Case Study: Former Telecoms Manager’s £195,000 DB Pension — Should Tom Transfer to a SIPP? (2026 Guide)

If you already have a SIPP and other savings, transferring a DB pension to get flexibility may add risk without adding much you don't already have. In this illustrative example, a self-employed former telecoms manager is offered £195,000 for a £9,750-a-year DB pension. The growth needed to match it is high, his wife depends on the spouse's pension, and the 2027 inheritance tax change weakens the legacy argument, so the likely outcome of regulated advice is to keep the DB pension.

Quick summary

• Illustrative example: "Tom", 58, a former regional sales manager, now a self-employed telecoms consultant
• DB scheme: a deferred final salary pension from a UK telecoms company (20 years' service)
• CETV offered: £195,000
• DB income from 65: £9,750 a year, index-linked
• Growth needed to match the DB pension: about 6.4% a year after charges
• Likely outcome of regulated advice: keep the DB pension, as the guaranteed income is too valuable to give up

Background: Self-Employed and Planning Ahead

Imagine Tom. He worked for a large UK telecoms company for just over 20 years before taking voluntary redundancy at 52. He now runs a freelance telecoms consultancy, earning around £45,000 a year. He has a SIPP worth about £72,000, built up from his own contributions since becoming self-employed, and a small defined contribution (DC) pot from a previous employer worth about £18,000.

At 58, Tom is starting to think seriously about retirement. He would like to wind down his consultancy between 63 and 65 and wants to understand all his options. His deferred DB pension has sat untouched for six years, and his latest statement shows a Cash Equivalent Transfer Value (CETV) of £195,000.

Tom has two reasons for looking at a transfer. He wants more flexibility over how and when he takes income, and he wants to know whether he could pass his pension to his two adult children more efficiently.

Important: Because Tom's safeguarded benefits are worth more than £30,000, the law requires him to take advice from an FCA-authorised adviser with the pension transfer permission before he could transfer. The FCA's starting assumption is that a transfer is unlikely to be suitable for most people.

The DB Pension in Detail

Tom's deferred DB pension is based on his salary when he left, increased each year until it starts. From 65 it will pay £9,750 a year, increasing in line with the Consumer Prices Index (CPI) up to 5% a year in this example. The scheme also pays a 50% spouse's pension to his wife, "Linda", if Tom dies first.

He doesn't need to take it early. Waiting until 65 means he avoids the reduction the scheme applies for early payment before its normal pension age.

What a Transfer Analysis Would Show

An adviser with the pension transfer permission would carry out an appropriate pension transfer analysis (APTA), including a transfer value comparator. One part of that is working out how much investment growth a transferred fund would need to provide the same benefits.

In Tom's example, a transferred fund would need to grow by about 6.4% a year after charges, throughout his retirement, simply to match the income the DB scheme already promises, guaranteed, index-linked and for life.

Key point: Growth of 6.4% a year after charges is a high bar. Achieving it consistently through market falls and changing conditions would need strong investment performance, with no guarantee of success. The DB scheme delivers the same income without any investment risk for Tom.

Income Without Transferring

If Tom keeps his DB pension and continues building his SIPP, his retirement income could look like this:

• Ages 63 to 65: draw from his SIPP (£72,000 plus further contributions) and DC pot (£18,000) to bridge the gap before the DB pension starts
• From 65: DB pension of £9,750 a year, index-linked for life
• From 67: the full new State Pension, which is £241.30 a week (about £12,548 a year) in 2026/27, if he has enough qualifying years. You can check your forecast on gov.uk.
• Guaranteed income from 67: about £22,300 a year before tax

That guaranteed floor would cover Tom and Linda's essential spending, with SIPP drawdown on top for travel and other extras.

The Inheritance Argument, Weakened by the 2027 IHT Change

Tom's wish to pass money to his children is understandable, but the picture has changed. From 6 April 2027, unused pension funds and most pension death benefits are due to come into the scope of inheritance tax for the first time. That significantly weakens the traditional argument that transferring a DB pension to a SIPP improves the position for your heirs.

Tom's DB scheme would pay Linda a 50% spouse's pension for the rest of her life if he died first. Depending on the scheme rules, there may also be a lump sum or guarantee if he died soon after his pension started. These protections have real value and would be lost on transfer. Our article on the 2027 pension IHT overhaul explains the change.

Likely Outcome of Regulated Advice: Keep the DB Pension

In an example like Tom's, a regulated adviser would be likely to conclude that he should keep his DB pension. The main reasons:

1. The growth needed, about 6.4% a year after charges, is high compared with the risk Tom would be taking with guaranteed income
2. Index-linking would be lost. The DB scheme provides inflation protection automatically. A SIPP does not.
3. Linda's spouse's pension would be lost. Her 50% survivor's pension would be hard to replace cheaply.
4. The 2027 IHT change means SIPP funds are expected to lose much of their inheritance tax advantage
5. Tom already has flexibility. His SIPP and DC pot already give him the drawdown flexibility he is looking for

What Tom Might Consider Instead

Instead of transferring, Tom could look at building up his existing SIPP before he winds down his consultancy. The annual allowance is £60,000, but tax relief on his personal contributions is limited to 100% of his relevant UK earnings, so about £45,000 a year in his case. Unused allowance from the previous three tax years can sometimes be carried forward.

He hasn't taken any tax-free cash yet, so his Lump Sum Allowance of £268,275 is untouched. He can usually take 25% of his SIPP and DC pot tax-free when he draws on them.

The DB pension at 65 and the State Pension at 67 then give a guaranteed income base, with the SIPP on top as a flexible pot for extras. Many people in Tom's position find that structure works well. MoneyHelper explains the annual allowance and tax relief rules.

Lessons From Tom's Example

Flexibility may already be there. If you already have DC pensions, you may not need to transfer a DB pension to get flexibility.

The legacy argument has changed. With pensions due to come into inheritance tax from April 2027, passing on a SIPP is likely to be less tax-efficient than it was.

Guaranteed income is the foundation. A DB pension and the State Pension together can cover essential spending, so flexible savings can be used for everything else.

Getting Regulated Advice and Help

Tom's figures are illustrative. Real transfer decisions depend on health, family, other assets, tax and a full transfer analysis by an adviser with the pension transfer permission. Every case is different, and what applies here may not apply to you. Our guide to final salary pensions explains the benefits you would be giving up.

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.

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This is an illustrative example. Tom and Linda are 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.