Final Salary Pension Transfer
Comments
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The CETV almost certainly will increase over time, depending on investment conditions. Two reasons: the pension is increasing year on year (it isn't frozen - given OP's age he must have left at a time when DB pensions had to revalue in deferment); and the member is that much closer to retirement, so a larger sum is needed to reflect the value of the benefits being given up.
I disagree with this.
CETVs are currently at an all time high, mainly due to the long term interest rates being very low. As the interest rates start to pick-up, I would expect to see CETVs rapidly falling back to the level they were three years' ago, i.e. about 25%-30% lower than their current values.
It also depends on how the pension trustees invest the funds. If the scheme is well funded, and mostly holds gilts, then the discount for future growth will be very low.I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.0 -
As others have said your pension isn't frozen and you don't have "a final salary pension pot". I think you need to understand a bit more about your current position before you look for alternatives. There are probably other options for funding the gap between 55 and your scheme's normal retirement age other than transferring out of your DB pension.
Why did the second IFA advise against a transfer and why do you think they were wrong?0 -
Yes Happy Harry. Why have other posters not picked up on this very very likely possibility, or at least the suggestion that some trustees might use it as an excuse if they wish to slow certain types of CETV outflows at the behest of their other masters, the sponsoring employers?HappyHarry wrote: »I disagree with this.
CETVs are currently at an all time high, mainly due to the long term interest rates being very low. As the interest rates start to pick-up, I would expect to see CETVs rapidly falling back to the level they were three years' ago, i.e. about 25%-30% lower than their current values.
It also depends on how the pension trustees invest the funds. If the scheme is well funded, and mostly holds gilts, then the discount for future growth will be very low.
Then there is the bigger question of whether the particular scheme will actually survive much longer.
The corollary of that (I think?) is a scheme where you are still employed by the sponsoring employer but in that case if no-one is paying into it beyond a certain date (other than sponsoring employer's shortfall contributions as agreed every three years following triannual revaluation), and subsequent regular salary-related contributions have gone into a replacement scheme, such a scenario may be one where the original scheme is both frozen and deferreddunstonh wrote:Is it frozen or are you just calling it frozen not realising that frozen has a specific meaning. Most DB schemes where you are no longer employed with that company are not frozen. They are deferred.
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peterbaker wrote: »Why have other posters not picked up on this very very likely possibility, or at least the suggestion that some trustees might use it as an excuse if they wish to slow certain types of CETV outflows at the behest of their other masters, the sponsoring employers?
Transfers out are usually welcome from a sponsoring employer POV, because it finalises the liability.a scheme where you are still employed by the sponsoring employer but in that case if no-one is paying into it beyond a certain date (other than sponsoring employer's shortfall contributions as agreed every three years following triannual revaluation), and subsequent regular salary-related contributions have gone into a replacement scheme, such a scenario may be one where the original scheme is both frozen and deferred
To be honest, for someone who works in DB pensions, schemes are usually classed as 'closed' or 'open' or somewhere in between ('closed to new entrants', 'closed to future accrual' - the binary 'closed' vs. 'open' also has a specific meaning in law) - it's individual memberships or pensions that get termed 'frozen' or 'deferred'.0 -
HappyHarry wrote: »I disagree with this.
CETVs are currently at an all time high, mainly due to the long term interest rates being very low. As the interest rates start to pick-up, I would expect to see CETVs rapidly falling back to the level they were three years' ago, i.e. about 25%-30% lower than their current values.
It also depends on how the pension trustees invest the funds. If the scheme is well funded, and mostly holds gilts, then the discount for future growth will be very low.
CETVs are high when returns are expected to be low. Conversely CETVs are low when returns are expected to be high.
All that can be concluded from that is that a high CETV is not a good enough reason on its own to transfer.
Most schemes don't hold only gilts. Typical scheme holding is 60/40, irrespective of funding level and maturity of the scheme with only a few breaking the mould.0 -
In case it helps thousands, I am going to quote some data based on an actual real case scenario of a scheme that has between 10,000 and 50,000 members, all of them deferred memberships now.CETVs are high when returns are expected to be low. Conversely CETVs are low when returns are expected to be high.
