What a completely bizarre requirement. However you did provide very easy to consume data!!! A solution here is not really too bad. Just add the next character into your CTE and you then have access to the "next" character.

if object_id('tempdb..#Names') is not null

drop table #Names

if object_id('tempdb..#StringInTable') is not null

drop table #StringInTable

create table #Names (Forename nvarchar(50), Surname nvarchar(50), PhoneticNameKey nvarchar(20))

insert into #Names(Forename, Surname)

select 'JOSE', 'ANTINORI' union all

select 'TEST', 'Knuckle' union all

select 'ITest', 'Nint'

select * from #Names

;with cte as

(

select

substring(Surname, 1, 1) as Chars,

substring(Surname, 2, 1) as Char2,

stuff(Surname, 1, 1, '') as Surname,

1 as RowID

from #Names

union all

select

substring(Surname, 1, 1) as Chars,

substring(Surname, 2, 1) as Char2,

stuff(Surname, 1, 1, '') as data,

RowID + 1 as RowID

from cte

where len(Surname) > 0

)

select RowID, Chars, Char2 into #StringInTable

from cte

order by RowID

select * from #StringInTable

select chars, char2, case chars

when 'A' then 'y'

when 'B' then 'b'

when 'C' then 'k'

when 'D' then 'd'

when 'E' then 'y'

when 'F' then 'f'

when 'G' then 'g'

when 'H' then 'h'

when 'I' then 'y'

when 'J' then 'j'

when 'K' then case when char2 = 'N' then 'n' else 'k' end -- but if K is followed by N then should become n

when 'L' then 'l'

when 'M' then 'm'

when 'N' then case when char2 in ('I', 'T') then 'm' else 'n' end -- if N is followed by I or T then set to m

when 'O' then 'y'

end

from #StringInTable