USS - General discussion

d6fs1l

While it is of course correct to say that the modeller and provisional quotes are not binding, you have to wonder as to the fairness of the situation that members can be thrown into as a result.

The modeller is just an estimate... a retirement quote is provisional... annual statements are illustrative... At what point can a member of the scheme reasonably rely on the information that the scheme has provided? The disclaimers tend to say that you should take financial advice; but what use will that have if it too ultimately relies on information provided by the scheme that may be incorrect?

No member of a scheme can expect to be unjustly enriched as a result of the trustee's errors; and of course a trustee has a duty to try to recover sums paid in error. But a trustee also owes a duty to act with reasonable care in its administration of the trust, and USS is moreover a professional trustee.

Bottom line -- it should not be beyond the trustee to get these things right.

Barralad77

gwt1965 said:

Barralad77 said:

Which sounds wrong in every way: it’s like the buyer who has to pay for the seller’s mistake:

Buyer: “How much is this?”
Seller: “£200”
Buyer: “OK, there’s £200. Thanks”
[6 months later]

Seller: “Sorry, I meant £300. You owe me £100”

This doesn’t sound too far removed from that, does it?

It's really nothing like that. 

When you get a quote from USS the heading is "Your Provisional Retirement Quote." The provisional quote makes the following point: "The figures provided are provisional and reflect scheme rules, legislation and the actuarial factors which are kept under regular review. Your actual retirement benefits will be calculated in accordance with the scheme rules, legislation and factors in force at the date of your retirement." 

The confirmation of benefits is only sent out a few weeks before your retirement date. 

Presumably if it was the other way around, and the quote was lower than the final figure, then you'd expect USS to make up the difference. But your main argument seems to be that the modeller/quote should be binding in some way.

If your retirement relies on a quote issued months in advance being 100% accurate, without the possibility of some very small percentage deviation, then you're probably not financially ready to retire. Things like changing early retirement factors etc are likely to be far more detrimental to your final position than the inaccuracies of benefit modeller estimations or provisional quotes.

That’s how I see it. In my case, I requested a quote a couple of months ago. I used the figures quoted to make a decision on whether I could afford to retire or not. Let’s assume nothing changes between getting the quote and me retiring, in terms of ERFs and so on. What am I supposed to do if I get a very different quote a few weeks before I finish work (having decided that I could afford to retire) which has a reduced annuity value? What’s defence would USS offer in this instance? They couldn’t argue that the new quote differed from the first due to changes in legislation, actuarial factors or adjustments to the scheme rules. They would have cocked up, simple as that.

My argument would be that the information they provided led me to make a decision I would otherwise not have made, and now I can’t ’go back’ on that decision. If the figures provided cannot be relied on to be accurate then what use are they?

And I’ll decide whether I’m ready to retire or not, thanks.

PJM_62

How much are you thinking when you say " very different " ?
25% ? 10 ? 5 ?

I wonder what's normal variation for other DB schemes ?

QrizB

Barralad77 said:

. What am I supposed to do if I get a very different quote a few weeks before I finish work (having decided that I could afford to retire) which has a reduced annuity value? 

Withdraw your resignation and go back to work?

Barralad77

PJM_62 said:

How much are you thinking when you say " very different " ?
25% ? 10 ? 5 ?

I wonder what's normal variation for other DB schemes ?

‘Very’ will vary with personal circumstances, I think. For one person a 5% difference may be meaningless, for someone else it might make all the diffference. But the actual numbers don’t affect the principles in question. If USS provide a quote that - by definition, one assumes - is in line with the rules, factors, and everything else 5 months before retirement but then a lower quote 5 weeks before retirement when none of the rules, factors and so on have changed in any respect, then I think there’s a problem. No?

Barralad77

QrizB said:

Barralad77 said:

. What am I supposed to do if I get a very different quote a few weeks before I finish work (having decided that I could afford to retire) which has a reduced annuity value? 

Withdraw your resignation and go back to work?

Too late in the day for that. Far too many other decisions made on the assumption that I won’t be working, both by me and my employer. Plus, I’ve already signed the forms by this point. No, all I would want is a quote that is accurate to begin with; not one that might prove to be higher than I will actually get due to errors on the part of the provider of the quote. From other contributions to this discussion, it seems that might be too much to expect and I’m possibly niaive for expecting it.

Cobbler_tone

PJM_62 said:

How much are you thinking when you say " very different " ?
25% ? 10 ? 5 ?

I wonder what's normal variation for other DB schemes ?

Mine is always 100% spot on but the critical difference is probably because it is a deferred scheme. I’ve used the model several times and reconciled against a full quote exactly for this reason. I’ve done enough that I take the modeller as read. My OH finishes with the USS next year, so read the thread with interest. Both the DB and DC schemes. She is currently contributing a lot to the investment builder in her final 12 months before VS. 

LL_USS

Hi everyone, my apology I am going off the above very interesting discussion of how binding are the quotes from USS. It is dreadful to think I'd plan my retirement based on some quotes that are not accurate. However, that would be my future problem, not now.

I did lots of reading around the USS forums here before to grasp basic understanding of this issue, and to outlines options I have in the next 15-20 years of work (or whether I can retire earlier). Then I thought the rough understanding is enough, things still can change, I can leave the issue for now.

Yet a senior colleague of mine has just received their quotes and they send them to me to ask for my opinion. There are three options: Max DB, Standard, and Max TFLS. They have about 200K in the DC pot. This is a very good pension and I wish I could be anywhere near this when I retire.
I just have a comment that it seems commuting DC is not as bad as I've heard in these forums.

	Max DB	Standard	MAX TFLS
DB	39,373.80	34,795.56	37,410.72
TFLS	204,643.37	231,970.40	249,404.24
DC leftover	0	77,059.65	0

I've heard from these forums here that I should not choose commutation as the rate is not great. It means take the middle option and leave some DC to be invested with USS.

But the final option they get higher TFLS (about 17.5K LS) and 77KDC-17.5=60K can buy about £2,740/annual pension if this person (approaching 60 year old) is in good health and buying as a single income that rise with CPI.

The difference in DB between option 2 and 3 is only £2,615 less, not far off £2,740/year figure. Meanwhile, if this person is going to make good use of all the max TFLS then no need to worry about how to draw down from this 77K DC invested in future years.

I would lean towards Option 3. My colleague thinks I am an expert with finance but no way, I just admit I only have this vague understanding (I would learn more when I am closer to retirement). Do I understand the meaning of the numbers above right?
Thank you

LL

MarlowMallard

The USS commutation ratio around 18 is a lot better than civil service / teachers around 12.  
That's 3 very good options there.  One thing to note is options 1 and 3 with indexation will probably tip into 40% income tax after state pension age, so on that basis I'd maybe lean towards option 2.  If he/she is 60ish, most of the 77k can be taken out in annual chunks before SPA without hitting 40% tax. 

LL_USS

@MarlowMallard ah good point about the possible push to 40% tax bracket with SP, as well as taking out the remaining of the DC before SPA, thank you so much.