several SIPPs?

It depends on the circumstances. Combining SIPPs can make administration simpler, reduce charges and make planning easier. Before moving anything, it is important to check for guaranteed annuity rates, exit charges or other valuable features. A regulated adviser can compare the total costs and benefits.

How much tax-free cash can a self-employed person take from a pension?

Usually 25% of the pension when you take it, up to the Lump Sum Allowance of £268,275. The allowance applies across all your pensions combined, not per pot. Most people with moderate pension savings are well within it.

How does the State Pension work for self-employed people?

Self-employed people build State Pension entitlement through National Insurance. Since April 2024, those with profits above the small profits threshold get a qualifying year without paying Class 2, while those below it can pay voluntary Class 2. The full new State Pension (£241.30 a week in 2026/27) normally needs 35 qualifying years. You can check your record on gov.uk and see whether voluntary contributions would help.

Will unused SIPP funds be subject to inheritance tax after 2027?

From 6 April 2027, unused pension funds and most death benefits are due to come into the scope of inheritance tax. The detailed rules are complex, so anyone with significant pension savings and inheritance tax concerns should take regulated advice.