Final salary transfer value

Carrot49

Cobbler_tone said:

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.

Thank you for that. My pot is worth approx. 140k my pension at 65 will be 7.5k per year. Assuming I die at 80 (current life expectancy is 78) I will only use 112k of the pot. Approx 30k left if I transfer out. My wife has dementia so is unlikely to be alive so any spousal benefits do not really matter. I'm am currently her unpaid carer. We don't live an extravagant life style and can live off the state pension. I'm not in need of the money immediately but possibly in 4-5 Years time depending on how my circumstances play out.

Cobbler_tone

ou are welcome.
A few points on that. Your expiry date is indeed unknown. I am assuming you don't have life limiting health issues currently, so you could live to 90+, whilst you could (hopefully not!) drop down tomorrow. 
Can we assume the £7.5k a year is going to grow with some protection?

It is unclear whether you need any money now, or how old you are. You say you don't need the money immediately, so is there an option to do nothing at the moment and let the pension increase, until you know what you do need.
Other than that have you checked the lump sum? 
Reading between the lines you are looking to access and draw money down to reach the state pension? If that is the case and you need it in 4-5 years, by then it may return enough that you need.

I'm sorry to hear about your wife.

Carrot49

Cobbler_tone said:

ou are welcome.
A few points on that. Your expiry date is indeed unknown. I am assuming you don't have life limiting health issues currently, so you could live to 90+, whilst you could (hopefully not!) drop down tomorrow. 
Can we assume the £7.5k a year is going to grow with some protection?

It is unclear whether you need any money now, or how old you are. You say you don't need the money immediately, so is there an option to do nothing at the moment and let the pension increase, until you know what you do need.
Other than that have you checked the lump sum? 
Reading between the lines you are looking to access and draw money down to reach the state pension? If that is the case and you need it in 4-5 years, by then it may return enough that you need.

I'm sorry to hear about your wife.

I'm 57. 58 in August. I'm using my other sipps at the moment. Should keep me going until approx 62-63. At that time I will be asking for another valuation. Things will obviously have changed by then but I was hoping to get some pointers as to what to look out for in the market as to the likely value, increase/ decrease without asking for a valuation everytime. Yes there is the 25% lump sum that I could take this obviously reduces my yearly pension. Which could be a good thing or bad thing depending on tax policy at that time. 
I don't plan on expiring anytime soon ( I've just got my motorcycle back on the road) but seeing my older friends and relatives I see that money is not an issue. Health is.
My wife says thank you.

Veteransaver

Dazed_and_C0nfused said:

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.

Mines halved since its 2021 valuation. The thing is though that in my case it isn't a massive amount of income, and I can't take it until 62, rather than 57. I would argue it would be better to be invested and potentially get a better return over the next 10/15 years with greater flexibility, but it is such a ballache to get DB pensions transferred into a Sipp!

Hoenir

Carrot49 said:

 My pot is worth approx. 140k my pension at 65 will be 7.5k per year. Assuming I die at 80 (current life expectancy is 78) I will only use 112k of the pot. Approx 30k left if I transfer out.

What annual uplift does the DB pension guarantee to provide? Investing unfortunately carries no such guarantees. Looking back with hindsight tells you would you should have done. Extrapolating forward on assumptions is never wise. 

Cobbler_tone

Carrot49 said:

Cobbler_tone said:

ou are welcome.
A few points on that. Your expiry date is indeed unknown. I am assuming you don't have life limiting health issues currently, so you could live to 90+, whilst you could (hopefully not!) drop down tomorrow. 
Can we assume the £7.5k a year is going to grow with some protection?

It is unclear whether you need any money now, or how old you are. You say you don't need the money immediately, so is there an option to do nothing at the moment and let the pension increase, until you know what you do need.
Other than that have you checked the lump sum? 
Reading between the lines you are looking to access and draw money down to reach the state pension? If that is the case and you need it in 4-5 years, by then it may return enough that you need.

I'm sorry to hear about your wife.

