A cash equivalent transfer value (CETV) is the cash value placed on your pension benefits. This is the amount that is available to transfer to an alternative plan in exchange for giving up your rights under the scheme. It is necessary to apply for your CETV statement if you wish to transfer from the scheme.
Do I need a CETV?
A CETV is required in circumstances where a pension member wishes to switch from a final salary scheme (also known as a ‘defined benefit’ plan) into a defined contribution scheme. Your pension scheme administrator will be able to provide you with a CETV statement. You will need a CETV in order to consider whether it is suitable to transfer a Final Salary Pension into an alternative vehicle such as a Personal Pension or a Self-Invested Personal Pension (SIPP).
The transfer value available to you.
This means that CETV statement is a vital piece of information for any individual who wishes to consider transferring their final salary pension plan.
It is important that any individual seeking a CETV statement also seek additional financial advice. This will help to give you information on the implications of transfer, and an assessment of whether transfer is suitable for you.
How is a CETV statement calculated?
The CETV is calculated by working out the lump sum that will be required to provide an equivalent pension to the scheme pension at your retirement age. This lumps sum is then reduced (discounted) depending upon how far away from retirement that you are. The scheme makes various assumptions in order to calculate the cash equivalent transfer value.
Do I have a right to a CETV?
If you are in a funded Final Salary Pension Scheme you have a right to a Cash Equivalent Transfer Value. The scheme must provide this within 3 months of any request. You do not have a legal right to a CETV in the 12-month period before retirement (although some schemes will provide this.) You are entitled to one free CETV in any 12-month period.
Next Steps with my CETV?
If you have a CETV or are thinking about requesting one and wish to discuss your options please make contact using our online contact box.