Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • nocash
    • By nocash 19th May 17, 10:54 AM
    • 21Posts
    • 1Thanks
    nocash
    CETV - CRASH in VALUE
    • #1
    • 19th May 17, 10:54 AM
    CETV - CRASH in VALUE 19th May 17 at 10:54 AM
    Received the annual CETV on my DB pension yesterday only to see it had dropped by a massive 33%. (92k - 61k)

    Called them to see why and was told it can change from day to day. Have the opportunity to speak to the actuaries if I wish but am wondering if it is worth waiting another year to see if it will change.

    I suspect that the scheme is not performing as well as expected but would be interested to hear any thoughts/ideas others may have?

    Thanks
Page 1
    • Malthusian
    • By Malthusian 19th May 17, 11:06 AM
    • 2,607 Posts
    • 3,721 Thanks
    Malthusian
    • #2
    • 19th May 17, 11:06 AM
    • #2
    • 19th May 17, 11:06 AM
    The actuaries will be able to tell you more than anyone here can. If you let us know what they say we can comment on whether it makes sense.

    When you say "if it is worth waiting another year" - waiting for what? Have you already decided or been advised to transfer out? What stopped you from doing it last year?
    • dunstonh
    • By dunstonh 19th May 17, 11:27 AM
    • 88,807 Posts
    • 54,156 Thanks
    dunstonh
    • #3
    • 19th May 17, 11:27 AM
    • #3
    • 19th May 17, 11:27 AM
    but am wondering if it is worth waiting another year to see if it will change.
    It changes all the time. It could well be a lot lower in 12 months.

    The increased transfer values are a short-term blip that will reverse sooner or later.

    Gilt Yields move daily. They hit their lowest point last August and increased towards the end of the year until around Feb where they fell back again a little although they are currently on the rise again and not far off where they were in 2014.

    There are more assumptions used than just gilt yields but they are the key reason for the big movements that have occurred. You say annual which suggests around the same time of year, then gilt yields are about 30% higher than what they were this time last year.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • agarnett
    • By agarnett 19th May 17, 11:32 AM
    • 1,282 Posts
    • 534 Thanks
    agarnett
    • #4
    • 19th May 17, 11:32 AM
    • #4
    • 19th May 17, 11:32 AM
    The actuaries will be able to tell you more than anyone here can. If you let us know what they say we can comment on whether it makes sense.

    When you say "if it is worth waiting another year" - waiting for what? Have you already decided or been advised to transfer out? What stopped you from doing it last year?
    Originally posted by Malthusian
    Yep the actuarial destroyers know all the answers ... but strangely they seem more often or not very very reluctant to clarify their black art, quite the opposite in fact:
    Willis Towers Watson got a bit aeriated last time I asked enough questions to get sent a telling breakdown which I then reverse engineered to understand what they thought was their secret tool for calculating CETVs including mine. Unfortunately they know you need above average maths skills to do that so the best you can expect is that they will bamboozle you unless you've got those skills.

    The CETVs on your scheme were perhaps enhanced for just a short window to allow insiders with the biggest CETVs to grab the money and run, and then the doors have been slammed shut behind on the little people who weren't sure what they were supposed to do last year because of mixed messages in forums like this.
    Last edited by agarnett; 19-05-2017 at 11:36 AM.
    • nocash
    • By nocash 19th May 17, 11:40 AM
    • 21 Posts
    • 1 Thanks
    nocash
    • #5
    • 19th May 17, 11:40 AM
    • #5
    • 19th May 17, 11:40 AM
    Wasn't ready to retire last year was the main reason I didn't do anything. I am fit, well and active but a recent health scare has had me re-thinking pensions, the tests results I have had now mean I need an internal examination so I will know more after that in a few weeks!!

    That apart I am just looking at my options now with a view to stopping work later this year, I can afford to wait another year if it is worth it as the scheme is gaining added years on the DB side.
    • woolly_wombat
    • By woolly_wombat 19th May 17, 11:41 AM
    • 477 Posts
    • 279 Thanks
    woolly_wombat
    • #6
    • 19th May 17, 11:41 AM
    • #6
    • 19th May 17, 11:41 AM
    Assuming you have already passed the scheme's Normal Retirement Age, might the most pragmatic next step simply be to take the pension now?
    • woolly_wombat
    • By woolly_wombat 19th May 17, 11:42 AM
    • 477 Posts
    • 279 Thanks
    woolly_wombat
    • #7
    • 19th May 17, 11:42 AM
    • #7
    • 19th May 17, 11:42 AM
    Sorry, hadn't seen your last post.
    • nocash
    • By nocash 19th May 17, 11:43 AM
    • 21 Posts
    • 1 Thanks
    nocash
    • #8
    • 19th May 17, 11:43 AM
    • #8
    • 19th May 17, 11:43 AM
    That thought had crossed my mind.

