Still Lower USS Transfer Value

Universidad

Just for interest I put in for a transfer value with USS again. (Last was in 2022, after transfer values fell off a cliff)

Surprisingly, given that I am two years older, and given the recent uplift, my CETV is lower than it was back then. The ratio is now essentially bang on 7x

(Just providing as a frame of reference - I have no intention of transferring out currently.)

Linton

Transfer values depend on interest rates which continued to rise after 2022.

Southend_2

Sorry just to clarify, are you saying the CETV is 7 x the annual pension? 

Universidad

Linton said:

Transfer values depend on interest rates which continued to rise after 2022.

True, but they also depend on age which sadly also continued to rise. 

Southend_2 said:

Sorry just to clarify, are you saying the CETV is 7 x the annual pension? 

Yes. 

Southend_2

Universidad said:

Linton said:

Transfer values depend on interest rates which continued to rise after 2022.

True, but they also depend on age which sadly also continued to rise. 

Southend_2 said:

Sorry just to clarify, are you saying the CETV is 7 x the annual pension? 

Yes. 

Do you mind me asking what is your age? 7x pension seems incredibly low to my (untrained) mind, whatever the age of the member.

Universidad

Southend_2 said:. 

Do you mind me asking what is your age? 7x pension seems incredibly low to my (untrained) mind, whatever the age of the member.

45. Majority of pension can be taken unreduced in ~18 years

I also think it is very low, but it doesn't change the value of the benefits I'm due to recieve. It just makes it less likely that there will be a situation where it's advantageous to transfer to a different scheme.

As I've said before, USS are very bullish about their investments, in the right circumstances. 

Southend_2

I'm shocked TBH. I'm of a similar age and just for my own planning purposes I value my USS benefits at around 20- 25x pension because that's roughly what I think I would need to replicate the benefits if purchasing an annuity at age 60+ from a DC pension. As you say, if you're not intending to transfer then it makes no difference what the CETV is, but it does make me wonder how on earth USS come up with only 7x.

As an aside, I wonder if CETVs for divorce purposes are calculated similarly? That may be beneficial to members and not so helpful for their ex spouse in the event of a divorce settlement.

ngstox

Have you taken into account the actuarial reduction? A rough rule of thumb is you lose 4% for every year before contract retirement age (currently 66). This implies you would be losing almost 60% of the CETV if you cashed in now (compared to at CPA). Taking this into account your pensionable salary should be reduced by the same amount - so the x7 multiple is probably closer to x16. Still pretty bad. it was x 30 at once point!