New USS modeller

PJM_62

If the modeller (now called Calculator) has options for setting future inflation / pay rises / AVCs / etc , doesnt that mean the benefits projection calc is in future terms ? 

WillC999

Exactly my question.
I’ve just rerun my modeller and it shows 14k at 65, assuming 2.5% inflation…which implies (to me) that I’ll get 14k when I’m 65, which will s as actually be worth a lot less. 

WillC999

I just found this hidden in the small print:
” Your benefits are shown in today’s terms to enable you to make a meaningful comparison.” which I think is good news. This really should be in 24pt bold on the modeller!

WillC999

But then it also says this about inflation ..” If you change the assumption, it will increase or decrease the projected value of your Retirement Income Benefits.”.
Which is confusing. If my pension is 14k at 65 in todays terms, inflation is irrelevant?

2nd_time_buyer

WillC999 said:

But then it also says this about inflation ..” If you change the assumption, it will increase or decrease the projected value of your Retirement Income Benefits.”.
Which is confusing. If my pension is 14k at 65 in todays terms, inflation is irrelevant?

That applies mainly to the investment builder portion

swindiff

However if you change the assumed inflation rate, it changes the value of the RB as well as the IB

PJM_62

.. as mud 

2nd_time_buyer

swindiff said:

However if you change the assumed inflation rate, it changes the value of the RB as well as the IB

How much did you change it? The proposal from April is for the retirement builder to match CPI up to 5% then 50% of CPI above that.

However, the current agreement that was put in place after the silly validation only matched to to 2.5% (although there has been a delay in implementation). I think it will be more realistic once benefits are reinstated in April.

swindiff

I put inflation up to 4.5% which is the maximum you can set it to. You are right it is probably only matching the first 2.5%

NickBFS

WillC999 said:

But then it also says this about inflation ..” If you change the assumption, it will increase or decrease the projected value of your Retirement Income Benefits.”.
Which is confusing. If my pension is 14k at 65 in todays terms, inflation is irrelevant?

The way I understand it is that they will project the figures based on the assumptions and then translate that back to today's equivalent amount.
Let us say for the sake of argument that the projection indicates that you will receive 20K nominal when you retire and let us say that  the cumulative inflation between now and the date of retirement is 20%. They would reduce that 20K nominal to give you an inflation-adjusted figure of 16K (20K minus 20%) and show this 16K figure as your pension at date of retirement.
Inflation is relevant because, depending on which rate of inflation you use, the inflation adjustment will vary. Typically, the higher the rate of inflation you select, the lower the final figure should be, all other things being equal. In my example above, if the cumulative rate of inflation was 25% instead of 20%, the figure shown by the calculator as your pension would be 15K rather than 16K in 'today's money'.