    Is it worth challenging them or will that not achieve anything and leave me open to revenge next year?
    • agarnett
    • By agarnett 19th May 17, 12:11 PM
    • 1,282 Posts
    • 534 Thanks
    agarnett
    • #9
    • 19th May 17, 12:11 PM
    • #9
    • 19th May 17, 12:11 PM
    That thought had crossed my mind.

    Is it worth challenging them or will that not achieve anything and leave me open to revenge next year?
    Originally posted by nocash
    A thought which as an old cynic, crosses my mind more than frequently. Depends whether you have the ability to take their calculation apart and show them where they have been unreasonable. It is next to impossible to get them to adjust however I got an extra 5% on one occasion when I highlighted an error of 10%, but they reduced it to 5% by adjusting something else they said they'd been too generous on. There are usually several lines of calculation for even the simplest deferred cases (if you do it manually). Their automated tools are sometimes accurate, and sometimes not quite coded correctly. The first CETV you get will probably be an automated answer.

    They kid you the parameters they inject into the calculations are all scientifically reasoned, but that's just multi-layers of smoke screen hiding the true pressures from upstairs and other intents behind the scheme. In the case of big banks, they're all in it together of course, so the special autonomous sections of Unite The Union keep the CETVs nice and rosey for all the old stager traders and managers who might need the cash for something else, like trading in their own bank shares on nods and winks.

    On balance, I'd say for most people life is too short at retirement age to get wound up about such ... I do, but that's me!

    The trustees and actuaries and other pullers of the levers of power in these things (on behalf of the unnamed upstairs of course) know that too. They trust you will accept their judgement quietly so they can keep taking the fees and salaries in the name of practising fairness. It's a tough old job for them, stuck between a rock and a soft place <-- the members
    Last edited by agarnett; 19-05-2017 at 12:17 PM.
    • Linton
    • By Linton 19th May 17, 12:24 PM
    • 8,089 Posts
    • 7,909 Thanks
    Linton
    That thought had crossed my mind.

    Is it worth challenging them or will that not achieve anything and leave me open to revenge next year?
    Originally posted by nocash
    Determining CETVs is a mathematical calculation, revenge doesnt come into it. You can only sensibly challenge them when you understand why the CETV is what it is, and the chances are that when you have that understanding you will see there is nothing to challenge them on.

    So take up the opportunity of talking to the actuary, and pls let us know what he/she says.
    • agarnett
    • By agarnett 19th May 17, 1:08 PM
    • 1,282 Posts
    • 534 Thanks
    agarnett
    Revenge might not, but subjectivity comes into it all the time, Linton.

    As I said, I already know exactly how my last CETV was calculated.
    It was calculated on a software tool marketed by WTW who are probably the biggest firm of scheme actuaries and administrators in the country, and it contained errors which were only discovered on my instigation. As with all software, GIGO - Garbage In Garbage Out and part of the Garbage In is often faulty code.

    So it was recalculated manually and total subjectivity came into how the trustees and WTW dealt with the errors - as I said, they claimed they found more errors which offset the major error I had noticed.

    They weren't particularly apologetic, and as I say were a bit aeriated at having to deal with my enquiry at such a detailed level of criticism. Revenge might be slightly too strong a word for what goes through aeriated staffers' minds, but from year to year there is plenty of scope for massaging what CETVs go out to individuals who may or may not have asked for them previously, and may or may not have easily accepted them as gospel.
    Last edited by agarnett; 19-05-2017 at 1:12 PM.
    • ischofie1
    • By ischofie1 19th May 17, 2:56 PM
    • 164 Posts
    • 129 Thanks
    ischofie1
    I had a work colleague who had his CETV rise by 25% over a 3 month period so 32% over 12 months is easily do'able.
    What if you go back next year & find its dropped another 32%.
    The key is to take the CETV when you're happy with what's being offered not trying to guess where they'll be in 1 years time.

    No point in deliberating about what was on offer 12 months ago. That's been & gone.
    • blisteringblue
    • By blisteringblue 19th May 17, 3:51 PM
    • 1,037 Posts
    • 1,888 Thanks
    blisteringblue
    The key is to take the CETV when you're happy with what's being offered not trying to guess where they'll be in 1 years time.

