What's your (CETV) Number (Multiple)

mark55man

With apologies to marinelife for the thread title - lifted shamelessly from his "number" thread which has been entertaining and educational in equal measure. 

Today I had my fourth CETV in just over 4 years on my works deferred DB scheme - just out of interest as I suspect at late 50's  I am still out of the sweet spot, although the current economic situation is pushing the number up whilst low inflation is keeping the expected income down

Based on my scheme retirement age estimated pension this represented a multiple of 26.  Whereas at the (actually quite steep) actuarial reduced rate for this year it represents a multiple of 35.

So my two  questions for comment on  this are - what is the best target DB income to use (ie Reduced Now or Unreduced at SRA), and more importantly what multiple/number would get you thinking about saying yes.  (I recall one thread were the multiple was 55 and that seemed unanimous in favour and another with a multiple of 25 which seemed to be a number were everyone would say depends on your circumstances, but not really a good idea,

I'm not interested in debate about how to go about it doing this - there have been many many threads on that.  Just to help the discussion - this is my only DB pension, although my OH does have TPS for a dozen years or so, and we are/will both be on full SP when that time comes around in a decade or so.  

Thanks in advance Mark

ffacoffipawb

As the CETV is going to be used for income now, the best comparator would be the actuarially reduced DB payable now.

I was offered a 42x multiplier on that basis at age 55 last year. I took the reduced DB instead to alleviate any LTA issues.

I dont think I would have taken the CETV whatever the multiplier as I find having a source of guaranteed income useful and wouldnt want to pay LTA tax on anything. Call it my bond allocation in my overall pension position.

Just to add. A pension payable x years in the future isnt a meaningful number to compare with a CETV imo.

mark55man

Thank you my plan would be to make a decision in 3-4 years - still well in advance of scheme age, and would be a choice between taking the reduced DB and taking the transfer for self management

Thrugelmir

Be the long term yield on gilts which is pushing the "number" up. Inflation is merely maintaining the buying power of the pension. Last 30 year Gilt auction was auctioned off at a yield of 0.77%.  Less than the July rate of CPI inflation of 1.1%. 

Stubod

..just updated my CETVs, one is 35 times the value of the pension, another 25 years, and another 22 years, (pension does not increase once it starts paying out). Last year I was tempted to take them, but in light of recent events I am thinking it may be better to just take the pension instead?

mark55man

Thanks all -
Stubod - what would it have taken to have flipped your decision the other way?  Or was it just the pandemic? 

Stubod

...the Pandemic and its potential impact on investments over the next few years. We already have some money invested and I would not liked to have moved all my pension money into the stock market to see it go South!

ffacoffipawb

Stubod said:

..just updated my CETVs, one is 35 times the value of the pension, another 25 years, and another 22 years, (pension does not increase once it starts paying out). Last year I was tempted to take them, but in light of recent events I am thinking it may be better to just take the pension instead?

... is the correct answer.

Stubod

...bird in the hand etc....

mark55man

How much higher would multiple have to had been before you would shift your view, if anything.

Plus Investments can go North as well as South!  The CETV would seem to well protected if not enhanced from that turmoil at the moment, but I do take the point

Brynsam

mark55man said:

How much higher would multiple have to had been before you would shift your view, if anything.

Plus Investments can go North as well as South!  The CETV would seem to well protected if not enhanced from that turmoil at the moment, but I do take the point

Do you understand how a CETV is calculated - not in detail, but the basic factors which affect it?