Final salary transfer value

Carrot49

Evening. I requested a transfer valuation back in 2021 but due to circumstances I never transferred out of my final salary scheme. I have just asked for a transfer valuation and it is 30% lower. Can someone please explain. I know their was an issue when Liz Truss announced her mini budget but that was 2 1/2 years ago. 

daveyjp

BoE base rate has increased (2021 it was only 0.25%, it is now 4.25%).

As you now receive more income for each £1 invested you don't need to invest as much to receive the same annual income, so the capital value offer is reduced.

Marcon

Plenty of detailed info available if you google on your question - eg https://www.cjfinance.co.uk/cetv-value-dropping-what-should-you-do/

dunstonh

Carrot49 said:

Evening. I requested a transfer valuation back in 2021 but due to circumstances I never transferred out of my final salary scheme. I have just asked for a transfer valuation and it is 30% lower. Can someone please explain. I know their was an issue when Liz Truss announced her mini budget but that was 2 1/2 years ago. 

Gilt yields were increasing before Liz Truss was in power and have continued to rise ever since.  They are currently higher than they were under Truss.

CETVs are currently around 60% lower than their peak which was around November 2021.     They are now back in their more typical ballpark after spending over a decade at abnormally high values.

If your CETV is only 30% lower then that suggests you didn't get your CETV at the peak but some point before the peak.

artyboy

The good news is that you still have the same pension entitlement as you did before... the change in CETV makes no difference to that.

Carrot49

daveyjp said:

BoE base rate has increased (2021 it was only 0.25%, it is now 4.25%).

As you now receive more income for each £1 invested you don't need to invest as much to receive the same annual income, so the capital value offer is reduced.

Thanks for this. I screwed up by not transferring back in 2021. I'm running a SIPP that is up 20% from 2023 it would have been wise to transfer. 

Carrot49

artyboy said:

The good news is that you still have the same pension entitlement as you did before... the change in CETV makes no difference to that.

True. And increasing looking like good value 

Carrot49

dunstonh said:

Carrot49 said:

Evening. I requested a transfer valuation back in 2021 but due to circumstances I never transferred out of my final salary scheme. I have just asked for a transfer valuation and it is 30% lower. Can someone please explain. I know their was an issue when Liz Truss announced her mini budget but that was 2 1/2 years ago. 

Gilt yields were increasing before Liz Truss was in power and have continued to rise ever since.  They are currently higher than they were under Truss.

CETVs are currently around 60% lower than their peak which was around November 2021.     They are now back in their more typical ballpark after spending over a decade at abnormally high values.

If your CETV is only 30% lower then that suggests you didn't get your CETV at the peak but some point before the peak.

So is it gilt yields I need to come down or BOE interest rates? Or both?

penners324

Very hard to get a DB scheme transferred to a DC scheme. In 95%+ of cases you're better off by leaving it where it is

Dazed_and_C0nfused

Carrot49 said:

dunstonh said:

Carrot49 said:

Evening. I requested a transfer valuation back in 2021 but due to circumstances I never transferred out of my final salary scheme. I have just asked for a transfer valuation and it is 30% lower. Can someone please explain. I know their was an issue when Liz Truss announced her mini budget but that was 2 1/2 years ago. 

Gilt yields were increasing before Liz Truss was in power and have continued to rise ever since.  They are currently higher than they were under Truss.

CETVs are currently around 60% lower than their peak which was around November 2021.     They are now back in their more typical ballpark after spending over a decade at abnormally high values.

If your CETV is only 30% lower then that suggests you didn't get your CETV at the peak but some point before the peak.

So is it gilt yields I need to come down or BOE interest rates? Or both?

Or just be satisfied with a DB/final salary scheme lots of people would love to be able to have.  It's going to pay you the pension you expected when joining the scheme.

Cobbler_tone

Carrot49 said:

dunstonh said:

Carrot49 said:

Evening. I requested a transfer valuation back in 2021 but due to circumstances I never transferred out of my final salary scheme. I have just asked for a transfer valuation and it is 30% lower. Can someone please explain. I know their was an issue when Liz Truss announced her mini budget but that was 2 1/2 years ago. 

Gilt yields were increasing before Liz Truss was in power and have continued to rise ever since.  They are currently higher than they were under Truss.

CETVs are currently around 60% lower than their peak which was around November 2021.     They are now back in their more typical ballpark after spending over a decade at abnormally high values.

If your CETV is only 30% lower then that suggests you didn't get your CETV at the peak but some point before the peak.

So is it gilt yields I need to come down or BOE interest rates? Or both?

There is an obsession from a limited amount of people whose eyes light up at the transfer value of their DB pension. I had an interest until I educated myself.
I have CETV's from 1st April 2019-2024 (because I had to for 4 of those years) in front of me, I didn't need one this year. They range from £675k-£415k, so whilst they may have moved in between the annual dates (i.e. sounds like an increase from April-Nov 21) I haven't seen a 60% drop personally, although the only year that really mattered as an option was 2024 onwards when I reached the age of being able to access it. As pointed out, the pension itself has ticked along nicely and hasn't changed in principle. Mine must be £400-500k today and a real 'dirty' figure will pay me out anything from £700k-£1m from my mid-70's into my late 80's, any time I access it from 55-65.

I am assuming that the reason it is rarely recommended to 'cash in' is because the amount wouldn't buy an equivalent annuity, with the associated protections and increases. You can check that yourself. Then it will cost you several thousand's to get the advice required. Remember to take the TFLS (PCLS equivalent) as assuming that anyone attracted by the lure of the CETV will want ££££ to compare an annuity.
So unless you fancy yourself as the next Wolf of Wall Street, you are unlikely to beat what you already have guaranteed. The people who are drawn towards the CETV aren't normally too invested in the guarantee they have, or at least they overlook it or don't fully understand it. 

My tip is to crunch some simple numbers, read the forum and you may/may not feel differently but definitely take in all of the information available.