    No point in deliberating about what was on offer 12 months ago. That's been & gone.
    Originally posted by ischofie1
    Absolutely spot on, I sat down with my IFA and he asked me what I wanted from my pensions, we went through plans and lifestyle and what I wanted before we looked at any of the numbers.

    I am likely going to transfer 2 of my 3 DB pensions, the 3rd just wasn't good enough.

    I have colleagues at work who get theirs every year, this was the first time I looked at mine and the numbers allow me to do exactly what I want, when I want.
    • ianthy
    • By ianthy 19th May 17, 4:34 PM
    • 76 Posts
    • 37 Thanks
    ianthy
    The key is to take the CETV when you're happy with what's being offered not trying to guess where they'll be in 1 years time.

    No point in deliberating about what was on offer 12 months ago. That's been & gone.
    Originally posted by ischofie1

    I think you are right. My CETV value has risen from £750k - £938k in 18 months and it continues to rise. I am at the point where I have plans for the cash lump sum and investing the pension. plus I am happy with the CETV sum. I can't spend the next x months second guessing the changes in CETV. Especially with the Conservative manifesto referencing pensions with increased powers for the Pensions Ombudsman, a lot could change regarding how companies handle DB pensions.
    • sandsy
    • By sandsy 19th May 17, 8:03 PM
    • 1,152 Posts
    • 667 Thanks
    sandsy
    Revenge might not, but subjectivity comes into it all the time, Linton.
    Originally posted by agarnett
    Of course subjectivity comes into it. Nobody knows what investment returns are going to be for the next few years, or what gilt yields will be at a specific time when a person retires, or what inflationary increases will be needed, or how long someone will live. It's all based on an educated guess from what current economic and demographic data tells us. And that educated guess results in in a value which is representative of the amount needed at a specific point in time by the scheme to pay out the benefits due if those guesses were born out in practice (which they won't be).

    As the economic data changes, so a different set of assumptions resulting in a different value emerging if the calculation is undertaken at a different point in time.

    So it's the nature of the beast that it's subjective.
    • agarnett
    • By agarnett 21st May 17, 10:10 AM
    • 1,282 Posts
    • 534 Thanks
    agarnett
    Of course subjectivity comes into it. Nobody knows what investment returns are going to be for the next few years, or what gilt yields will be at a specific time when a person retires, or what inflationary increases will be needed, or how long someone will live. It's all based on an educated guess from what current economic and demographic data tells us. And that educated guess results in in a value which is representative of the amount needed at a specific point in time by the scheme to pay out the benefits due if those guesses were born out in practice (which they won't be).

    As the economic data changes, so a different set of assumptions resulting in a different value emerging if the calculation is undertaken at a different point in time.

    So it's the nature of the beast that it's subjective.
    Originally posted by sandsy
    Yes, but it is also the nature of the beast in many cases that the sponsoring employer company realises that there is far more capital tied up in its DB staff pensions scheme than there is accessible capital for their declared business, and so that it is the pension scheme business which has become core. Their declared business is almost incidental. Look how many takeover propositions have floundered when the true scale of DB pension scheme liabilities has emerged. Look at that shining example of department store prowess, BHS. I used to quite enjoy shopping there assisted by the experienced happy staff!

    I once memorably read a comment about an air traffic control company with major contracts at airports in UK, Europe and around the world. It was said that the company was in effect a multi billion pound Pension Scheme Administrator that just happened to run an air traffic control service as a sideline!

    So which do you think they are tempted to tweak the most in their heavily loaded ships to steer them to where they want them to go? They turn the taps on and off on CETVs because they know they can and that the little people will point to the well worn excuse of ups and downs of gilt yields. It ain't as simple as that by a long way - especially if Goldman Sachs consultants have had their foots in the door and sold their brands of "de-risking" to trustees/employer.

    But be alert. Shifting CETVs, unusually up, or unusually down are a barometer of the financial health of the sponsoring employer and it is very difficult to read.
    Last edited by agarnett; 21-05-2017 at 10:25 AM.
    • LHW99
    • By LHW99 22nd May 17, 3:50 PM
    • 829 Posts
    • 652 Thanks
    LHW99
    Given the OP's post No.5, is it likely that ill-health retirement may be an option (should the test results show a problem (hope not tho'))?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,548Posts Today

9,127Users online

Martin's Twitter