Opinions on CETV ?

NottinghamKnight

Brynsam said:

NottinghamKnight said:

Brynsam said:

NottinghamKnight said:

Brynsam said:

NottinghamKnight said:

The difficulty is that you'd have to spend many thousands on an ifa, if you can find one, to give you the report you need. That would say it's not in your interest to transfer and you'd then struggle to find anywhere to accept a transfer in against advice. 

Red herring. Any stakeholder pension would take it whatever the advice says - the law requires it to do so. OP could then transfer on to a SIPP without difficulty, as that would be a DC to DC transfer.

Not at all. Stakeholders may take it but whether any will or are able to is a very different proposition. 

Stakeholder pensions are currently the only type of pension which is required to accept a transfer in from any UK registered pension scheme - so 'whether any will or are able' doesn't apply. Welfare Reform & Pensions Act 1999 Section 1 if you'd like to check for youself.

The advice is still needed where the CETV is £30K+ because the ceding DB scheme will need to confirm advice has been received by the member.

You've misunderstood my point. This has been discussed before and whilst they may be required to, if they are not open and accepting any new money then it effectively means they are not available. The law may allow, or prescribe something, but if no one is offering that option it's not available, it's a fairly simple point. I'm not aware that anyone has successfully achieved a transfer to a stakeholder but it may have occurred. 

It's been discussed before, with much of the discussion being inaccurate. The Pru is certainly open for stakeholder business - and transfers!

Fair enough, have there been any reports of confirmed transfers?

dunstonh

Most stakeholder pension providers have withdrawn their stakeholder pension for new business.  There are only a handful left.  If the provider retails only via intermediaries then you can forget about using a stakeholder with them as the intermediary will be compelled by the transfer requirements.   Only direct to consumer stakeholder pensions could avoid it.  Not many of those left.  I cannot recall from a previous thread, although it was discussed, whether the Pru stakeholder is available direct to consumers.  

Albermarle

I think you've misunderstood the market. I transferrred on a non-advised basis (CETV below £30K) to a Pru stakeholder a few months ago.
As it was under £30K , I think many providers of pensions, SIPPs etc would have  accepted the transfer anyway?
Looking at the Pru website they still seem to offer a stakeholder without the need for advice ( although their 'normal' personal pension is only available via an advisor) .
Aviva also have a mixed model and I think nowadays only offer new customers personal pensions with advice? although not clear if  this applies to the stakeholder .
Plus Standard Life offer a stakeholder.
Maybe that is it ?

Silvertabby

NottinghamKnight said:

Tony4625 said:

Read a lot about CETV multiples  , is there a way of working out what is a good multiple or Is it just worked out  with very  complicated set of stats / figs  ie 20 x  , 30x etc  ? Just trying to get a handle on things I’ve never thought about till recently.

One simple way of looking at the cetv is to take the figure and convert to it's reciprocal, so 20x (which was a historically common multiplier) would be 0.05, or 5%. That is the return you need to replace that investment income, though actually slightly lower as there will be some use of capital. So 30 times would 3.3%, 40 times would be 2.5%.
Historically the returns on annuities or savings accounts would be at those levels so the guaranteed income could be replaced, now given zero interest rates hen even generous transfer offers can't be replaced with certain income. The high cetv values are a function of the economic climate, and capital can of course be spent but that will run out over time. 
We are now hearing of cetv multipliers of 40x or more, the value being determined by the calculated liability to the pension payer.
If you outlined the reason for requiring a large lump sum then people may be able to comment further with more ideas.

The exception being the LGPS.  As a public sector scheme, its transfer factors are set by GAD.  An average of just 20 X annual pension given up would be nearer the mark.  Yet people still do it.

NottinghamKnight

Silvertabby said:

NottinghamKnight said:

Tony4625 said:

Read a lot about CETV multiples  , is there a way of working out what is a good multiple or Is it just worked out  with very  complicated set of stats / figs  ie 20 x  , 30x etc  ? Just trying to get a handle on things I’ve never thought about till recently.

One simple way of looking at the cetv is to take the figure and convert to it's reciprocal, so 20x (which was a historically common multiplier) would be 0.05, or 5%. That is the return you need to replace that investment income, though actually slightly lower as there will be some use of capital. So 30 times would 3.3%, 40 times would be 2.5%.
Historically the returns on annuities or savings accounts would be at those levels so the guaranteed income could be replaced, now given zero interest rates hen even generous transfer offers can't be replaced with certain income. The high cetv values are a function of the economic climate, and capital can of course be spent but that will run out over time. 
We are now hearing of cetv multipliers of 40x or more, the value being determined by the calculated liability to the pension payer.
If you outlined the reason for requiring a large lump sum then people may be able to comment further with more ideas.

The exception being the LGPS.  As a public sector scheme, its transfer factors are set by GAD.  An average of just 20 X annual pension given up would be nearer the mark.  Yet people still do it.

Jam today?
I think this is an issue that is often lost or not addressed as the average db pensioner will not have much experience of investment or managing a large fund. Holders of dc schemes will have built the sum up over time, and been obliged to manage it, which I guess is one reason why there are so many issues around advisers and the insurers recommending transfers out when they may be liable for six figure claims in future. 

