Getting an up to date DB value from USS

SMcGill

A while back I read a post that said not all pension administrators automatically provide an annual update on this but that deferred DB members were entitled to one if they requested it so I messaged USS requesting one.

They have now replied restating the value of my DB benefits at the point when I left the scheme in 2017 (which I already knew) but giving an up to date value of the DC part. I know I can get quite close to estimating my current DB value using the published annual increase % but I’d much prefer a formal valuation.

Before I go growl at them for not giving me what I asked for, am I asking for the impossible, or asking in the wrong way?

Marcon

SMcGill said:

A while back I read a post that said not all pension administrators automatically provide an annual update on this but that deferred DB members were entitled to one if they requested it so I messaged USS requesting one.

They have now replied restating the value of my DB benefits at the point when I left the scheme in 2017 (which I already knew) but giving an up to date value of the DC part. I know I can get quite close to estimating my current DB value using the published annual increase % but I’d much prefer a formal valuation.

Before I go growl at them for not giving me what I asked for, am I asking for the impossible, or asking in the wrong way?

Very sensible of you to check before growling!

Many schemes do not provide updated pension figures for DB schemes until a deferred member is within a few years of retirement, otherwise it's a lot of calculations for no real benefit. As you've found, you simply get a leaving service statement (for the DB part) and there should be a note on the statement explaining how increases in deferment are calculated, meaning you can so a rough estimate yourself. If you can't, post the figures here (minus any identifying information such as name or NI number) and someone will be able to help.

DC benefits are different - those change the whole time, and are simply a fund value, so that bit is easy.

SMcGill

Thank you! I hadn’t considered that and it does make sense, although USS know my target retirement date is 2023 (age 60) and they even note that in the updated DC valuation they provided. They also haven’t provided any information on how the DB is revalued.

I’d appreciate it very much if my maths could be checked! Ignoring the DC element for now as it’s very small, I left in Aug 2017 with £9086 in DB. The pension increases in their guide say:

2017 - 1% (I assume this is included my my starting figure of £9086
2018 - 3%
2019 - 2.4%
2020 - 1.7%
2021 - 0.5%
2022 - 3.1% (I am assuming)

58% of my DB is payable at age 60, 48% at 65. The 48% part will be subject to an ERF of 0.84 if I take it at 60.

So using that split, I make the current 2021 value of my DB pension £9043. How close am I??

[Deleted User]

I may be missing something obvious here, but how can £9086 in 2017 become £9043 in 2022 after several years of index linked increases?

OldBeanz

SMcGill said:

 How close am I??

Close enough

SMcGill

I may be missing something obvious here, but how can £9086 in 2017 become £9043 in 2022 after several years of index linked increases?

Half of my pension is due at 60 but half will take an ERF hit as it’s due at 65. That’s what is counteracting the annual CPI increase.

If I waited until 65 then I think today’s value of my pension would be £9795, but I’d be missing out on 5 years of payment of the lower £9043 amount between 60 and 65. Effectively I’m giving up £750 a year to receive £40,000.

NedS

Have you checked your calculations using the USS online DB modeller here:

https://www.ussbenefitmodeller.co.uk/deferred/pension_increase

Simply plug in your DB values on leaving the scheme together with DoB and date of leaving, and it will do the calculations for you.

My understanding is that USS use the Occupational Pensions revaluation tables, increasing by CPI capped at 5% for people entering deferment since 2011, so you should be able to use The Occupational Pensions (Revaluation) Order tables as published annually by the government:

https://www.legislation.gov.uk/uksi/2021/1308/made

Using the above table, your starting valuation entering deferment in 2017 would have increased by 11.1% to 2021

SMcGill

@NedS - the modeller doesn’t work for me I’m afraid as half my pension has a contracted NRA at 60 and the other half has the standard scheme NRA at 65.

USS doesn’t let me take my pension at two different dates so I either take it all at 60 and accept the ERF on part of it, or I defer it all until 65 and lose out on the pension that is payable from 60.

NedS

SMcGill said:

@NedS - the modeller doesn’t work for me I’m afraid as half my pension has a contracted NRA at 60 and the other half has the standard scheme NRA at 65.

USS doesn’t let me take my pension at two different dates so I either take it all at 60 and accept the ERF on part of it, or I defer it all until 65 and lose out on the pension that is payable from 60.

You can use the modeller to give you the current value for each portion of your DB pension, as per your calculations in your second post, and then apply the ERF to your portion with NRA of 65 to get accurate values in today's money (and ignore inflation as you don't know what it will be and it's index-linked anyway). The modeller (or revaluation tables on which the modeller is based) simply save you having to do the CPI calculations manually.

hyubh

NedS said:

My understanding is that USS use the Occupational Pensions revaluation tables, increasing by CPI capped at 5% for people entering deferment since 2011, so you should be able to use The Occupational Pensions (Revaluation) Order tables as published annually by the government:

https://www.legislation.gov.uk/uksi/2021/1308/made

Using the above table, your starting valuation entering deferment in 2017 would have increased by 11.1% to 2021

This isn't quite correct - the USS uses public sector increases, albeit somewhat capped if the increase for a year is over 5%. As with public sector schemes, pension increases apply from leaving not retirement, i.e. technically there's no concept of revaluation distinct from pension increases (outside of GMP).

2nd_time_buyer

The inflation increases applied are in the right hand table on page 13 here:

https://www.uss.co.uk/-/media/project/ussmainsite/files/financial-advisers/mfuss-for-ifa.pdf