CETV Estimation Ranges and Risks Question

joeriki

Dear Forum, I have a Defined Benefits Penion that pays £8555 per year from this year (im 55 and was in banking so it started early). I had it valued in June 2019 at 380k. I had it valued again now I can access it and its 284k. I want to transfer it. But after my laymans research I found out how this work a little and noted that I had my valuation at the exact high in gilt yields. On the day!  Since then the yields have fallen a significant amount. My pension provider are keeping cards close to chest so I made a table that tracks the CETV valuations, the yields of gilts, the S&P gilt index, the XP pensions tracker, CPI and came up with some guesitimates. I feel it may be worth 310-330k now so I feel on blanace its wroth waiting till Jan for a new value as i really hit the worst. time after the Truss fail.

My questions then: how much impact can the unknown factors have? Have I missed something? Can the pension fund balance sheet significantly impact?  Can the pension fund just say "well we pay less now because things a bleak" Or is it really mostly yield based discount dominant. I havnt done anything clever here just looked at all the assets and indicates that changed and compared the effect from 2019 to Oct 2022 and then compared that with Nov 22 to get an idea and took an average. My guarantee rate expires Jan 10 2023. Thanks. Image attached. 

dunstonh

 I had it valued in June 2019 at 380k. I had it valued again now I can access it and its 284k. 

It probably peaked at around £520k in December last year.

I feel on blanace its wroth waiting till Jan for a new value as i really hit the worst. time after the Truss fail.

CETVs were falling heavily over 2022 long before Truss's budget mishap.

My questions then: how much impact can the unknown factors have?

Pretty significant impact as its the unknowns that cause the bigger movements.

Have I missed something?

Finding an adviser that still operates in the DB market and then getting a positive recommendation to transfer.

We are back to the days where only around 1 in 10 DB pensions are suitable to transfer.    So, do you think you are in the 1 in 10 or the 9 in 10?

Or is it really mostly yield based discount dominant. 

Mostly.;

Marcon

joeriki said:

Dear Forum, I have a Defined Benefits Penion that pays £8555 per year from this year (im 55 and was in banking so it started early). I had it valued in June 2019 at 380k. I had it valued again now I can access it and its 284k. I want to transfer it. 

Why do you want to transfer it? Your reasons for doing so will have a major impact on the advice you are likely to receive.

joeriki said:

Can the pension fund just say "well we pay less now because things a bleak" 

No. 

[Deleted User]

There are several factors which impact CETV, not just the gilt yields.  Like how your scheme credits inflation.  

Not sure how good this calculator is but its likely more accurate than your estimate.

https://reviewmypensions.com/free-resources/free-pension-calculators/transfer-value-calculator/

Albermarle

If you type 'DB transfer' in the search box at the top of the page, you will see many threads on the difficulties involved in trying to transfer out if a DB pensions, even when CETV values were much higher than today 

shortseller09

You'll find many schemes won't permit a transfer out within a year of first payment, have you checked?

Marcon

shortseller09 said:

You'll find many schemes won't permit a transfer out within a year of first payment, have you checked?

OP is only 55 and it's unlikely the scheme has an NRA of anything lower than 60. Members normally have a statutory right to a transfer out until a year before their scheme's NRA (not when the first payment is expected to be made - and a transfer isn't possible at all once a payment from a DB scheme has actually been made). 

Members may still be able to transfer on a non-statutory basis if they are within 12 months of reaching the scheme's NRA, and as you correctly suggest, that needs to be checked with the scheme in question.

joeriki

dunstonh said:

We are back to the days where only around 1 in 10 DB pensions are suitable to transfer.    So, do you think you are in the 1 in 10 or the 9 in 10?

Thanks for this. How do I know what group I am in? What are the justifyable reasons for transfering out?  I did not know it was an issue. Thanks

Thanks for this. How do I know what group I am in? What are the justifyable reasons for transfering out?  I did not know it was an issue. Thanks

joeriki

Thanks. Some clarity. The penion only came due this year in July. I have not taken any payments. I have early retirement because I was a trader at a bank many moons gone. I only worked there 4 years so this seams like a huge pension now. I was told I can take £46k lump sum and £6936pa, £8555pa or £284k transfer. No conditions were mentioned other than i need to speak to a financial advisor. I have another penion that is activated and pays similar. The reason I want to cash out is whatever they will say yes to. Not being dodgy here. There a a million reasons to cash out and I agree with them all. So I may as well lead with teh one that gets me in control of my funds. What are the reasons they say yes too?  Seams innapropriately controlling.

Dazed_and_C0nfused

So I may as well lead with teh one that gets me in control of my funds. What are the reasons they say yes too? Seams innapropriately controlling.

You don't have may funds.  You have a promise to pay you either £6936/year and a £46k lump sum or £8555/year.  And both continuing payments will no doubt have an inflation proofing element of some sort.

They are offering you £284k to go away and save them having to pay you the inflation proofed pension for the rest of your life.

joeriki

Deleted_User said:

There are several factors which impact CETV, not just the gilt yields.  Like how your scheme credits inflation.  

Not sure how good this calculator is but its likely more accurate than your estimate.

Thanks thats a really useful tool. One question. I left teh scheme at 37. The retirement age officially is 60. But I can go early at 55. So what number do I put in box two? Thanks.