Tesco DB Pension not performing - transfer?

Andy_L

Bostonerimus1 said:

This is a very depressing thread. So many people seem to be confused about some of the most important aspects of their personal finances.

There's a selection bias going on though. People who do understand aren't going to be posting questions so we do only see those who don't understand. But at least they know they don't understand (known unknowns) and are investigating 

feynman33

Bostonerimus1 said:

feynman33 said:

Bostonerimus1 said:

feynman33 said:

DRS1 said:

feynman33 said:

So do drastic fluctuations in a schemes CETV's affect DB to DB transfers, or does the receiving scheme's calculations cancel the effect? It's suppossed to be regulated to protect the pension holder after all?

I'm looking to initiate the proccess shortly. Is there such thing as a bad time to do it? I guess i'll find out when i get my quotes, but in the meantime i'd like to know!

I am not sure DB to DB transfers happen very much these days.  You may get a Club transfer between public sector schemes.

What you need to look at it is what benefits the receiving scheme will grant for the transfer and compare them to the ones you'd have got under the transferring scheme but it may not be easy to compare.  For example your old scheme may be a 1/60ths final salary scheme and the new one may be 1/57th CARE scheme.  It is not going to be as simple as I have 5 years under the old scheme so I should get 5 years under the new one.

I'm looking at a non-club transfer, private care to public care. I think it should be as simple as comparing X per year to Y per year minus the lump sum. I expect it will be an easy decision, this thread just got me wondering how the CETV plays into it and if there is a 'bad' time to do it.

Can you explain what you mean by "private care to public care" in detail please?

Acurately explained above. I understand the proccess, was just wondering if ones quoted new annual pension can vary drastically with timing/market conditions/CETVs. It doesn't really matter, I'll either like the quote and go ahead, or i wont. I'd rather make the transfer though, and it'll be months before i receive quotes so just curioius in the meantime.

Interest rates are higher than a few years ago so CETVs will have fallen. Before doing any transfer I would think holistically about your potential retirement income streams and certainly don't base any transfer on a perceived loss of "value" due to falling CETVs.

Should the receiving schemes calulation be somewhat the inverse of CETV calculation?

Thanks, I'll be deciding based on what the new scheme tells me the CETV will buy...

DRS1

feynman33 said:

Bostonerimus1 said:

feynman33 said:

Bostonerimus1 said:

feynman33 said:

DRS1 said:

feynman33 said:

So do drastic fluctuations in a schemes CETV's affect DB to DB transfers, or does the receiving scheme's calculations cancel the effect? It's suppossed to be regulated to protect the pension holder after all?

I'm looking to initiate the proccess shortly. Is there such thing as a bad time to do it? I guess i'll find out when i get my quotes, but in the meantime i'd like to know!

I am not sure DB to DB transfers happen very much these days.  You may get a Club transfer between public sector schemes.

What you need to look at it is what benefits the receiving scheme will grant for the transfer and compare them to the ones you'd have got under the transferring scheme but it may not be easy to compare.  For example your old scheme may be a 1/60ths final salary scheme and the new one may be 1/57th CARE scheme.  It is not going to be as simple as I have 5 years under the old scheme so I should get 5 years under the new one.

I'm looking at a non-club transfer, private care to public care. I think it should be as simple as comparing X per year to Y per year minus the lump sum. I expect it will be an easy decision, this thread just got me wondering how the CETV plays into it and if there is a 'bad' time to do it.

Can you explain what you mean by "private care to public care" in detail please?

Acurately explained above. I understand the proccess, was just wondering if ones quoted new annual pension can vary drastically with timing/market conditions/CETVs. It doesn't really matter, I'll either like the quote and go ahead, or i wont. I'd rather make the transfer though, and it'll be months before i receive quotes so just curioius in the meantime.

Interest rates are higher than a few years ago so CETVs will have fallen. Before doing any transfer I would think holistically about your potential retirement income streams and certainly don't base any transfer on a perceived loss of "value" due to falling CETVs.

Should the receiving schemes calulation be somewhat the inverse of CETV calculation?

Thanks, I'll be deciding based on what the new scheme tells me the CETV will buy...

Very very unlikely.

feynman33

DRS1 said:

Very very unlikely.

