The FCA's default position is that most DB transfers don't suit most members. The Advice Boundary requires regulated advice for transfers over £30k, and most advisers will recommend AGAINST transfer in most cases. Specific scenarios where transferring CAN be reasonable: (1) significant ill health expected to shorten life; (2) substantial other guaranteed income (state pension + other DB + sufficient capital); (3) inheritance objectives (DB pays nothing to non-spouse beneficiaries); (4) scheme funding concerns (rare in UK private sector with PPF protection); (5) specific tax planning around the 2027 IHT-on-pensions reform. The base rate of "right to transfer" cases is probably 10-20% of all DB members.
The regulatory framework — the Advice Boundary
For DB transfers over £30,000, you MUST obtain advice from an FCA-authorised Pension Transfer Specialist (PTS). This is a statutory requirement under Section 48 of the Pension Schemes Act 2015.
The advice must:
- Consider whether the transfer is suitable for you.
- Compare the DB benefit to what could be achieved via the transferred amount in drawdown.
- Account for your circumstances, objectives, and risk tolerance.
- Document the recommendation in writing.
The FCA's regulatory pressure on DB transfer advice is significant. Many advisers either refuse to advise (preferring to leave the area entirely) or carry a 30-day "cooling off" requirement before completing the transfer.
The default position — why most transfers don't suit most members
A DB pension provides:
- Guaranteed income for life regardless of market performance.
- Inflation protection (RPI/CPI escalation, depending on scheme).
- Spousal continuation (typically 50% to surviving spouse).
- PPF protection (Pension Protection Fund — covers most benefits even if scheme fails, up to a cap).
- Zero investment management responsibility.
For most retirees, these features are genuinely valuable. The transfer trades these for:
- Investment risk (DC pot can rise OR fall).
- Longevity risk (can run out if you live long).
- Inheritance optionality (pass remaining capital to heirs).
- Flexibility (vary withdrawals).
- Pre-2027 IHT advantage (DC pots were outside estate; reforms now bringing them in).
For most members, the value of guaranteed inflation-protected income exceeds the value of flexibility + inheritance.
When transfer can be reasonable — scenario 1: Significant ill health
If you have a serious condition that shortens life expectancy (cancer in active treatment, advanced heart disease, etc.), the DB pension's lifetime promise loses much of its value. A 55-year-old with 10-year life expectancy may only receive 10 years of pension payments — vs the actuary's assumed 30-year payout used in the CETV calculation.
The transferred amount in a SIPP can be passed in full to beneficiaries (or used flexibly in the remaining years). For ill-health cases, the transfer can be reasonable.
When transfer can be reasonable — scenario 2: Sufficient other guaranteed income
If your essential spending is already covered by:
- State Pension (~£12,547.60/year for full new state pension).
- Another DB pension.
- An annuity already purchased.
... then losing this DB pension doesn't put your essential income at risk. The flexibility + inheritance benefits of transfer can outweigh the loss of guaranteed payment.
Example: a retiree with £30k/year of essential spending who has £15k State Pension + £20k DB from another scheme. The £15k DB transfer doesn't undermine essential coverage — transfer can be reasonable.
When transfer can be reasonable — scenario 3: Inheritance objectives
DB pensions typically provide:
- Spousal continuation (50% to surviving spouse).
- 5-year guarantee (if you die in the first 5 years of payment).
- Nothing to non-spouse beneficiaries.
A DC pot from a transferred DB can:
- Pass any remaining capital to spouse, children, or any beneficiary.
- Pre-2027: completely outside the IHT estate.
- Post-2027: in the IHT estate but still flexible.
For members with strong inheritance objectives (significant family wealth transfer goals), transfer can be reasonable.
When transfer is rarely reasonable
- You'll rely on the DB for essential spending. Don't give up the guaranteed inflation-protected income.
- Standard health, average longevity expectations. The actuary's discount rate already accounts for typical longevity.
- Limited investment experience or low risk tolerance. A £400k SIPP requiring 25 years of investment decisions is a significant responsibility.
- No inheritance objective. If you don't care about leaving money to anyone, the DB's lifetime guarantee is purely valuable.
- You'd be tempted to overspend in early retirement. Behavioural risk — drawdown allows you to spend down too fast.
The 2027 IHT-on-pensions reform — changing calculus
Pre-April 2027: DC pension pots are outside the IHT estate. Pass to beneficiaries tax-free (if death before 75) or at marginal rate (if 75+). DB pensions don't have this benefit — they cease at member death (or surviving spouse).
Post-April 2027: DC pension pots are added to the IHT estate. The IHT-free advantage of DC pots is largely eliminated.
Implication: the historical IHT case for DB-to-DC transfer (to preserve IHT-free wealth) is being largely reversed. From 2027, DB pensions (which never were IHT-able) may actually have a small advantage on the IHT front vs DC pots.
The numbers — would the transferred amount match the DB?
Standard FCA test: if you transfer the CETV into a SIPP and invest it, can you withdraw an income equivalent to the DB pension throughout retirement?
Required return analysis: a £420k CETV needs to grow at ~4.5% real per year (after inflation) to sustain a £18,750/year inflation-linked income for 30+ years. This is roughly the long-term real return of a 60/40 equity/bond portfolio — i.e. it's achievable, but not guaranteed.
The "critical yield" — the return required to match the DB pension — is calculated by FCA-authorised advisers as part of the transfer suitability test. Critical yields above 8-10% are usually red flags suggesting the transfer is unfavourable.
The transfer process at a high level
- Request CETV statement from scheme. Wait 3-12 weeks for response.
- Engage an FCA-authorised Pension Transfer Specialist for advice (mandatory for transfers >£30k).
- Adviser produces a Transfer Value Comparator (TVC) report — the key suitability document.
- Decision: stay in DB, or proceed with transfer.
- If transferring: open receiving SIPP, complete transfer paperwork, scheme administrator transfers funds (4-12 weeks).
- If staying: continue accruing or move to deferred status.
See the full transfer process guide for the step-by-step.
Sources and methodology
Regulatory framework: Pension Schemes Act 2015 (Section 48), FCA COBS rules. Critical yield methodology: FCA TVC requirements. Pension Protection Fund coverage: ppf.co.uk. This page is educational only. DB pension transfer decisions require FCA-regulated advice — see the tax adviser editorial recommendation for ongoing tax-planning relationships; for the transfer advice itself, contact an FCA-authorised Pension Transfer Specialist.
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