TFL Pension made a loss over the last 10 years?

Eth4in

I'm currently going through a divorce. My wife had an affair at work (not at TFL), and we are sorting out pensions. My pension pot is larger, so I have to transfer a percentage of my retirement to her (yay, lucky me, a double kick in the face).

In 2015 she was given a transfer amount for her TFL fund of 30k, I can see the written document. This was when she left TFL. I don't believe she made the transfer. When we requested the total fund size now, TFL sent a written response saying it's 27k. I don't understand how it could lose 3k in 10 years, or am I misunderstanding what "transfer" value means in 2015, and fund value means now in 2025?

She said she asked and was told something about the bonds she was invested in didn't perform. However I checked the TFL pension performance results for last 10 years, and cannot see evidence of this.

2015 13.20% 2016 1.40% 2017 20.20% 2018 4.10% 2019 5.30% 2020 -2.60% 2021 22.30% 2022 10.60% 2023 -0.60% 2024 6%

I'm stuck on how to push this to a resolution, what questions I should be asking, or maybe I'm just misunderstanding something. Any help would be appreciative.

dunstonh

In 2015 she was given a transfer amount for her TFL fund of 30k, I can see the written document. This was when she left TFL. I don't believe she made the transfer. When we requested the total fund size now, TFL sent a written response saying it's 27k. I don't understand how it could lose 3k in 10 years, or am I misunderstanding what "transfer" value means in 2015, and fund value means now in 2025?

TFL is a defined benefit pension.   So, she doesn't have a fund.  It hasn't lost money.

You are looking at the CETV but that is not a fund value.  Its the cost of buying out the pension.   CETVs have halved since 2021 as the cost of buying out the pension has halved.     

She said she asked and was told something about the bonds she was invested in didn't perform.

As she isn't invested in them, that won't apply.  However, in a roundabout way, its partly responsible.     Gilt yields, when low, increase the CETV.  When higher, they lower the CETV.   Gilt yields were at 300 year lows post credit crunch but that all unwound late 2021 to 2024 and we are back in normality again.

Hoenir

The basic mechanics are that as interest rates fell from their peak in 2007. So did Government Gilt yields. It therefore require a bigger and bigger pot to buy the guaranteed pension. As interest rates have normalised. Then the reverse has occurred. Your wife is exactly the same position. 

Marcon

Eth4in said:

I'm currently going through a divorce. My wife had an affair at work (not at TFL), and we are sorting out pensions. My pension pot is larger, so I have to transfer a percentage of my retirement to her (yay, lucky me, a double kick in the face).

In 2015 she was given a transfer amount for her TFL fund of 30k, I can see the written document. This was when she left TFL. I don't believe she made the transfer. When we requested the total fund size now, TFL sent a written response saying it's 27k. I don't understand how it could lose 3k in 10 years, or am I misunderstanding what "transfer" value means in 2015, and fund value means now in 2025?

She said she asked and was told something about the bonds she was invested in didn't perform. However I checked the TFL pension performance results for last 10 years, and cannot see evidence of this.

2015 13.20% 2016 1.40% 2017 20.20% 2018 4.10% 2019 5.30% 2020 -2.60% 2021 22.30% 2022 10.60% 2023 -0.60% 2024 6%

I'm stuck on how to push this to a resolution, what questions I should be asking, or maybe I'm just misunderstanding something. Any help would be appreciative.

Transfer values fluctuate the whole time in a DB scheme. The only question to ask is for a current CETV for her pension - which you've got. If you have a defined benefit pension, your CETV will also have dropped, so there will be 'lower numbers' on both sides.

If you have a defined contribution scheme, then the value of your pot will depend on the underlying funds in which you've chosen to invest - so your pot value won't necessarily have moved in the same direction (ie up or down) as her CETV.

squirrelpie

I'm curious (I'm not thinking about getting divorced though!) how are DB pensions valued in divorces? IIUC assets are valued and totalled and evenly divided, but how much is a DB pension worth?

Marcon

squirrelpie said:

I'm curious (I'm not thinking about getting divorced though!) how are DB pensions valued in divorces? IIUC assets are valued and totalled and evenly divided, but how much is a DB pension worth?