All that can be concluded from that is that a high CETV is not a good enough reason on its own to transfer.
Most schemes don't hold only gilts. Typical scheme holding is 60/40, irrespective of funding level and maturity of the scheme with only a few breaking the mould.
CETV quotes are as follows:
1987 after which no further contributions were made £5,000
1989 £5,200
1991 £5.900
1993 £6,700
1997 £9,000
...
...
2003 £29,300
2005 £35,100
...
...
2009 £70,000
2011 £77,000
...
...
2015 £89,000
2015 £95,000 (yes same year!)
2016 £99,000
2017 £121,000
2018 £106,000
2018 £117,000 (yes same year again!)
All these figures have had the same actuary and same sponsoring employer and trustees behind them all along (individuals of course have changed in more ways than one :mad:)
Does anyone see what we deferred members might be up against in trying to make rational decisions about CETVs when parties in between us and our just desserts might be almost as unscrupulous as it gets? And does this picture not make a complete mockery of the ludicrous requirement for a specialist financial advisor to pontificate on matters they simply have no understanding of unless they are experts in the possible extremes of corporate unscrupulousness? And here we have some suggesting that the difference between a 1.5% and 2.7% annual fee makes a difference to the projected yields and therefore the professional advice ... don't make me laugh out loud. Try doing your math on the annual differences of some of the CETVs above (both up and down like a flippin' yoyo - as bad as petrol prices over similar periods).0 -
peterbaker wrote: »All these figures have had the same actuary and same sponsoring employer and trustees behind them all along (individuals of course have changed in more ways than one :mad:)
Does anyone see what we deferred members might be up against in trying to make rational decisions about CETVs when parties in between us and our just desserts might be almost as unscrupulous as it gets?
Your 'just desserts' are drawing the scheme pension according to the rules at the time is was accrued, plus a statutory right to transfer out instead on a 'best estimate' (or better) basis. None of the figures you have quoted give evidence your 'just desserts' are being undermined. If anything, a failure to interpret 'best estimate' on a more optimistic (for the scheme) basis is giving you more than 'just desserts'.And does this picture not make a complete mockery of the ludicrous requirement for a specialist financial advisor to pontificate on matters they simply have no understanding of unless they are experts in the possible extremes of corporate unscrupulousness?
No, because this is with respect to the CETV as it is at the time of transferring out, not as it might be.Try doing your math on the annual differences of some of the CETVs above (both up and down like a flippin' yoyo - as bad as petrol prices over similar periods).
Surely evidence against the grand conspiracy you claim exists...0 -
HappyHarry wrote: »CETVs are currently at an all time high, mainly due to the long term interest rates being very low. As the interest rates start to pick-up, I would expect to see CETVs rapidly falling back to the level they were three years' ago, i.e. about 25%-30% lower than their current values.
Wall St is currently at an all time high, mainly due to the long term interest rates being very low.
As interest rates start to pick-up, I would expect to see Wall St falling back to perhaps 66% lower than its current values.
So deferring action might prove a big win. Maybe, maybe not, but it's far from certain that it'll produce a loss.Free the dunston one next time too.0 -
You might be best to offer it, hyubh. If so please do. I haven't told you the whole story, but suffice to say that the years when I obtained two valuations I did not have to pay for the second ones - just bang the table very hard to make the trustees and actuaries wake up, and this year I fully expect to have a third valuation (higher than the other two, at no charge before the year is out).Surely evidence against the grand conspiracy you claim exists...
Thank goodness the most popular A level this year was Maths. The crooks who think they can pull the wool over members eyes on CETV calculations and other shallow minded financial services corporate wheezes will eventually get forced out by force of good logic over the evil of corporate greed, manipulations and obfuscation. Trustees, actuaries, pension directors and administrators hate members who use advance maths to question what they've been up to.
PS there ain't no sand in my just desserts 0 -
peterbaker wrote: »All these figures have had the same actuary and same sponsoring employer and trustees behind them all along (individuals of course have changed in more ways than one :mad:)
Same actuary and employer are irrelevant. There are a lot of moving parts in the calculation of a CETV - numerous assumptions. And in the very rare event the assumptions remained the same, the CETV would still continue to increase each year.0
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