A reader wants to know why the transfer value of their pension has gone down
The cost of providing your pension is closely correlated to movements in UK government gilt yields . This is because defined benefit schemes invest in gilts to pay the incomes they have promised to members.
That means when gilt yields drop, the scheme needs to use more of its assets to meet its liabilities. As a result, when gilt yields drop, cash equivalent transfer values offered to members will go up – the scheme can afford to pay more as the cost of you staying in the scheme and it having to provide your benefits is higher.
None of this affects your entitlement to a retirement income – it’s just the way DB accounting works in relation to liabilities.For anyone considering transferring a DB pension with a cash equivalent transfer value of £30,000 or more, you will need to take regulated financial advice before transferring.
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