Starting point is the CETV - but predictably that's not the end of the matter! Do some googling on 'pensions and divorce' and you'll get masses of info (some differences in procedure if you're in Scotland). 

pterri

The TfL pension is in rude health (125% funded I think), so much so that the trustees have agreed that TfL can reduce their contribution to I think the minimum and are still able to derisk the funds investments. At least I hope so….

Eth4in

Hoenir said:

The basic mechanics are that as interest rates fell from their peak in 2007. So did Government Gilt yields. It therefore require a bigger and bigger pot to buy the guaranteed pension. As interest rates have normalised. Then the reverse has occurred. Your wife is exactly the same position. 

I guess I'm struggling to understand the performance reportants? My post shows the % gain, each year.  it seems to be making good % gains?

QrizB

Eth4in said:

Hoenir said:

The basic mechanics are that as interest rates fell from their peak in 2007. So did Government Gilt yields. It therefore require a bigger and bigger pot to buy the guaranteed pension. As interest rates have normalised. Then the reverse has occurred. Your wife is exactly the same position. 

I guess I'm struggling to understand the performance reportants? My post shows the % gain, each year.  it seems to be making good % gains?

Those gains are entirely disconnected from the cash-equivalent transfer value (CETV) of your wife's pension.

Your wife has a Defined Benefit pension with TfL. She doesn't own a slice of their investment fund; the fund value is pretty much irrelevant.

What she has is a promise from TfL to provide a certain pension income from the scheme retirement age until she dies.

The CETV represents the cost of providing that income for that period, making some assumptions about longevity and inflation.

Back in 2015, investment returns on bonds were low and so it would have taken a large investment to provide that income. This was reflected in the larger 2015 CETV. Today, investment returns on bonds are much higher and so today's CETV is lower.

Sarahspangles

Eth4in said:

My pension pot is larger, so I have to transfer a percentage of my retirement to her.

I now see this rather differently, but then that’s the benefit of hindsight!

Because my ex did not prioritise their pension, I was always going to be in a position where I part-funded their retirement. Divorce meant I cut my losses at that point, and my post-divorce contributions are now funding my own retirement. Like lots of people, I’m in a new relationship and we’re both finding we’re better off than we expected we would be, at the point we divorced.

Aretnap

Eth4in said:

Hoenir said:

The basic mechanics are that as interest rates fell from their peak in 2007. So did Government Gilt yields. It therefore require a bigger and bigger pot to buy the guaranteed pension. As interest rates have normalised. Then the reverse has occurred. Your wife is exactly the same position. 

I guess I'm struggling to understand the performance reportants? My post shows the % gain, each year.  it seems to be making good % gains?

You don't need to understand them. They have no relevance to you. 

A defined benefit pension doesn't "perform" and your wife owns no "investments". She doesn't have a pot of money which has a value, she has a promise from her former employer to pay her £1500/year (or whatever it might be) from her retirement age, and she has the same promise now as she had in 2015 when she left employment, give or take an adjustment for inflation.

The question is how to value that promise for the purposes of dividing up the marital assets and the answer is, very crudely, to look at what it would cost to pay an insurance company to promise to pay her the same income for life after she retired. That is, very crudely, where the"transfer value" comes from. It has little connection to the underlying value of investments in the pension fund and is mostly a function of long term interest rates, along with some assumptions about inflation and life expectancy. CETVs have roughly halved in the last 5 years or so, mainly because interest rates have risen so much, making it much cheaper for insurance companies to turn a pile of cash into a guaranteed income.

There IS a TfL pension fund which exists to cover the costs of providing the pensions of ex-employees, and that fund does invest in bonds and shares whose value does go up and down (more up than down,nas you have posted). So the fund can be said to have a "performance". However that is not your concern. Your wife doesn't own a proportion of that fund, she owns a promise to pay her an income for life in retirement. If the fund were to be unable to keep that promise, it would be TFL's problem, not her's : TFL would have to make up the difference. And by the same token, if the fund performs spectacularly well it's TfL who would get the benefit in the form of having to make lower contributions in future - your wife wouldn't get extra pension because of the good performance.