DB revaluation - cashflow assumptions

Hello All.

I hope everyone is well in this strange new world we seem to find ourselves?

I have to complete a cashflow and will need to include the clients existing DB scheme. The scheme seems to revalue benefits according to Treasury Orders. I was just wondering what rate others are assuming for such revaluations? Would you assume an inflation link (CPI) or do some clever math based on past treasury orders declared??

Your thoughts would be appreciated

Comments

  • Treasury Orders would probably be CPI, but for a definitive answer I would contact the scheme.

  • Treasury Orders are September CPI. Mostly public sector pensions and state benefits use these in the following April.

    If the existing DB is deferred, then you'll be able to get accurate figures for what it is as at April 2020 from the scheme, then use your CPI assumption in the cashflow to take it to the retirement age. Depending on what cashflow you're using, you might want to create a specific event for the NRA of this scheme and set that as the NRA, rather than 'Retirement' (which you could move) as this will avoid any early access that would need reduction factors modelling into.

    Benjamin Fabi FPFS
    Chartered Financial Planner
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