To wonder how much a public sector pension is really worth?

[CrunchTime22]

DH and I are divorcing and going through mediation to sort out finances. We have both got pension valuations, but one is a final salary public sector pension and the other's pension is made up of various private pension pots.

I've read that Public Sector pensions are often valued higher than the CETV if an actuary looks at them, but I'm reluctant to go this route as it will just spin things out even longer and I just can't deal with that. It's been going on too long and I'm just so tired of it.

Does anyone have any experience of just how much higher the valuation would be likely to be? 10%? 20%? More?

I'd guess up to 50% more. I believe that local government pensions are valued according to government set rules at 20x annual pension plus any lump sum. CETVs on private pensions can currently be 30x or more depending on how much the pension provider wants to get rid of the future liabilities. You might do better to post on a pension forum where more knowledgable people post. Not sure if I can name it but there is a very good three letter forum also starting with the letter M with quite a few pension experts posting. A lot of idiots too!

Do not underestimate the real value of a local government pension especially if on high earnings/long service.

My local authority pension is around 35k per year if that helps.

Thanks, both. I guess what I'm really asking is, not what will the pension pay, but if it's been valued at say £200k on the CETV, how much more do you think an actuary would put it at?

I'd guess 250-300k, probably the higher end. But you 'd probably be best to ask on a pensions site as somebody may well have real life experience of this.
If say the pension was worth 10k per annum, then assuming no lump sum the initial local government pension valuation would be about 200k. But to buy an annuity of 10k year with spouse dependents benefits linked to CPI would cost more like 400k I suspect. Just based on current private sector CETVs it would be worth probably 300k.

I am not a pensions expert, just an LGPS scheme member.

A lot will depend on how long the pension has been running. Despite the views of many on MN the public sector pensions have been seriously hit in recent years. For example, the Teacher's Pension for those joining the profession in the past 6 or 7 years is no where near as good as it used to be. The new Local Government pension is also not the scheme it once was.

Despite the views of many on MN the public sector pensions have been seriously hit in recent years

I was going to say this. It’s really not as amazing as some think - definitely not “gold plated” any more.

Hi - I had to reply to this, I am an actuary working in pensions

You should 100% definitely get the CETV done. The pension is likely to be drastically better and you could be missing out.

Depending on the exact scheme I would say the pension could be anything from significantly better to just much better - but will confidently be at least much better (I hope that makes sense)

@JustForFunn

Hi - I had to reply to this, I am an actuary working in pensions

You should 100% definitely get the CETV done. The pension is likely to be drastically better and you could be missing out.

Depending on the exact scheme I would say the pension could be anything from significantly better to just much better - but will confidently be at least much better (I hope that makes sense)

I have just reread - not sure what you mean that you have a CETV done but an actuary can look at it.

Usually the CETV is the value calculated by the actuary. I wouldn't expect there to be a difference.

Nip over to Pensions on the Martin Lewis MSE site A poster there called SilverTabby is an expert on LGPS and there are others who are pensions administrators for other public sector schemes. They know loads and are very helpful.

@JustForFunn

Hi - I had to reply to this, I am an actuary working in pensions

You should 100% definitely get the CETV done. The pension is likely to be drastically better and you could be missing out.

Depending on the exact scheme I would say the pension could be anything from significantly better to just much better - but will confidently be at least much better (I hope that makes sense)

Thanks for replying! We have all the CETVs from the various pension providers, but my understanding was that an actuary would come up with an independent valuation, which might be more? The CETV is just what the pension provider will pay to be rid of the obligation, I think?

@BrioNotBiro thanks - I did do a search a while back but I don't think I saw those posters, I'll take another look.

@CrunchTime22

I work in the private sector (but have had a small amount of exposure to public sector schemes). Usually the scheme actuary calculates the CETV using the CETV basis (I.e a set of assumptions which essentially make up "instructions") as to how the CETV should be calculated) which is specific to that scheme. That basis is not negotiable - it is agreed with the actuary, trustees and relevant company - it doesn't matter what an independent financial advisor for example thinks.

My understanding is that this holds for public sector schemes, but the basis is set by the Government Actuary Department (GAD). I find it hard to believe that you could get an independent actuary to value it higher - this wouldn't be fair to all members as some would end up better off than others.

As I said I have limited experience in the public sector - but I do know that it is extremely rare for people to want to transfer out of public sector schemes because they are so good.

I'm not sure I agree 100% with what your saying but my advice would be to follow up and go the additional route if there is one to take full advantage of the pension. :)

If you post a thread yourself OP, with the key words in the title, I'm sure the relevant people will pop up

@itrytomakemyway

A lot will depend on how long the pension has been running. Despite the views of many on MN the public sector pensions have been seriously hit in recent years. For example, the Teacher's Pension for those joining the profession in the past 6 or 7 years is no where near as good as it used to be. The new Local Government pension is also not the scheme it once was.

This is true but compared to a similar private DC scheme they are definitely considerably better in 95% of circumstances.

If you're wanting to make a claim on another person's pension you really need to be sure of your claim upon it eg number of years married, children, did you lose out financially while you were with that person.