USS CETV very low.

swindiff

I just requested a CETV from the USS, not because I want to transfer out but because I am mortgaging my property beyond normal retirement age and the lender wanted proof that I would have the means to pay off the mortgage should I need to.

I was surprised at how low the CETV was.  I have built up an annual income of £17,920, with a 3x lump sum of £53,760.  The CETV is £248,149.

(£248,149 - £53,760) / £17920 is just 10.85x

You would have to be mad to transfer at this rate even if you could

If calculating for the LTA the value would be £412,160.  Thats quite a difference.

ussdave

Froim what I've heard USS CETVs have historically always been quite low, even during the height of CETV valuations.  Obviously with the current interest rates and resultant liabilities this has dropped even further.

I'm surprised that the lender wanted to see a CETV.  Surely even if it was a high transfer value it would be less valuable to them than setting a pension statement showing your entitlement?  Given how hard it is to transfer out of a DB scheme, I mean.

swindiff

It's a bit nuts, the mortgage takes me to the age of 73, 20 year term but only a 2 year fix.  Who sticks for the full term of a mortgage after the fix ends anyway lol. 
It's also for only £96k on a property with a value of £330k.  They did end up accepting a signed confirmation that I would be willing to work to the age of 73, even though I plan on retiring at 60. 
I had aleady requested the CETV though when they initially asked for proof and it's just come through.  I knew USS were not generous but I was quite surprised at how low it was.
I think they wanted the CETV just to prove that I would have enough funds in retirement to pay the mortgage if needed.
I could pay my mortgage down before NRA quite easily, but I made the decision when USS introduced the Investment Builder to pay quite heavily into that instead of the mortgage.

Marcon

swindiff said:

It's a bit nuts, the mortgage takes me to the age of 73, 20 year term but only a 2 year fix.  Who sticks for the full term of a mortgage after the fix ends anyway lol. 
It's also for only £96k on a property with a value of £330k.  They did end up accepting a signed confirmation that I would be willing to work to the age of 73, even though I plan on retiring at 60. 
I had aleady requested the CETV though when they initially asked for proof and it's just come through.  I knew USS were not generous but I was quite surprised at how low it was.
I think they wanted the CETV just to prove that I would have enough funds in retirement to pay the mortgage if needed.
I could pay my mortgage down before NRA quite easily, but I made the decision when USS introduced the Investment Builder to pay quite heavily into that instead of the mortgage.

A CETV gives no such indication. They should have been looking at the promised benefits. They also failed to take into account the fact that if an adviser recommended against transferring, there is currently only one known type of scheme which would accept the transfer - and currently only one provider open to new direct retail business, who might shut the doors to new business before you reach that point. 

Albermarle

I think they wanted the CETV just to prove that I would have enough funds in retirement to pay the mortgage if needed.

It sounds like the mortgage company/employee does not really understand what they were asking and were just ticking a box, because in reality it is a bit of a nonsense question.

swindiff

My mortgage advisor thought it was very strange.

This was the wording of the request

Please provide Details of all Retirement income confirming current pension transfer value and Current Annual income if drawn - this is required for Underwriter affordability assessment.

Marcon

swindiff said:

My mortgage advisor thought it was very strange.

This was the wording of the request

Please provide Details of all Retirement income confirming current pension transfer value and Current Annual income if drawn - this is required for Underwriter affordability assessment.

I think they're actually asking for transfer values of defined contribution schemes (not CETVs, a term specific to DB schemes), but it's still a poorly worded question as they don't ask for details of projected DB benefits/potential retirement lump sums, which would be much more informative.

Albermarle

Also some public sector schemes will not allow transfers at all, so presumably no CETV would be supplied.

Pat38493

Marcon said:

swindiff said:

My mortgage advisor thought it was very strange.

This was the wording of the request

Please provide Details of all Retirement income confirming current pension transfer value and Current Annual income if drawn - this is required for Underwriter affordability assessment.

I think they're actually asking for transfer values of defined contribution schemes (not CETVs, a term specific to DB schemes), but it's still a poorly worded question as they don't ask for details of projected DB benefits/potential retirement lump sums, which would be much more informative.

This was my reaction as well but then thinking about it, isn't a CETV valuation kind of legally binding document - it usually says "this value is confirmed correct until date x".  On the other hand, a pension estimate of what benefits you will get when you start drawing the pension, carries no legal or contractual weight, and as we've seen on this forum on occasions can be completely wrong, or at least inaccurate. 

However I agree they should be asking for the predicted income from the pension.

Even if this was their reasoning,  it's probably no less likely to be accurate than a work income when you might be made redundant next week...

Doctor_Who

swindiff said:

It's a bit nuts, the mortgage takes me to the age of 73, 20 year term but only a 2 year fix.  Who sticks for the full term of a mortgage after the fix ends anyway lol. 
It's also for only £96k on a property with a value of £330k.  They did end up accepting a signed confirmation that I would be willing to work to the age of 73, even though I plan on retiring at 60. 
I had aleady requested the CETV though when they initially asked for proof and it's just come through.  I knew USS were not generous but I was quite surprised at how low it was.
I think they wanted the CETV just to prove that I would have enough funds in retirement to pay the mortgage if needed.
I could pay my mortgage down before NRA quite easily, but I made the decision when USS introduced the Investment Builder to pay quite heavily into that instead of the mortgage.

Presumably they also wanted to know the value of the Investment Builder DC pension along with the CETV? I can understand the reason for the former, but as everyone else has said, not the reason for the latter.

swindiff

They originally asked for the "Transfer Value" whatever that was supposed to mean. I said that a CETV of my DB pension could take upto 3 months so asked if screenshots from the "myuss" website would suffice which shows my projected retirement income along with my DB lump sum and my investment builder cash pot.  I sent them the screenshots to illustrate this.  I currently have £80k in my investment builder.  It was at this point they requested that I sign a declaration that I would be prepared to work until the end of the mortgage term (73), which I signed just to progress the application.  This was even though at my NRA of 67 it showed my income would be more than it currenlty is now due to how much I salary sacrifice into my pension.