Mum can't get her full pension pot even though she hasn't taken anything

xylophone

I am an IFA (although not a PTS). I am a deferred member of this 1964 scheme (effectively I came out in 2010 when they closed the scheme to existing staff) and everyone went into a new DC scheme called 'Afterwork' which isn't too bad either (but that's another topic)

We learned almost more than we wanted to know about The Barclays Pension Scheme, Towers Watson and Uncle Tom Cobley and all.......

https://forums.moneysavingexpert.com/discussion/4736856

Wet towel round the head time.........:rotfl:

jamesd

Low bond yields have really boosted the CETVs from some defined benefit schemes, making transfers out extremely attractive due to the low break-even yields it takes to match their assumptions.

zagfles

jamesd wrote: »

Low bond yields have really boosted the CETVs from some defined benefit schemes, making transfers out extremely attractive due to the low break-even yields it takes to match their assumptions.

Do they take health/life expectancy into account when calculating the CETV on an individual level? If not then surely the actuaries would account for the fact that people transferring out are more likely to be in poorer health, and so offer a lower CETV than might be expected for someone in good health.

In the same way as commutation rates (ie exchanging part of the pension for a lump sum) are generally much worse than typical "good health" annuity rates.

agarnett

jamesd wrote: »

Low bond yields have really boosted the CETVs from some defined benefit schemes, making transfers out extremely attractive due to the low break-even yields it takes to match their assumptions.

Can you suggest what might be the qualifying characteristics that would make a DB scheme fall into this category, jamesd? It looks for example like the Barclays 1964 scheme may do!

audi321 very kindly indicated how his CETV quotes had increased massively each year since 2011 for a scheme which was frozen to new contributions in 2010. He quoted:

In 2011 it was £187k
In 2012 it was £322k
In 2013 it was £357k
It is now £498k!

audi321 doesn't give exact dates, but that could be around a 30%pa increase in CETV quotes!

Whereas I had one which was quoted at £140K in 2009, £155K in 2010. As I had previous quotes I could see it (the quoted CETV) was growing at some serious double digit rates for a number of years. But then just recently I got a new quote for just £180K - a somewhat paltry 3% pa increase. I am somewhat perturbed!

Was my mistake in not asking for quotes between 2010 and 2015?

How could there be such a big difference between my experience in the last 4 or 5 years and audi321's?

jamesd

zagfles wrote: »

Do they take health/life expectancy into account when calculating the CETV on an individual level? If not then surely the actuaries would account for the fact that people transferring out are more likely to be in poorer health, and so offer a lower CETV than might be expected for someone in good health.

I don't think that they do it at an individual level and since CETVs are used in divorce I'm far from sure that it's practical or permissible to adjust them. Still, I don't know the rules and some schemes might have such a presumption and adjustment that would reduce the transfer value based on lower assumed number of years to pay out.

jamesd

agarnett wrote: »

Can you suggest what might be the qualifying characteristics that would make a DB scheme fall into this category, jamesd?

Just how much the transfer value is and how that compares to alternatives like deferring the state pension or drawdown for income production.

agarnett wrote: »

Whereas I had one which was quoted at £140K in 2009, £155K in 2010. As I had previous quotes I could see it (the quoted CETV) was growing at some serious double digit rates for a number of years. But then just recently I got a new quote for just £180K - a somewhat paltry 3% pa increase. I am somewhat perturbed!

Was my mistake in not asking for quotes between 2010 and 2015?

Maybe. I think that the yields of bonds have reached fairly close to their high levels so I don't think that transfer values for that reason will continue to increase much more. But people have been writing about bond highs for a long time now so i could easily turn out to be wrong on this.

agarnett wrote: »

How could there be such a big difference between my experience in the last 4 or 5 years and audi321's?

Actuarial differences between schemes and different investment mixtures, perhaps. Also differences in benefits. A scheme mainly consisting of manual labourers would have a lower life expectancy than one consisting of mainly desk workers so I'd expect the transfer value of the former to be much lower than the latter.

woolly_wombat

audi321 wrote: »

Since 2010 I have written almost annually for a CETV for my 1964 pension (I had 24 years service and a final salary of £38,000).

In 2011 it was £187k
In 2012 it was £322k
In 2013 it was £357k
It is now £498k!

I have run virtually every combination of calculation possible (as you can imagine with my job!). This scheme has GMP revaluation at 65 (but only at NAE) and a State Pension Reduction at 67 (for me), the non GMP part is indexed at RPI.

Presumably the RPI-indexation accounts for the tremendous increase in CETV?

WW

agarnett

jamesd wrote: »

Just how much the transfer value is and how that compares to alternatives like deferring the state pension or drawdown for income production.

Well my point was that my CETV in 2010 was probably very similar in size to audi321's.

Actuarial differences between schemes and different investment mixtures, perhaps. Also differences in benefits. A scheme mainly consisting of manual labourers would have a lower life expectancy than one consisting of mainly desk workers so I'd expect the transfer value of the former to be much lower than the latter.

Nope, desk workers the lot of us.

Towers Watson calculates both audi321's CETV and mine. Perhaps I should ask them what's different!

buckster

jem16 wrote: »

However here we have an OP with 10/11 months investment experience who apparently has made 32% in that time and assumes (from the sound of it) that this will happen every year and it's easy to do. I would hazard a guess that the OP has never experienced any sort of stockmarket downturn and doesn't realise that the 32% profit in one year could soon turn into a 60% loss in another year.

I have been doing my pension for more than 10 to 11 months. My wife on the other hand (who's account this is) did only start one in the last year and before you ask "why didn't she ask you about pension advice instead of asking MSE forums, some women like to stand on their own two feet and do their own thing. I help her if she wants me to but to be honest, she is very independent and likes the challenge of winning on her own merit.

I have also been in the dog house over the last few days for getting her MSE account into an argument.

Today I am down to 31% growth on this last tax year and I fully understand it isn't easy as I stated "I've had a blinding year" and it may drop next year. I am accepting of the fact that my investments may go down next year and may even fall 60% as you say but by being accepting of this fact will help me deal with it if it happens.

We also have the OP's mother (whose pension pot it is) and father in bad health who have been offered a 7.5% annuity (the terms of which have never been clarified here despite numerous requests - is it joint/single, level or index-linked) which is just totally dismissed. The OP's mother (nor father) does not have the experience to manage a drawdown pot and could possibly run out of money.

The IFA stated " I could probably get you 7.5% " and my mother wasn't interested (due to her ongoing bad health) so she did not go into details about how much dad would get if she died first. I was not there at that meeting as I live in another city or I would have asked these questions.

The transfer value also seems to go between £180k and then £150k and as yet has not been clarified which it is.

No, wrong. I said the transfer value was £150k at the beginning. Later someone asked what the original pot was and I said that "it isn't officially called 'a pot' but the figure was £180k"

And to the idiot that states that I am looking after my interests and hope to inherit my mothers money....

I want my mother to enjoy having this windfall because to be honest she didn't realise the size of it until very recently. She loves holidays and she wants to travel as much as she can so I have said "do it, spend as much of 'your money' as you can before your times up"

xylophone

No, wrong. I said the transfer value was £150k at the beginning. Later someone asked what the original pot was and I said that "it isn't officially called 'a pot' but the figure was £180k"

Barclays originally said the CETV was £180,000 but later amended this to £150,000?