Pension challenge

DK

your assessment of the valuation - that 25p now would buy £1 in 20 years seems, on the face of it, to be a good way of describing why this 25% of CETV value appears to have arisen - although this is the first time I have seen it put like that.

If that is going to be so, then it would be good to have an equation that allowed you to work out the pension value on a sliding scale. You know -- if you take the pension in 20 years each £1 is worth 25p but if you have only 10 years to go, each £1 is worth 60p and so on ... sort of like compound interest.

However the argument founders when you look at what you would have to PAY to get equivalent pension benefits. According to the actuary's report I would have to put in nearly 200k NOW to get the same pension at 60 as my stbx.
Yet if his was valued at 25% of CETV, I would only "get" about 45k.

Pensions make my head hurt

Hadenoughnow

Thanks for that - I use NPV in my work at times so am familiar with the concept - but its not easy to explain.

As you say it can easily be used on a sliding scale and there are NPV tables that allow the discount rates (in effect the interest rate used) and the term to be varied.

I think the analysis is sound in my case as we will be comparing CETV with CETV - but as you say it doesn't work if you are comparing apples and pears i.e theoretical CETV values versus real cost to aquire pension benefits.

Good luck

DK