I'm 57. 58 in August. I'm using my other sipps at the moment. Should keep me going until approx 62-63. At that time I will be asking for another valuation. Things will obviously have changed by then but I was hoping to get some pointers as to what to look out for in the market as to the likely value, increase/ decrease without asking for a valuation everytime. Yes there is the 25% lump sum that I could take this obviously reduces my yearly pension. Which could be a good thing or bad thing depending on tax policy at that time. 
I don't plan on expiring anytime soon ( I've just got my motorcycle back on the road) but seeing my older friends and relatives I see that money is not an issue. Health is.
My wife says thank you.

Whilst a lot can change before then, it sounds a sensible approach to leave your DB and maybe take the lump sum from it. Then you will have a small guaranteed income (will pay for your bike) and state pension on top of that at 67.
If you are drawing down SIPPs already and not buying annuities with them, it would make no sense to do the same with a robust DB pension. 
All the best.

artyboy

OP, is the £7.5k a year figure a projection based on some assumed revaluation between now and when you expect to take it? One of the common mistakes we see here is that people get a figure based on a point in time and don't realise that it will grow before they start to take it (with the basic aim of keeping pace with inflation).

Case in point, I have an old deferred DB pension, the headline figure is £1940/year, but once you get into the nitty gritty, you see it revalues by RPI, capped at an average maximum of 5% PA while in deferment.

What that basically means is that I am expecting more like £3500/year by the time I actually start taking it, assuming no more huge inflationary spikes...

Albermarle

. Assuming I die at 80 (current life expectancy is 78) 

That figure of 78 is average life expectancy from birth. Once you have survived until you are 60 it goes up.
Currently 84 for men and 86 for women, which means 50% will live longer than that, and 25% will reach their early 90's.
So maybe you need to recalculate a bit.

I refused a large CETV about 5 years ago. The logic being that I already had built up significant DC pensions, savings etc. so was not sensible to put all eggs in one basket. I would for sure be better off if I had cashed it in, but most likely at the expense of sleepless nights when markets were crashing, like with Covid.

Carrot49

artyboy said:

OP, is the £7.5k a year figure a projection based on some assumed revaluation between now and when you expect to take it? One of the common mistakes we see here is that people get a figure based on a point in time and don't realise that it will grow before they start to take it (with the basic aim of keeping pace with inflation).

Case in point, I have an old deferred DB pension, the headline figure is £1940/year, but once you get into the nitty gritty, you see it revalues by RPI, capped at an average maximum of 5% PA while in deferment.

What that basically means is that I am expecting more like £3500/year by the time I actually start taking it, assuming no more huge inflationary spikes...

Hi. Sorry for the delay in replying. Been a couple of difficult days. This is from my last pension statement. 
"Your pension in excess of the guaranteed minimum pension accrued prior to April 2010 will increase by the lesser of the increase in RPI and 5% for each complete year between date of leaving and normal retirement date."
"Your pension in excess of the guaranteed minimum pension accrued after April 2010 will increase by the lesser of the increase in CPI and 2.5% for each complete year between date of leaving and normal retirement date"
So there are increases. I may well sit on it for this year and ask for another valuation in 12 months. My financial picture will be clearer then and my wife's health picture will be clearer.

Carrot49

Albermarle said:

. Assuming I die at 80 (current life expectancy is 78) 

That figure of 78 is average life expectancy from birth. Once you have survived until you are 60 it goes up.
Currently 84 for men and 86 for women, which means 50% will live longer than that, and 25% will reach their early 90's.
So maybe you need to recalculate a bit.

I refused a large CETV about 5 years ago. The logic being that I already had built up significant DC pensions, savings etc. so was not sensible to put all eggs in one basket. I would for sure be better off if I had cashed it in, but most likely at the expense of sleepless nights when markets were crashing, like with Covid.

How old you are when you die doesn't really matter. I have an uncle who is 94. He has done nothing but sit in a chair for the last 15 years. Your bills, gas, electric,  poll tax and food are the only essentials you have to pay and I keep spreadsheets for those costs. All other monies are for enjoyment. I don't imagine I will be flying long haul when I'm 80. Our current standard of living is very comfortable. I will get another valuation in 12 months and then I have more information ad to which to make a decision.