William Burrows

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Billy

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DB Transfer quotations
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I was asked an interesting question last week by a potential client which I thought readers might be interested in 

"I have a transfer quote from my DB scheme and I have been sitting on it for a few months and now it is about to expire. I am not sure whether to accept the current transfer value or get another quote.

 

If I request a new transfer value what are the chances of it being lower than the one I have now? "

 



-- Edited by William Burrows on Monday 22nd of October 2018 11:04:09 PM

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Billy

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Posts: 14
Date:
Transfer quotations
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In simple terms the transfer value is calculated with reference to gilt yields. If yields go up the transfer value will fall and if yields fall the transfer will rise.

This is similar to way annuities are priced. For example if the cost of purchasing £ 3,500 per annum of index linked pension was £ 100,000 when the benchmark yield is 1.5%- the cost would rise to about £ 105,000 if the yield fell to 1% but would fall to about £ 95,000 if the yield rose to 2%.

You can see the trend in gilt yields at www.williamburrows.co.uk/toolbox/annuity-charts/benchmark and at present yileds are rising so expect transfer values to fall a little


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