Transfer Values

casterman

Is there any way to get an independent check on whether a transfer value is correct?

I am in dispute with the Civil Service who have paid out a CETV (cheque has cleared) but now say they have miscalculated and want £26000 back.

Their explanations as to why this error (if it is an error) occurred has not convinced me

taking_stock

it's quite a long calculation, dependent on numerous factors. if you want to post the preserved benefits (that were given up), to be taken at what age, when you transferred and what age you were when it transferred - then i'm sure someone here (self included) would be able to give a ball park figure.

anyway, if u've transferred already from the civil service, then i presume you must have used an ifa, who checked all the figures in enormous depth???

we need more info in order to help.

casterman

Right, here goes.

Pensionable earnings £7728.13

Annual GMP on Last day of service £239.72
Annual GMP Revalued by factor of 2.527 £605.72

Post 1988 accruals £37.44
On day of leaving £94.61

For Public sector transfer club transfers
AMC factor 1.234
PI Factor 1.9705

Preserved Benefits
Pension on last date of service £836.56
Revalued to date £1649.03

Lump Sum on leaving £2510.48
Lump sum to date £4947.10

Widowers pension on leavong £102.82
to date £202.61

Make any sense?

taking_stock

ok, what age were you, when you did the transfer, and what age were the benefits preserved for?

casterman

Age 49

Transfer value was guaranteed up to 8 March 2011

Benefits preserved for 60

The confusion is that they gave me one CETV, paid out another and then went back to the original.

My questions were: why was a 2nd CETV calculated at all - the only reason I can think of is that I missed the 8 March guaranteed date so it had to be recalculated again

taking_stock

if u missed the original deadline for acceptance, then they would certainly recalculate.

essentially, you work out how much the £1649 annual pension would cost for a 60-year old - about £57,500 (assuming non-smoker, wife of same age, increasing with RPI and spouse gets 50% in event of your death - similar to standard civil service benefits).

now, because you're taking the money before age 60, it will be rated down (the discount rate) to take into account the investment returns you'd get on the money in the meantime.

so (57500+4947) * (1.025)^11 / (1.075)^11 i.e. we're reducing the benefit by 7.5% for 11 years, but increasing by long-term RPI to take into account that the benefits would increase with inflation (typical civil-service assumptions).

there would then be a market value adjustment (MVA), but essentially it points to a CETV around £36,981.
the MVA changes slightly with stock-market conditions and of course i've used 11 years 0 days, whereas a fraction of a year is taken into account.

I'd be interested to hear what was the CETV, out of interest and for comparison.

hope this helps.

casterman

The original CETV was £23,641. The actual amount sent was £49,120. When the receiving scheme informed the Civil Service of the difference between the CETV they were expecting (£23000) and the actual amount received (£49,000), the CS said the 2nd CETV was an error and it should, indeed, be the original figure of £23,000.

I have spoken to the CS Pensions Dept and he could not explain to me where the 2nd CETV came from, how it was calculated or how the error occurred.

They firstly told me that the guarantee date had expired and they had to recalculate - but if that was the case surely they should have informed me that the CETV had changed and asked if I still wanted to proceed.

Then they threw some technical jargon saying that before they send out the money they double check the CETV and when this was done someone did not suppress something on the computer which then spewed out the 2nd, higher, amount.

Again, if this was a check how come nobody noticed it was over double the 1st CETV.

I need to be sure that what I eventually accept is a true figure

JamesU

Not familiar with these calculations, but maybe the higher CETV value is the calculation using 2008 discount rate assumptions made before CETVs were suspended last Summer, whereas the lower figure is based on the newer revised discount rate assumptions 2011 and using CPI (TakingStock's calculation above uses long term RPI)? Link below with changes outlined in Sections 4.2-4.5.

http://www.hm-treasury.gov.uk/d/publicservice_pensions_060810.pdf

JamesU

taking_stock

i'm still puzzled as to whether you organised this transfer yourself??? i didn't think it was allowed without an IFA accepting liability (for a sum) because of the likelihood that benefits are better left in place.

casterman

JamesU

That's what I thought originally, but when I spoke to the person in Pensions at Civil Service he said the change from RPI to CPI wouldn't make a huge difference - certainly not the difference between £23000 and £49000. Saying that, he still couldn't give me an answer as to how and why the 2nd, higher calculation, was achieved.

Taking Stock
I am transferring my pension into a QROPS as I have not lived in the UK for 10 years. I used a QROPS specialist firm in arranging the transfer to a receiving scheme in NZ. I also did this with a previous pension and all went well with no hitches at all.

I am now stuck - the receiving company are getting no reply from the CS, the QROPS firm are also getting no answers and after I talked direct with the person in CS pensions he promised to send a letter explaining what had happened.

Needless to say, I have heard nothing. What to do next?

jamesd

Wait for them to explain. It seems that it was operator error in calculating the new value and that ultimately the receiving scheme will need to send the overpayment back. What the CS needs to do is say what the check calculation result should have been so everyone knows that they are asking for the correct amount to be returned.