DB Pension

johnboy13

Hello

I am 54 yrs old and will be 55 in June. I started a works pension in July 2003 which was a Final Salary pension. My company stopped the the final salary pension in July 2012 and we started a Define Benefit pension up untill Oct 2021. Then my company changed the pension again but this time you could have a 2 year break and rejoin after. I took the 2 year break and rejoined in Oct 2023 which im still in.

When I had my pension break I asked my pension provider (Capita) for a CETV, to see how much was in my pension pot.

So in Feb 2022, they issued me with my figure which was £303,000.

So in May 2023 I asked for another CETV, before I went back into the pension, to see if my pension pot had gone up and also if I needed to make any alterations to my DC. I wanted to know if I needed to get my pension to where I needed them, for when I retire.

This time Capita quoted me £169,000, which I thought was very surprising. I contacted them and their said the numbers where correct.

I've just requested for another CETV and this time the quote is £144,000.

This surely cant be right. Any thoughts would be appreciated.

Thanks

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6656569/db-pension

It can, and almost certainly is, right. But why are you interested in the CETV?

Isn't what the pension pays (as set out in the scheme rules) more important?

dunstonh

When I had my pension break I asked my pension provider (Capita) for a CETV, to see how much was in my pension pot.

Defined benefit pensions don't have a pot. The CETV is irrelevent for your retirement planning.

So in Feb 2022, they issued me with my figure which was £303,000.

The peak for CETVs was around Nov 2021. Although some schemes would have a lag on that.

This time Capita quoted me £169,000, which I thought was very surprising. I contacted them and their said the numbers where correct.

The number seems in the ballpark of expectation and not surprising.

I've just requested for another CETV and this time the quote is £144,000.

Again, not surprising. Gilt yields are just off their peak.

This surely cant be right.

Yes, all seems in line with expectations.

I suspect the mistake you are making is a belief that the CETV has anything to do with your retirement benefits. It doesn't. You are asking the wrong question and getting the correct answer to that wrong question.

Silvertabby

You should ask for a current DB statement. The CETV is meaningless to you.

HappyHarry

https://forums.moneysavingexpert.com/discussion/6656569/db-pension

Yes, that will be correct.

You are still entitled to the defined benefits promised from your Defined Benefits and Final Salary schemes.

These benefits will be in the form of a lifetime income payable from your normal retirement date (typically 60, 65 or state pension age depending on the scheme rules.

What has changed is the amount the pension trustees are offering you to waive your rights to these benefits, and instead take a lump sum into a personal pension plan of your choosing. Over recent years, as interest rates have risen, the cost to the trustees of providing your benefits has fallen. This means that the amount the trustees are offering you to waive your rights to the benefits has also fallen.

The good news is this amount being offered to you is is probably irrelevant, as it is unusual for the lump sum offered to be of better value to you than then original scheme (hint - otherwise the trustees wouldn't offer it to you).

Also, as mentioned at the top of this post, you are still entitled to the defined benefits promised from your Defined Benefits and the Final Salary schemes.

jimjames

I am 54 yrs old and will be 55 in June. I started a works pension in July 2003 which was a Final Salary pension. My company stopped the the final salary pension in July 2012 and we started a Define Benefit pension up untill Oct 2021. Then my company changed the pension again

Is this actually correct? You had a DB scheme (final salary) and then another DB scheme? Or do you mean the scheme up to Oct 2021 was Defined Contribution? Defined Benefit and final salary are the same thing.

Which one did you get a valuation for?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81896128#Comment_81896128

Well they could have had a CARE Scheme from 2012.

All final salary schemes are defined benefits but not all defined benefits schemes are final salary.

johnboy13

Sorry after my Final Salary Pension, I got put into a Career Average Plan in 2012. Then in 2023 got put into a another Career Average Plan, but instead of 1/80th it's 1/70th if that makes sense.

I thought a CETV was the total amount of whats in your pension pot.

I'm on a annual wage of £48,000, my company on the Career Average Plan as put in 23% of my wage since that pension started.

I contribute £190 myself into my pension and I have DC Pension which I contribute in as well and that is worth around £60,000.

I was inquiring weather to take it out and put it into a sipp because what they are offering is very good.

daveyjp

Figures are right. Base rates have increased in 4 years.

You therefore need to invest less to achieve the same return so CETV reduces.

I doubt any SIPP will guarantee to beat a DB pension year on year, whatever the type of DB pension.

dunstonh

I thought a CETV was the total amount of whats in your pension pot.

That is where you are going wrong. You don't have a pension pot with defined benefit schemes. You have defined benefits.

I was inquiring weather to take it out and put it into a sipp because what they are offering is very good.

You have missed that boat. CETVs were artificially high post credit crunch due to low gilt yields (the lowest they were in hundreds of years). They are now back to normal again and CETVs have fallen back to their historic norm.

The figures will almost certainly be in favour of remaining with the existing schemes.

Yorkie1

As others have said, DB schemes (whether final salary or CARE) are not a pot. The CETV is what you would be paid, at current rates, to give up your right to your projected retirement 'salary', for life, which will (depending on the rules of your scheme) almost certainly increase with inflation to some degree.

Some years ago, the government was so concerned at the number of people who were inappropriately giving up their DB schemes that it made it compulsory to take financial advice before such a transfer out could be done. That advice will cost £000's and will almost certainly be to advise you against a transfer. You would then still be able to transfer out, but in the first instance probably only to a stakeholder pension (as they must accept the transfer in).

It is easy to see the figures and be tempted by them. But given that your life expectancy is likely to be at least 30 years, it is quite a risk to be taking that your investment decisions would outperform your DB scheme.