Case Study: Utility Company DB Pension — Should Alan Transfer His £178,000 CETV?

Background

Alan is 63 years old and lives in the East Midlands. He spent 12 years working as a senior engineer for a large utility company before taking voluntary redundancy at 53. Since then, he has worked as an independent infrastructure consultant, earning around £28,000 per year — enough to cover day-to-day costs, but he is keen to step back from full-time work by 65.

Alan’s financial picture when he came to us:

• Deferred private sector DB pension (utility company scheme): CETV £178,000, expected pension £8,400/yr from age 65
• SIPP accumulated from later self-employment: £67,000 (currently in a balanced multi-asset fund)
• Stocks and Shares ISA: £52,000
• No mortgage — owns home outright (estimated value £310,000)
• Married to Janet (60), who has her own private pension (DC, £84,000) and will receive State Pension from 67
• Two adult children, no financial dependants

Alan had read about pension freedoms and wondered whether transferring his DB CETV into his existing SIPP would give him more flexibility — particularly around tax-free cash, investment growth, and eventually inheritance planning in light of the 2027 pension IHT changes.

The Analysis: What the Numbers Tell Us

Retirement Risk Rating (RRR): 5.8%

The Retirement Risk Rating (RRR) — formerly known as the Critical Yield — is the annual investment return Alan’s SIPP would need to achieve, every year without fail, to replicate the income his DB pension would provide at 65 with full indexation. Alan’s RRR came out at 5.8%.

At first glance, 5.8% might seem achievable. However, this figure assumes consistent, uninterrupted growth across a two-year accumulation window (Alan is 63 now, pension starts at 65) followed by decades of reliable drawdown — with no bad sequence-of-returns years, no significant market downturns, and no deviation from the assumed trajectory. Alan would need to sustain this return while also taking income, which significantly increases the risk.

The Value of £8,400 Per Year — Guaranteed

Alan’s DB pension offers £8,400 per year from 65, increasing each year in line with scheme rules (capped RPI, broadly similar to CPI). To purchase an equivalent inflation-linked annuity in the open market today, a 65-year-old male would typically need a fund of £200,000–£230,000. Alan’s CETV of £178,000 is below what it would cost to replicate his DB income on the open market — a clear signal that the scheme is pricing the benefit generously from the insurer’s perspective but prudently from the member’s.

Alan’s Actual Income Picture at 65

If Alan retains his DB pension and continues drawing down his other assets sensibly, his projected income from 65 looks like this:

• DB pension (from 65): £8,400/yr
• SIPP drawdown (from 63 to 67): ~£10,000–12,000/yr (managed drawdown)
• ISA drawdown: Available tax-free as a buffer
• State Pension (from 67): £11,973/yr (2025/26 full new State Pension at £230.25/week)
• Estimated total from 67: ~£29,000–31,000/yr household (combined with Janet’s income)

This comfortably covers Alan and Janet’s estimated annual expenditure of £26,000–£28,000 without needing to rely on uncertain investment returns.

The 2027 IHT Concern — Addressed

Alan raised the 2027 pension inheritance tax changes. From April 2027, unused pension funds will fall within a person’s estate for inheritance tax purposes. He wondered whether transferring to a SIPP and drawing it down faster might be preferable.

Our analysis showed that Alan’s SIPP (£67,000) combined with Janet’s DC pension (£84,000) gives the couple total pension assets of £151,000 — well below the nil-rate band and residence nil-rate band thresholds available to them. The 2027 changes do not create a meaningful IHT problem for Alan and Janet in their current financial position. The DB pension, once in payment, is not a capital asset and does not form part of the estate — it simply stops on Alan’s death (with a reduced spouse’s pension to Janet, which the scheme provides).

The NMPA Change: Worth Noting

Alan is 63 now and plans to stop working at 65. He is unaffected by the Normal Minimum Pension Age (NMPA) change from 55 to 57, which takes effect in April 2028 — he will already be over 57 by then and can access his SIPP freely. This was a key question we clarified early in the advice process.

Recommendation: Retain the DB Pension

The formal recommendation was to retain the DB pension. The transfer was assessed as unsuitable for the following reasons:

1. The RRR of 5.8% carries meaningful investment risk given the short accumulation window
2. Alan’s existing SIPP and ISA already provide flexibility and drawdown options
3. The DB pension provides guaranteed, inflation-linked income from 65 — reducing Alan’s reliance on investment returns in later retirement
4. The 2027 IHT concern does not apply materially to Alan and Janet’s current asset position
5. The scheme is financially sound with no employer insolvency risk identified at the time of advice

What Alan Did Instead

Alan accepted the recommendation. In parallel with the DB advice, the following steps were agreed:

• SIPP reviewed and moved to a lower-risk multi-asset portfolio for the final two-year run to retirement
• ISA earmarked as a tax-free bridge for age 63–65 living costs (reduces SIPP drawdown pressure)
• DB tax-free cash option reviewed — Alan can take a lump sum by commuting part of his pension at 65 within scheme rules; this was assessed and built into the income plan
• Expression of Wishes on SIPP updated to reflect current intentions
• Janet’s DC pension reviewed separately (outside scope of DB advice)

Seeking Professional Advice

Alan’s case illustrates a common situation: a private sector DB pension that, on the surface, seems like a candidate for transfer but on closer analysis provides irreplaceable guaranteed income that a SIPP simply cannot replicate at acceptable risk. A lower RRR than many headline cases does not automatically make a transfer suitable — context, time horizon, and the client’s wider financial picture all matter.

If you have a deferred private sector DB pension and are approaching retirement, a qualified Pension Transfer Specialist can help you understand your CETV, your RRR, and whether flexibility or security better serves your retirement goals. This is not a decision to make without regulated advice.

This case study is based on a hypothetical client scenario for illustrative purposes. It does not constitute financial advice. All regulatory figures are correct as at March 2026. Individual outcomes will vary. Always seek regulated financial advice before making any pension transfer decision.