Barclays 1964 scheme retirement fund

mfellows

I have received a transfer quote from bank. The figure has reduced dramatically. The Bank is saying it is due to inflation and yield. It has reduced by £142495. Can someone explain if this is correct

FIREDreamer

mfellows said:

I have received a transfer quote from bank. The figure has reduced dramatically. The Bank is saying it is due to inflation and yield. It has reduced by £142495. Can someone explain if this is correct

If it was about £300,000 a couple of years ago then it is quite possible for the transfer value to have nearly halved in value due to interest rates increasing sharply since that point.

Silvertabby

If this is a DB (final salary) scheme, then your promised pension won't have decreased.  Just the CETV.

mfellows

Yes it is a DB pension. What is the CETV?

Keep_pedalling

Sounds about right, the days of very high CETVs are over (for now at least).

Marcon

mfellows said:

Yes it is a DB pension. What is the CETV?

 Cash Equivalent Transfer Value.

FIREDreamer

mfellows said:

Yes it is a DB pension. What is the CETV?

Cash Equivalent Transfer Value

xylophone

https://www.cjfinance.co.uk/cetv-value-dropping-what-should-you-do/

Pension transfer values had fallen by 23% as of June 2022, with some of the most dramatic drops in recent years occurring after record-high values in 2021. Rising interest rates appear to be the primary culprit, but there are other factors at play too. While many factors influence Defined Benefit pension transfer values, the rising interest rate is the primary driver of the 2022 drop in transfer values.

The ultra-low interest rates that have fuelled soaring UK transfer values in recent years have now ended. After remaining at 0.1% for much of 2021, the Bank of England has raised interest rates several times. After 5 consecutive rate hikes, it is now at 1.25%, up from 0.1%, and there is talk of more rate hikes to combat rampant inflation. Rising interest rates, combined with other global and domestic market pressures, have impacted transfer values, resulting in massive drops across the board.

https://www.ukemploymenthub.com/understanding-the-downturn-in-the-defined-benefit-pension-transfer-market/

A further reason behind this decline can be attributed to falling transfer values. A typical member aged 55 with a pension of £10,000 per annum payable from 65 had a transfer value of around £250,000 at the beginning of 2022, but that has now fallen to around £130,000. This decrease reflects the higher gilt yield – a key factor in determining DB pension transfer values. This is because higher gilt yields reduce the value of liabilities of a scheme, thereby improving its solvency. This improves the funding position of DB schemes as it means a higher return is anticipated on a pension scheme’s assets and a lower sum of money is needed now by a scheme to pay a member’s pension when it comes. As a lower fund value is needed to buy a set level of income, it in turn reduces the transfer out value.

Brie

I doubt you will be able to get anyone to advise that you transfer the scheme.  I know a number of employees did about a decade back but things have changed. While you could pay a few thousand to get an adviser to review a transfer even if they said a transfer would be ok it's unlikely that another company would accept a transfer in due to the possibility that you might decide you had been mis-sold.  

xylophone

He would certainly have to take the advice (expensive) of a Pension Transfer Specialist.

The likelihood is that a transfer would not be recommended.

However, while it is true that very few schemes will accept a transfer in without a positive recommendation, 

https://forums.moneysavingexpert.com/discussion/comment/80084205/#Comment_80084205 and following.

presumably he could take the precaution of opening a stakeholder pension before even embarking on attempting a transfer?