A CETV represents the amount of money needed now by the Fund, in today’s monetary terms, which is expected to be sufficient to meet all your pension payments from the Fund in the future. This includes benefits on retirement and on death which may be payable to your spouse, civil partner, or dependants.
CETVs are calculated in accordance with legislation and the Fund’s Trust Deed and Rules. In particular, legislation requires the Trustee to determine the assumptions to be used based on advice from the Scheme Actuary and for this method to be based on the best estimate of the expected cost of providing the member’s benefits in the scheme at the date of calculation.
The key factors affecting how the value of a CETV may change if calculated at different dates are as follows:
1. The estimate for future price inflation:
a. If the estimate for future price inflation decreases, the Trustee expect to pay a lower annual pension in the future which results in a decrease in the CETV.
b. If the estimate for future price inflation increases, the Trustee expect to pay a higher annual pension in the future which results in an increase in the CETV.
2. The expected future investment returns:
a. If the expected future investment returns decrease, this increases the expected amount of money needed at the date of calculation to meet the benefits payable in the future which increases the CETV.
b. If the expected future investment returns increase, this decreases the expected amount of money needed at the date of calculation to meet the benefits payable in the future which decreases the CETV.
3. As a member gets closer to their Normal Retirement Date (the date at which you are expected to retire as defined in the Fund’s Rules), the shorter period of discounting results in an increase in the CETV.
The above factors mean that when a CETV is calculated at different dates, the value of the CETV can go up or down. Please get in touch here if you have any concerns about a change in your CETV amount.