Isn't the CETV supposed to represent the ~cost of providing X future benefits, based on todays market conditions. While the receiving schemes quote is what future benefits the CETV will buy me based on todays market conditions. All regulated to protect the pension holder? 

Or am i being naive 🤔😂

hugheskevi

feynman33 said:

DRS1 said:

Very very unlikely.

Isn't the CETV supposed to represent the ~cost of providing X future benefits, based on todays market conditions. While the receiving schemes quote is what future benefits the CETV will buy me based on todays market conditions. All regulated to protect the pension holder? 

Or am i being naive 🤔😂

You are considering transferring a private career average scheme to a public sector career average scheme. 

The private sector scheme will have a CETV based on financial market values, most notably gilt and high quality corporate bond rates. 

The public sector scheme discount rate is based on long term expected GDP growth. 

A decade ago when interest rates and yield were extremely low, but optimism around GDP growth, you could double your pension by transferring a private sector DB into public sector. 

Things have significantly changed round now, with higher yield and lower GDP growth expected.

feynman33

hugheskevi said:

feynman33 said:

DRS1 said:

Very very unlikely.

Isn't the CETV supposed to represent the ~cost of providing X future benefits, based on todays market conditions. While the receiving schemes quote is what future benefits the CETV will buy me based on todays market conditions. All regulated to protect the pension holder? 

Or am i being naive 🤔😂

You are considering transferring a private career average scheme to a public sector career average scheme. 

The private sector scheme will have a CETV based on financial market values, most notably gilt and high quality corporate bond rates. 

The public sector scheme discount rate is based on long term expected GDP growth. 

A decade ago when interest rates and yield were extremely low, but optimism around GDP growth, you could double your pension by transferring a private sector DB into public sector. 

Things have significantly changed round now, with higher yield and lower GDP growth expected.

I see, makes sense thanks. I'll wait and see what they come back with...

Marcon

feynman33 said:

DRS1 said:

Very very unlikely.

Isn't the CETV supposed to represent the ~cost of providing X future benefits, based on todays market conditions. 

Not quite the full story, at least in the private sector. A CETV represents the actuary's 'best estimate' of the cost to the scheme concerned of providing the member's benefits at the scheme's Normal Retirement Date, taking into account current market conditions. A DB scheme's own investment strategy will have an impact on that CETV. A DB scheme which is heavily invested in growth assets will assume a higher rate of return on those assets than one adopting a largely defensive position - so a lower CETV for the former, and a higher CETV for the latter.

feynman33 said:

While the receiving schemes quote is what future benefits the CETV will buy me based on todays market conditions. 

...and the receiving scheme will offer benefits based on what they estimate it would cost them to provide benefits in their scheme.

feynman33 said:

All regulated to protect the pension holder? 

Or am i being naive 🤔😂

In pensions there are always plenty of regulations around, but they aren't intended to - and can't stop - members making daft decisions, especially where the member has a choice whether or not to do something. A scheme has to offer fair value but it's up to the member to decide whether to not proceed with a transfer. You can't always protect people from themselves...

Naivety is where you don't know the answer and don't ask any questions - so no, you quite definitely aren't in that camp.

QrizB

Coincidentally, while I'm not in the Tesco scheme my 2025 deferred DB pension benefit statement did arrive in the post today.

My pension benefit is 1.7% higher than on last year's statement, which (unsurprisingly) matches last September's CPI value of 1.7%. Anyone would think they're linked

My indicative CETV is roughly half what it was a few years ago, at ~12.5x my annual pension. No, I'm not transferring.

HedgehogRulez

QrizB said:

Coincidentally, while I'm not in the Tesco scheme my 2025 deferred DB pension benefit statement did arrive in the post today.

My pension benefit is 1.7% higher than on last year's statement, which (unsurprisingly) matches last September's CPI value of 1.7%. Anyone would think they're linked

My indicative CETV is roughly half what it was a few years ago, at ~12.5x my annual pension. No, I'm not transferring.

Just think of all that untapped growth you’re missing out on!

QrizB

HedgehogRulez said:

Just think of all that untapped growth you’re missing out on!

I value a peaceful night's sleep more than that 😉