Unilever Final Salary estimate & GMP

Mrpaddyseymour

Back in December 2021 I requested a Transfer value which I received as set out below:-

Members Total Pension at at DOC £ 3,877.11 per annum
Member's pre 6 April 1997 pension at DOC £ 3,808.81
Member's automatic lump sum £ 9,207.98

GMP post 6 April at DOC £2,044.12 per annum

Total defined benefits transfer value £ 175,078.00

Pre 6 April 1997 transfer value arising from GMP £ 84,242.00

last week on request I was sent an updated estimate of my pension if I retire at 65.  Initially i requested 55 out of interest which was a little higher than anticipated based on the above.

I received the following figures based on retiring at 65 in 2033

A full estimated pension of £ 6437 + an automatic lump sum of £ 9207.98

or 

a pension of £ 4,950 plus a lump sum of £ 33,000

I have no idea why the figures are so different between December of £ 3,877.11 and £ 6,437

Capita were no help and advised someone would call back to explain but they are very busy.


Can anyone shed light on the big difference in the annual estimate of my potential pension?

Many thanks in advance

Tommyjw

£3,877 is the value of your pension at "DOC" being date of calculation = value in December 2021 when they sent the letter

£6,437 is the projected value of your pension in 2033 , roughly 11-12 years later. They would have increased your GMP by a fixed amount from now until then, and probably assumed inflation for the rest of your pension (e.g. assume inflation is 2.5% per year until 2033). So the final value may be higher/lower depending on what assumptions they have versus what inflation actually ends up being.

Mrpaddyseymour

Many thanks for the response.

I see.  Yes the GMP is stared as fixed 7%. Effectively £ 3877 is the value in todays money, £ 6847 is adjusted based on inflation assumptions and GMP at 7%.

So the automatic lump sum will always be £ 9207 regardless and is not altered for inflation.

Based on that the £ 175,000 Transfer value is 46 times the annual pension.  Is this a good deal?

Mrpaddyseymour

if I took £ 175 k and invested for 12 years at 4.5% growth I'd have £ 271,000 - if on average it continued to grow at 4.5% i could draw 12K per year, almost double the 6.5k n the estimate, and leave the pot to my children.  What I'm I missing?

xylophone

You cannot guarantee the rate of growth.

You do not know how long you will live.

You do not know how capable you will be in extreme old age (if you attain it) of managing the pension.

Presumably there is a spouse pension (or is this irrelevant to your circumstances)?

Do you have other DB/DC pension provision?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

If you do decide that you wish to transfer out, you will need to obtain advice from a pension transfer specialist.

This will not be cheap.

If the PTS does not give a recommendation to transfer, you will be what is termed an insistent client. 

See this thread

https://forums.moneysavingexpert.com/discussion/6301481/gaining-control-over-my-pension/p1

Mrpaddyseymour

Thanks, true that's an average I've used over the last 100 years, quick internet search.

Spouse pension is not a factor.

I have pensions and ISA of 330K at the moment and continue to contribute.

obviously lots to think about.  How much does advice cost?

Mrpaddyseymour

So the automatic lump sum will always be £ 9207 regardless and is not altered for inflation.

Mrpaddyseymour

Thanks for the link.  Looks like id have to go down the insistent client route and providers are unlikely to accept the transfer on that basis.  Essentially although the paperwork form Unilever says its an option it doesn't really appear to be one.

Ah well,...

although can anyone explain why the automatic lump sum will always be £ 9207 regardless and is not altered for inflation.

sandsy

You don't seem to thought about inflation. The DB pension will increase each year in payment. Presumably, if you transferred, you'd also want the £12k to increase each year to keep up with price inflation. 

Mrpaddyseymour

Hi sandsay, 

I'm resigned to keeping things as they are. However I'm not sure what you mean

Thrugelmir

Mrpaddyseymour said:

Thanks, true that's an average I've used over the last 100 years, quick internet search.

That information is based on an academically compiled research database. Only in more recent years has the world truly opened up to investors. Though this now already seems to have been shortlived.