Leaving Final Salary Scheme - Can you challenge CETV?

bigadaj

peterr_ibg wrote: »

£21,500 is the figure at todays value at 65 - the quote at 55 was £12,500 . The difference between the two numbers ( £21,500 vs £27,500) is the estimated growth ( CPI) between now and 2030. Our scheme is also small and there is a plan to get the fund out of deficit with input from the company, but that doesn't help me now

But the cetv value is current, so you should be comparing with the £21500 figure, you are comparing apples with oranges.

Thrugelmir

peterr_ibg wrote: »

but the initial CETV itself does not look to be good value.

Scheme members have to be treated on an equitable basis. The Pension Trustees have a responsibility to ensure that this is the case. A pie can only be cut so many ways.

davieg11

peterr_ibg wrote: »

£21,500 is the figure at todays value at 65 - the quote at 55 was £12,500 . The difference between the two numbers ( £21,500 vs £27,500) is the estimated growth ( CPI) between now and 2030. Our scheme is also small and there is a plan to get the fund out of deficit with input from the company, but that doesn't help me now

If you are 55 just now and your quote is £12,500 then £440000 is a multiple of X35. You won't get much better than that.

peterr_ibg

davieg11 wrote: »

If you are 55 just now and your quote is £12,500 then £440000 is a multiple of X35. You won't get much better than that.

Sorry, but that's not how CETV is calculated . Xylophone offered this link that explains

http://www.pensionsandannuities.co.uk/The_transfer_value_calculation.htm

Linton

peterr_ibg wrote: »

Sorry, but that's not how CETV is calculated . Xylophone offered this link that explains

http://www.pensionsandannuities.co.uk/The_transfer_value_calculation.htm

True but according to that reference the £440K/£350K should be increased by the discount rate over the next 10 years to get a meaningful "conversion rate", the inverse of the X earnings figure. One way or another you either compare money now with pension now or money at 65 with pension at 65, Your 16X figure comes from comparing pension at 65 with money at 55.

agarnett

The administrators, sponsoring employer, Trustees, and appointed actuaries (in that order), probably won't like it, and you may even be denied it for no good reason, and then told there is a ridiculous charge per hour for "more information", but you can ask for a full breakdown line by line of the CETV calculation, and if your maths is up for it, you may be able to rework it using their methodology but with your corrected data, and it may result in a revised calculation in your favour. Or it may work the other way too!

Contrary perhaps to popular opinion because punters quite reasonably suppose that the actuaries responsible are flawless experts, these calculations are only as good as the people that put data in one end, program the process in the middle, and interpret correctly what comes out when they turn the handle.

Mine was approximately 10 lines of calculation each containing around 10 steps - the sort of thing you can only really tackle yourself if you are pretty fluent with how to use MS Excel functions.

xylophone

I guess that the scenario you give above would be something we could discuss with an IFA about the whole CETV position?

It's a fairly simple procedure.

https://forums.moneysavingexpert.com/discussion/5580163

kidmugsy

peterr_ibg wrote: »

If I retired at 55 my DB pension would pay me about £9,000 per year plus a £65,000 lump sum.

Or you could take a CETV of about £350k. Assume you take 25% tax-free lump sum i.e. £88k: that's £23k bigger than the £65k alternative. You'd be left with a tax-exposed pension pot of £262k, plus the £23k tax-free surplus. So your ratio is approx

(£262 + £23)/£9k p.a. = about 32x. That's far better than the 13x you were complaining about.

You would, presumably, aim to top up your wife's entitlement to State Pension, and contribute to a private pension for her. With your poor life expectancy there might be no point contributing more to a State Pension for yourself, but it might be sensible to contribute to a private pension that you could drawdown later on, or would transfer to your widow on your death. (If you died before age 75 she could draw income from your remaining pensions tax-free.)

The big question is how much annual post-tax income you think the pair of you need to live on. Did you tell us that?

kidmugsy

One other thought: if your health is lousy, you might consider investing part of your CETV taxable capital into an ill-health annuity. Your IFA could presumably get quotations for you.

peterr_ibg

kidmugsy wrote: »

The big question is how much annual post-tax income you think the pair of you need to live on. Did you tell us that?

I didn't, but £2,000 per month would put us in the same position as we are now. Cutting back and tightening of belts would mean we could get by on £1,400 per month

BTW I also have another personal pension that has a transfer value of £53,000