Silvertabby

NottinghamKnight said:

Silvertabby said:

NottinghamKnight said:

Tony4625 said:

Read a lot about CETV multiples  , is there a way of working out what is a good multiple or Is it just worked out  with very  complicated set of stats / figs  ie 20 x  , 30x etc  ? Just trying to get a handle on things I’ve never thought about till recently.

One simple way of looking at the cetv is to take the figure and convert to it's reciprocal, so 20x (which was a historically common multiplier) would be 0.05, or 5%. That is the return you need to replace that investment income, though actually slightly lower as there will be some use of capital. So 30 times would 3.3%, 40 times would be 2.5%.
Historically the returns on annuities or savings accounts would be at those levels so the guaranteed income could be replaced, now given zero interest rates hen even generous transfer offers can't be replaced with certain income. The high cetv values are a function of the economic climate, and capital can of course be spent but that will run out over time. 
We are now hearing of cetv multipliers of 40x or more, the value being determined by the calculated liability to the pension payer.
If you outlined the reason for requiring a large lump sum then people may be able to comment further with more ideas.

The exception being the LGPS.  As a public sector scheme, its transfer factors are set by GAD.  An average of just 20 X annual pension given up would be nearer the mark.  Yet people still do it.

Jam today?
I think this is an issue that is often lost or not addressed as the average db pensioner will not have much experience of investment or managing a large fund. Holders of dc schemes will have built the sum up over time, and been obliged to manage it, which I guess is one reason why there are so many issues around advisers and the insurers recommending transfers out when they may be liable for six figure claims in future. 

Exactly.  I strongly suspect that for some lower paid manual workers, in particular, a CETV of £KK is seen as the equivalent of a lottery win.  Only interested in 'cashing it in' so no worries about investment choices. 

euanlowe

Tony4625 said:

Read a lot about CETV multiples  , is there a way of working out what is a good multiple or Is it just worked out  with very  complicated set of stats / figs  ie 20 x  , 30x etc  ? Just trying to get a handle on things I’ve never thought about till recently.

I took a small CETV and therefore had a good think about this question. If you google pension annuity rates you can find out how much this costs - and immediately it gets complicated. For a hundred grand, you can get 4.9-5k annuity at 65. This works out at 5% or 20x. BUT, this is with no spousal pension and no inflation protection. For 50% for the wife and 3% escalation it is 2.8-3k. Which again works out as 3% or 33x. So not only is your 30x below this, there's a good chance your pension has more generous inflation protection than this 33x annuity.
What I think some people miss is that this is referring to what's happening at 65. After a bit of reading, I discovered CETVs are mostly about how the scheme is currently invested. You have a pension fund with everyone retired and its mostly invested in gilts and your CETV will be 40-50x because they have to assume a terrible return. They might even be bribing you to leave. A different pension scheme with a younger crowd and mostly invested in equities, and also in deficit, and they can be really ungenerous, maybe give you even less than 17x (funds are allowed to chop the CETV if there is a deficit).
The other commentators are right, the offer you have received is merely alright, especially as it'll cost you 5-10k to get the money transferred. But that is also where your involvement begins, how well are you going to look after your money etc. I think from your original post, they estimated your pension at 65 would be 20% higher, so 2% a year...maybe inflation linked. If you can absorb the transfer fee and also generate a better return than inflation you will be better off. My personal take is I'd probably stick with the annuity (and I'm a guy who would take 40x all day long), but it did sound like you had some personal reasons.

xylophone

Looking at the Pru website they still seem to offer a stakeholder without the need for advice ( although their 'normal' personal pension is only available via an advisor) .

https://www.pru.co.uk/pdf/SHPF0342.pdf

Tony4625

euanlowe said:

Tony4625 said:

Read a lot about CETV multiples  , is there a way of working out what is a good multiple or Is it just worked out  with very  complicated set of stats / figs  ie 20 x  , 30x etc  ? Just trying to get a handle on things I’ve never thought about till recently.

I took a small CETV and therefore had a good think about this question. If you google pension annuity rates you can find out how much this costs - and immediately it gets complicated. For a hundred grand, you can get 4.9-5k annuity at 65. This works out at 5% or 20x. BUT, this is with no spousal pension and no inflation protection. For 50% for the wife and 3% escalation it is 2.8-3k. Which again works out as 3% or 33x. So not only is your 30x below this, there's a good chance your pension has more generous inflation protection than this 33x annuity.
What I think some people miss is that this is referring to what's happening at 65. After a bit of reading, I discovered CETVs are mostly about how the scheme is currently invested. You have a pension fund with everyone retired and its mostly invested in gilts and your CETV will be 40-50x because they have to assume a terrible return. They might even be bribing you to leave. A different pension scheme with a younger crowd and mostly invested in equities, and also in deficit, and they can be really ungenerous, maybe give you even less than 17x (funds are allowed to chop the CETV if there is a deficit).
The other commentators are right, the offer you have received is merely alright, especially as it'll cost you 5-10k to get the money transferred. But that is also where your involvement begins, how well are you going to look after your money etc. I think from your original post, they estimated your pension at 65 would be 20% higher, so 2%...maybe inflation. If you can absorb the transfer fee and also generate a better return than inflation you will be better off. My personal take is I'd probably stick with the annuity (and I'm a guy who would take 40x all day long), but it did sound like you had some personal reasons.

Thanks for your reply , it’s appreciated.