CETV or Cash Equivalent Transfer Values on pension transfers. Post yours.

QrizB

scoobyjones1 said:

Yes of course but I do not think said advice should be mandatory.,,,unless it's free advice as with Pensionwise or Citizen's Advice.

You don't receive advice from either of those organisations. Providing advice is a regulated activity, and neither of those organisations are permitted to dispense it.

scoobyjones1 said:

With other pension types it is not.

It's not only DB pensions, although those are the more common ones affected.

michaels

cambb said:

HI,

I transfered my DB in 2017. My figures are below:-

Age 55 Gross Retirement Pension
£12,288.60 Per Annum

Age 58 Gross Retirement Pension
£13,809.24 Per Annum

Age 65 Gross Retirement Pension
£19,016.28 Per Annum

I recieved £522k but was actually £501k after fees in July 2017.

Today its worth £677k. I do have another works DC pension that I pay 5% and my company 20% due to them closing down the DB scheme.

Thanks

So about 5% total growth in real terms or less than 1% pa - but probably better than the DB if the inflation increases were capped.

scoobyjones1

michaels said:

cambb said:

HI,

I transfered my DB in 2017. My figures are below:-

Age 55 Gross Retirement Pension
£12,288.60 Per Annum

Age 58 Gross Retirement Pension
£13,809.24 Per Annum

Age 65 Gross Retirement Pension
£19,016.28 Per Annum

I recieved £522k but was actually £501k after fees in July 2017.

Today its worth £677k. I do have another works DC pension that I pay 5% and my company 20% due to them closing down the DB scheme.

Thanks

So about 5% total growth in real terms or less than 1% pa - but probably better than the DB if the inflation increases were capped.

I would rather have 500k at age 48 than 12, 13, 19 k per year for life or whatever basically matching inflation. cambb now has 677k (plus another pension), still growing nicely and can leave ALL of that to his wife or kids and IHT free if it's in a SIPP wrapper. He would have tax free interest as well and any dividends would be tax free. Cap gains also tax free. His death benefit was 50% in the old scheme. My wife's is zero %. He made the right decision he feels, and I totally agree.

sandsy

scoobyjones1 said:

Also the threshold for compulsory financial advice on DB transfers, £30k, has not changed for many years. That's just wrong with the inflation we have had. 

But as you noted above, the main driver of CETVs is gilt yields, not inflation. Even with the recent very high inflation increasing CETVs, the effect has been more than offset by the change in gilt yields. With the recent drop in transfer values, fewer people need to take advice currently anyway.

it's also the case that older people are more likely to have to take advice than younger people with the same level of benefits.  This is because transfer values increase as you get older anyway - assuming the assumptions remain unchanged over time and the assumptions are borne out in practice. Of course, neither of those things does happen in practice! But the general principle holds.

But this means comparing transfer values is a futile excercise unless everyone is the same age, and has the same level of accrued benefits and the same benefit structures  ( retirement age, pre- and post-retirement increases, survivor benefits etc). And even then CETVs will vary according to the scheme investment strategy etc.

scoobyjones1

sandsy said:

scoobyjones1 said:

Also the threshold for compulsory financial advice on DB transfers, £30k, has not changed for many years. That's just wrong with the inflation we have had. 

But as you noted above, the main driver of CETVs is gilt yields, not inflation. Even with the recent very high inflation increasing CETVs, the effect has been more than offset by the change in gilt yields. With the recent drop in transfer values, fewer people need to take advice currently anyway.

it's also the case that older people are more likely to have to take advice than younger people with the same level of benefits.  This is because transfer values increase as you get older anyway - assuming the assumptions remain unchanged over time and the assumptions are borne out in practice. Of course, neither of those things does happen in practice! But the general principle holds.

But this means comparing transfer values is a futile excercise unless everyone is the same age, and has the same level of accrued benefits and the same benefit structures  ( retirement age, pre- and post-retirement increases, survivor benefits etc). And even then CETVs will vary according to the scheme investment strategy etc.

Noted. But inflation and interest rates ARE related...and Gilts are related to interest rates. Anyway, I still find these comments... and thank you for yours, interesting and helpful. I'm told others do. As one person said, they were only aware of their CETV value due to this Forum and he transferred at a very good time because of it. Not everyone has an annual review either.
Don't you think that CETVs, taking into account the individual differences of course, should generally start to go up again if and when interest rates are cut and I presume Gilt yields go up? This is what I was told by one pension specialist adviser this week. Was he wrong?

Scallypud

I transferred my £7,900 final salary pension on February 2021 for 249K ( 31 times ).
Since then it has gained 3% which is not great but still wouldn't have it any other way.
The reason i took it was because i would of been roughly 87 yrs old before i got 249K from my final salary pension.
I would rather have the money now and hopefully some left over for my children.

scoobyjones1

Scallypud said:

I transferred my £7,900 final salary pension on February 2021 for 249K ( 31 times ).
Since then it has gained 3% which is not great but still wouldn't have it any other way.
The reason i took it was because i would of been roughly 87 yrs old before i got 249K from my final salary pension.
I would rather have the money now and hopefully some left over for my children.

Well done, I think you have done extremely well to get 31 times, that would be lower in 2023 most probably. No doubt the IFAs will argue...
Is it held as cash, because it should be making a bit more than that I would've thought by now in interest? But anyway, it's there if and when you need it and as you say, you should have something to pass on when you go.
Were you forced into paying for advice? If so did they approve the transfer? And what did they charge you for the advice? 

Universidad

Within the last year, I had a USS CETV of 95K on £8K PA of benefits that can be taken unreduced at 65. Taking the lump sum off the top, that is a multiplier below 9. I didn't complete this transfer.

I also had an older workplace pension with a value of just £140 PA. I was offered 1050 on this. That's a multiplier of 7.5.

I felt compelled to transfer this because after I enquired about a CETV the trustees determined that my pension should not have been preserved in the first place, so the alternative was to recieve back my contributions with no adjustment after nearly 20 years in deferral!

Anyway, it bought six months off the vesting period of my new DB pension scheme, and 100 pounds per year of annual pension.

scoobyjones1

Universidad said:

Within the last year, I had a USS CETV of 95K on £8K PA of benefits that can be taken unreduced at 65. Taking the lump sum off the top, that is a multiplier below 9. I didn't complete this transfer.

I also had an older workplace pension with a value of just £140 PA. I was offered 1050 on this. That's a multiplier of 7.5.

I felt compelled to transfer this because after I enquired about a CETV the trustees determined that my pension should not have been preserved in the first place, so the alternative was to recieve back my contributions with no adjustment after nearly 20 years in deferral!

Anyway, it bought six months off the vesting period of my new DB pension scheme, and 100 pounds per year of annual pension.

Wow, those are pretty mean valuations. I don't blame you for not transferring in that case.
Isn't the multiple worked out as the amount offered vs the annual payment, without any lump sum involved? So 95k divided by the 8k...which would be 11.875 X ?
Still pretty low though in any case.

QrizB

scoobyjones1 said:

Isn't the multiple worked out as the amount offered vs the annual payment, without any lump sum involved? So 95k divided by the 8k...which would be 11.875 X ?

Lump sums skew the valuation. For comparison purposes it's better to discount those first before doing the calculation.

Many public sector DB schemes have an automatic lump sum of 3x annual pension. 11.875-3= less than 8.