Deferred DB pension - my head is spinning!

Albermarle

I have a small DB pension from a private company which became deferred in 2015 when I left. This is now administered by Mercer (or aptiview or whatever they’d called now). The only data I can find is the pension value at the time I left  - £13700. 

Just for perspective a deferred DB pension of £13700 is not small. Guaranteed income is very valuable. Probably today ( 10 years on )  in theoretical cash terms it is worth about a third of a Million Pounds. 

This is now administered by Mercer (or aptiview or whatever they’d called now). 

You have my deepest sympathy, they are useless.

Moonwolf

Moonwolf said:

mrklaw said:

so the 5% is used as an estimate (or they use their own estimates) for future growth illustrations, but then revert to government published lists like the one shared for *actual* years up to the current date and will recalculate at that point with real numbers? 

the 18k figure if accruate as a ballpark would be good just to let me baseline with my other planning at the moment which is based on ‘now’ money. Although I would like to do some estimates of drawing at 60 so I’m guessing between 20-25% reduction from that again as a ballpark for rough planning purposes

The 5% is a cap.  It will grow by RPI but no more than 5%, if inflation is 6% or 10% you will only get 5%, if inflation is 2% you will only get 2%.  We haven't had a lot of high interest years recently.

On the information given it should be around £18,000 in todays money, possibly a little higher, but one the reasons why no one else has answered your question with even that level of precision is there are too many unknowns so it could be wrong.

You should be able to request an up to date estimate of your future pension from your pension administrator.

My deferred private sector scheme says benefits after 6/4/1997 grow by CPI capped at 5% and benefits after 6/4/2009 grow by CPI capped at 2.5% and gives me numbers in each part.  It also mentions GMP but then the figures are zero in those boxes, I don't have any.

I should add, I was assuming the £13,700 a year was the pension earned in 2015 as told to you in 2015. 

If it is a later the £18,000 will definitely be wrong. Also, one of my estimates for my pension gives the figure now in todays money, another estimates what my pension will be at retirement date assuming future inflation is 2% a year, which is very confusing.  If you get a new figure you need to read carefully to see which it is.

mrklaw

thanks - I’ve asked for a ‘now’ revaluation but the statement continually says ‘as of exit in 2015’ so I think it is 2015 figure

” The benefits shown are as at 15/03/2015, the date you left the Scheme” 

Sarahspangles

mrklaw said:

thanks - I’ve asked for a ‘now’ revaluation but the statement continually says ‘as of exit in 2015’ so I think it is 2015 figure

” The benefits shown are as at 15/03/2015, the date you left the Scheme” 

I know it’s frustrating but the quickest way to find out is to look at your scheme booklets and see how annual revaluation works for your scheme. It’s a matter of multiplying the 2015 figure by the revaluation percentage. If you get stuck with how to do it, but can find out what rules the calculation is based on, I’m sure someone can help.

mrklaw

like I said all I can find is the reference to 5% so I assume will be around the number someone mentioned of 18000 from a 2015 ending being revalued to now. I will see if I can find the original doc from when I left but I may not have it, and mercer has a bunch of old generic ones and no personal statements with much of practical use for this and I’ve looked through all of them. 

They also refused to talk to me in February as I was too far away from being eligible to draw down (I was 53, I’d think it reasonable that a 53 year old might want to be looking at valuations if they can withdraw at 55..) - I’m trying again once I turn 54 as thats less than a year in case its an arbitrary line but they’ve been very unhelpful so far

mrklaw

Quick follow up - thanks for the help so far my head hurts slightly less now.

- if I’m thinking of taking at 60, should I estimate forwards to 65 using eg 2-2.5% as a placeholder, then apply the estimated 25% reduction? 

So eg £18700 in todays money based on latest government adjustment, 11 years (to 65)  2/2.5% is £23.25k/£24.5k so call it £23750. Then 25% off that is £17812 - reasonable starting figure? About £15800 in today money 

Moonwolf

mrklaw said:

Quick follow up - thanks for the help so far my head hurts slightly less now.

- if I’m thinking of taking at 60, should I estimate forwards to 65 using eg 2-2.5% as a placeholder, then apply the estimated 25% reduction? 

So eg £18700 in todays money based on latest government adjustment, 11 years (to 65)  2/2.5% is £23.25k/£24.5k so call it £23750. Then 25% off that is £17812 - reasonable starting figure? About £15800 in today money 

Personally, projecting forward I always use today's money.  For a pension I wasn't adding to I would just apply the reduction.  Add in any other pensions in today's money like the current state pension.

My spreadsheets for deferred pensions have them worth what they are today.  For pensions I am paying into I assume I will pay the same in as I am now and add that as growth.  For invested defined contribution pots I use 2% growth over inflation but check at 1%, 1.5% and 2.5% as well.

It isn't going to be any more wrong than any guess you might make as to what will happen to inflation in the future and you know what £100 feels like now. 

If you think for every £100 today you will have £150 at a point in the future, you might feel like you will have more money but bread, taxis and electricity will call cost more as well.

mrklaw

Ah ok maybe I’m mixing my measurements. For DC I’m using 1/4/7% and removing inflation so it should be ‘today’ money equivalent I think?

So for the DB I am ok to revalue based on latest government numbers to get a ‘today’ amount (34%, gives £18500 ish). And for that of it’s only updated by CPI then I should use that as a flat amount in future to represent today money - right? 

In that case it’d still be £18500 at 65 and approx £14k reduced for taking early at 60? 

Phossy

If it helps, I became a deferred member of my then works DB scheme in 2015 - it also has a 5% RPI cap.
I have just received an updated statement  and todays number reflects a  growth of 21.8%. over the figure in 2015 (so about 2.2% growth per year).
I use the latest figure in all my calculations as a representation of the value it will be at whatever date I chose to retire as I expect the pension to grow with inflation. 

mrklaw

Phossy said:

If it helps, I became a deferred member of my then works DB scheme in 2015 - it also has a 5% RPI cap.
I have just received an updated statement  and todays number reflects a  growth of 21.8%. over the figure in 2015 (so about 2.2% growth per year).
I use the latest figure in all my calculations as a representation of the value it will be at whatever date I chose to retire as I expect the pension to grow with inflation. 

Thanks. Looking at the government data though suggests a 34% adjustment?