Falling CETV value.

Xenon123

I am retiring in a few months early as a result of illness, and have spent the last 8-9 months preparing.
I had 2 x DB pensions that I no longer pay into and wanted to consolidate these and the two DC pensions I also have into one pot for drawdown.  After receiving the compulsory IFA advice and investigation, and a subsequent recommendation from the advisors to proceed with the transfer, I decided to go ahead.

I don't want to go in to the ins and outs of my retirement plan, suffice to say, it took most of 2022 so far to get to this point in terms of making my choices, and then getting the appropriate advice and recommendation to proceed.
I got my CETV values for both DB pensions.  The first completed a few days ago.
For the second, I had requested the transfer value before engaging the IFA, and we just missed the deadly to action before the IFA advice to proceed.
I paid £175 to have a recalculation done, and on this particular DB pension the CETV fell from £132,000 to £100,000 in just 3 months!  I was gobsmacked to be honest.
Now, it doesn't change my plans as such.  I still have enough in the overall 'basket' to proceed with my retirement options, but obviously its £7,500 less I can take as a lump sum, and a fair chunk less in my overall pot for the future.

However, the calculations the IFA did when we were engaged in the process, was that the CETV figure for this pension wasn't particularly generous in the first place, to fall over 30% just a few months later is a real kick in the teeth.

What I wanted to ask here, was can this revised CETV figure be challenged in any way?  I know increasing interest rates do have an effect on the CETV calculation, but for it to drop so much in such a short time seems exceptional?

In the absence of above, would it make financial sense currently to hold off for a while on this pension, and revisit the CETC in say 6 or 12 months from now?
Given the likelihood of interest rates climbing further I am unsure.

Just to end, and before I speak to my IFA again (this revised CETV only arrived this morning), how long will the pension company accept the IFA recommendation to go for the CETV?  Is there a time limit on the advice being accepted?

Many thanks

dunstonh

I paid £175 to have a recalculation done, and on this particular DB pension the CETV fell from £132,000 to £100,000 in just 3 months!  I was gobsmacked to be honest.

That is within the expected ballpark.

What I wanted to ask here, was can this revised CETV figure be challenged in any way?

you can ask them to take another look if you think it is wrong but it doesn't seem to be outside of expectation.

  I know increasing interest rates do have an effect on the CETV calculation, but for it to drop so much in such a short time seems exceptional?

it is exceptional.   Exceptional means unusual, not typical.    The drop in value in gilts has been exceptional.  A gilts crash is defined as at least 5% (unlike a stockmarket crash which is 20%).   95% of the time, gilts will not move around in the short term by more than 5%.    However, we are in that 5% of the time period and gilts, in particular long term gilts, went down by 25%.   Your CETV fell 24%. So, you are within the expectation.

In the absence of above, would it make financial sense currently to hold off for a while on this pension, and revisit the CETC in say 6 or 12 months from now?

Gilts had a decade of exceptional growth that was uncharacteristic.    This is what drove CETVs to be so high.   Gilts gain value as interest rates fall and inflation is low.     Gilts lose value when interest rates rise and inflation rises.      You have had a perfect storm event of interest rates coming off an all time low, far higher inflation than typical and interest rates rising.

It is quite likely that the CETV will continue to fall.

 how long will the pension company accept the IFA recommendation to go for the CETV?

You may wish to check with the adviser firm as they may withdraw their recommendation once they become aware of the CETV change and refuse to sign the advice given declaration (or change it so the advice was not to transfer).

Albermarle

What I wanted to ask here, was can this revised CETV figure be challenged in any way?  I know increasing interest rates do have an effect on the CETV calculation, but for it to drop so much in such a short time seems exceptional?

I think you can turn this on its head and say that until recently CETV values were exceptionally high, and you have benefitted from this with the first transfer at least.