I thought I would see what CETV my Final Salary Pension Scheme would come up with, as I am 3 years away from my Pension Scheme NRD (60)
Background: Final Salary 55ths scheme from 1982 to 2003, Hybrid 80ths scheme from 2003 to 2008, scheme frozen 1st April 2008, but has been revalued every year for inflation plus a one-off additional 5% sweetener to accept the scheme ending (complicated as there are 4 different parts: for GMP pre/post 1988 and pre/post 1997).
So if my accrued pension was £nn,000 pa in 2008, it has now risen by 21.2% to the current value and the final estimated value in 3 years time is approx. 37% higher than the 2008 value.
However the CETV appears to have been valued at 26.7 times the 2008 pension value, so when compared to the current value it is 21.3x, compared to the expected 2020 value it is a mere 19x, not what I was expecting at all from all the stuff in the press about high CETV values and it being a great time to transfer out.
So although it is still a six figure sum, looks like I will be sticking with the Final Salary option unless I can get some guidance from the Pension Scheme trustees, but my understanding is they do not have to explain how they arrived at the CETV value.
Any thoughts?
FT
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DB Transfer - Low CETV
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- Lemon Slice
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Re: DB Transfer - Low CETV
The CETV is how much money the trustees have to lay aside today to pay your pension of £nn,000 + 37% in 3 years' time, indexed and with spouse's follow-on benefits etc.
The reasons for an apparently 'low' CETV (assuming fair assumptions by the actuary) are (somewhat ironically) either that this scheme has a very good rate of return on its investments (so they don't need to lay aside very much for you); or that the scheme has had a very poor return on its investments and is in deep deficit, in which case it is allowed to reduce your CETV to help preserve the scheme for the remainers.
The reasons for an apparently 'low' CETV (assuming fair assumptions by the actuary) are (somewhat ironically) either that this scheme has a very good rate of return on its investments (so they don't need to lay aside very much for you); or that the scheme has had a very poor return on its investments and is in deep deficit, in which case it is allowed to reduce your CETV to help preserve the scheme for the remainers.
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- Lemon Half
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Re: DB Transfer - Low CETV
DrBunsenHoneydew wrote:The CETV is how much money the trustees have to lay aside today to pay your pension of £nn,000 + 37% in 3 years' time, indexed and with spouse's follow-on benefits etc.
There's one other variable which may apply. If any of the future indexation of pensions in payment is at the discretion of the Trustees, they may be able to disregard placing any value on this in calculations, even they've got the assets in the fund to potentially pay this.
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Re: DB Transfer - Low CETV
Thanks for the info folks, I'll revisit in a couple of years time to see if the offer is improved at all
Cheers, FT
Cheers, FT
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