DB pensions projections - how accurate are they?

Parking_Trouble

Albermarle said:

The other due for payment next year, I've had to chase to get a forecast out of the administrator - WTW.
I got a forecast out them last year and I assume they'll contact me a month or two before payment with the final figure.

I would not assume anything with WTW, or similar pension administrators. My own DB pension was 4 months late with the first payment, and even then only after a lot of pushing and complaining.

Luckily not had much interaction with them since the pandemic so best to assume they are even less efficient than before.

I'll give them a nudge, ask for another statement and ask when I'll get the final, firm projection.

Dazed_and_C0nfused

LV_426 said:

Dazed_and_C0nfused said:

Unless it has fixed inflation proofing, which seems highly unlikely, then it can only ever be a guesstimate.

If you had a projection from say 3 years ago it's highly unlikely that that the 2023 increase would be based on current inflation figures as no one is going to have foreseen the sudden large increase that we've had.

When you say guesstimate, what do you mean? I just want to be sure that the number I have on the report is what I will get, at the NRA. Which from dunstonh's reply I assume it will.

I understand that the projection is based on various factors, which are outlined in the statement, and I won't go into. But of course the real year by year inflation figures are variable. So the cost of living in 2031 may not match the level of income provided by this pension.

The inflation element means It definitely shouldn't be what you'll get.

When the pension originally becomes a deferred pension you will know what you have accrued at that point.

And you can usually get an upto date figure from the scheme but any future projection can only ever be a guesstimate as no one knows the future inflation figures.

It could be some schemes have a fixed inflation link, say 2% per year, but I don't recollect anyone posting about such a scheme so I suspect not.

LV_426

Lol! There's no wonder pensions are a mystery to many people. I can't even get a straight answer out of this thread

german_keeper

LV_426 said:

Lol! There's no wonder pensions are a mystery to many people. I can't even get a straight answer out of this thread

As far as I know the process for a deferred DB pension is the same for all schemes.

At the point of leaving the scheme you will have built up an entitlement to benefits under the scheme rules. I assume you were told this but I don't think you have quoted this figure anywhere.

Then from that point to Normal Retirement Age those benefits will be increased in line with inflation, again according to scheme rules. You have quoted those rules yourself in an earlier post.

If at any point during that period you want to know the current value of the pension you can calculate the amount with those 2 pieces of information. If you are lucky the scheme administrator may be prepared to do that for you.

Anything in the future is mere speculation and guesswork based on trying to predict inflation rates. It may be almost exact, very unlikely; it may be quite accurate, very possible; it may be miles off, again very possible.

All of this information is contained in the thread so I am not sure why you think you haven't had a straight answer. 

Parking_Trouble

LV_426 said:

Lol! There's no wonder pensions are a mystery to many people. I can't even get a straight answer out of this thread

Because there isn't a straight answer. 

Looks like you've had enough advice to assess whether it's good enough for planning, or with a calculator you can work it out yourself.

Albermarle

german_keeper said:

LV_426 said:

Lol! There's no wonder pensions are a mystery to many people. I can't even get a straight answer out of this thread

As far as I know the process for a deferred DB pension is the same for all schemes.

At the point of leaving the scheme you will have built up an entitlement to benefits under the scheme rules. I assume you were told this but I don't think you have quoted this figure anywhere.

Then from that point to Normal Retirement Age those benefits will be increased in line with inflation, again according to scheme rules. You have quoted those rules yourself in an earlier post.

If at any point during that period you want to know the current value of the pension you can calculate the amount with those 2 pieces of information. If you are lucky the scheme administrator may be prepared to do that for you.

Anything in the future is mere speculation and guesswork based on trying to predict inflation rates. It may be almost exact, very unlikely; it may be quite accurate, very possible; it may be miles off, again very possible.

All of this information is contained in the thread so I am not sure why you think you haven't had a straight answer. 

This matches my experience. I had a figure at NRA given to me when I left the employer. When I got nearer to taking it, I read the scheme rules on inflation linking and found inflation statistics from Google and did an approx calculation myself.
In any case getting info/updates out of some pension administrators is less than straightforward, to put it mildly .

RetSol

you have your years(and days) of service giving you the multiplier 

.. if your service was uncomplicated.

If you took maternity leave or sick leave or a career break for example, you may find that you need to check the trustees' calculations. 

I agree with @Albermarle. It can be less than easy. 

My experience was with Civil Service Pensions and it took a good deal of to-ing and fro-ing to sort out my reckonable service and other issues. 

They re-calculated my added years contributions due to a rounding error made by my employer. 

In addition, my part-time service (a reasonable adjustment owing to disability) was upgraded to full-time service as a result of changes to equalities legislation applied subsequent to my departure. It worked in my favour but it made a mockery of the previous statements of preserved benefits which I had received and which took no account of the changes. 

Another potential problem is the availability of your records. It is not unknown for an employer to lose them... 

Albermarle

My experience was with Civil Service Pensions and it took a good deal of to-ing and fro-ing to sort out my reckonable service and other issues. 

And with some private sector pension administrators, even just the mechanics of to-ing and fro-ing is a challenge in itself.....

Pat38493

One other thing to watch out for here - even if your estimate of your future pension long into the future is broadly accurate, be careful about comparing that number to your current spending needs today.

If you have an estimate for 10 years into the future or whatever, all your costs from today will also go up by inflation in the next 10 years, so if you are trying to look at your spending power in retirement you need to either inflate all your costs by the same amount, or de-flate your pension back to today's value.

At least that's my understanding from everything I read.

Also - from my understanding unless your scheme guarantees something more generous as discussed above, the inflation rises that are actually applied when you really do retire will actually be fixed by a document that is released by the UK Government in November each year, believe it or not - I cannot remember what that document is called but it basically tells all schemes like this what (minimum) uplift to apply to the deferred value of deferred DB pensions.

Dazed_and_C0nfused

Like this,

https://www.gov.uk/government/publications/public-service-pensions-increase-2022