Boots Pension Linked to Guilts (Government Bonds)

hyubh

cliffyevans said:

Many thanks to all who have replied. Now need to do some homework.

To Hoenir - pension is in UK, daughter is in Australia . . .

Keep in mind not paying increases if you retire in (e.g.) Australia is something specific to the state pension. Occupational pensions, like her Boots one, won't reduce their payouts just because the retiree lives abroad.

cliffyevans

FIREDreamer said:

cliffyevans said:

Dear All,

My Daughter and family now live in Australia. I have power of Attorney over her pensions until I am able to transfer them. One of the pensions is casing me some concern.

The Pension involved is from Boots (the chemist). In 21st Sept 2021 the ‘transfer value’ was listed as £34,650 yet in 10th Aug 2023 value given as £16,797, a big drop. ( some 51.5% over 2 years)

I queried this with Boots and their reply - to quote them

“The cost of providing pensions is closely linked to the price of Government bonds (gilts).  As the price of these gilts has fallen significantly in recent months, so has the cost of providing the benefits. This is then mirrored in the transfer value.  Transfer values have fallen significantly due to these changes in gilt prices.”

So that I may verify what they are saying is correct where may I see a chart of these gilts (government bonds) over this time period?

These are some examples from Hargreaves Lansdown. Obviously long dated gilts have dropped a lot more than shorter dated ones but this gives you an idea of what has happened recently.

Long Dated Index Linked Gilt

Long Dated Normal Gilt

And here is a 15 year gilt fund which has pretty much halved in value - like your CETV quote.

Very many thanks for this FireDreamer. I was unaware that Gilts were in such trouble.

cliffyevans

dunstonh said:

The Pension involved is from Boots (the chemist). In 21st Sept 2021 the ‘transfer value’ was listed as £34,650 yet in 10th Aug 2023 value given as £16,797, a big drop. ( some 51.5% over 2 years)

That is in line with expectation as Nov 2021 was the peak.

So that I may verify what they are saying is correct where may I see a chart of these gilts (government bonds) over this time period?

It is correct.

Remember that the boots pension is not investment-linked.  It is defined benefits.  However, if you wish to give up those defined benefits, you can ask them to buy you out of the scheme.      They give you a cash equivalent to match the cost of the benefits (hence cash equivalent transfer value - CETV).    That uses gilt yields in the calculation.

After the credit crunch, interest rates went to record lows and that made gilts more attractive to investors.   So, the values boomed but the yields fell.   The low yields pushed CETVs up to record highs from 2009 to 2021.   However, as interest rates and inflation rose, as well as confidence over the BoE and Government and the UK in general,  gilt values dropped and this pushed gilt yields higher.     So, in turn the CETVs fell.

They are now back within their normal historical range.

The period of 2009-2021 was an anomaly created as a result of the credit crunch.  It had unwind at some point.    The CETV from 2021 is the end of the anomaly.  The CETV from 2023 is back to normality.

dunstonh - thanks for this. You are in a different (higher) league to me.