Posted May 19th, 2011
I am currently dealing with an interesting case which involves two parts of the same scheme.
Unfortunately, at outset the clients received two different cash equivalent transfer values (under separate cover) and the assumption was made that the schemes were different. This was a fair assumption at the time given that one scheme provided for money purchase benefits and the other defined benefits. An actuarial report was undertaken and it was agreed that each scheme would be shared differently (100% for the money purchase / 31% for the defined benefit).
What happened next was ridiculous. The credit member’s solicitors sent the two pension sharing orders to the scheme involved for pre-approval before submission to court and they were approved. Only when the orders were submitted to the scheme for implementation were they rejected with the scheme confirming that only one pension sharing order can be set against one pension scheme. The two schemes were in fact two sections of the same scheme.
Now we are left with the situation where we have two pension benefits which the clients have agreed to share in different ways (100% and 31%) and a single pension sharing order is too blunt an instrument to deal with sharing the benefits differently. The scheme is insisting on one pension sharing order and they will not allow for the benefits to be shared differently.
We now have to look at alternatives. The key is to check each pension benefit carefully before proceeding.
If you are experiencing difficulties with your pension sharing order and would like some advice, please do not hesitate to contact me on 01204 663904 or email phil@thedivorceifa.co.uk
Tags: Actuarial Report, Cash Equivalent Transfer Value, Defined Benefit, Money Purchase, Pension Scheme, Pension Sharing, pension sharing order | Posted in Pension Sharing |
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Posted April 1st, 2011
In the last few weeks an increasing number of clients have approached with pension sharing orders which need implementing as the existing scheme is not prepared to offer an internal transfer and they do not know what to do.
They themselves are members of final salary pension schemes (usually Public Sector) and have found out at the last moment of the divorce that their existing pension scheme will not allow their pension share to be transferred in.
So what next? - The pension transfer has to go somewhere and it is up to the client to set up a new pension arrangement to accept the transfer.
If this is you and you would like advice from a Resolution Accredited Independent Financial Adviser on how best to approach the implementation of your pension sharing order then call me on 01204 663904 or email – phil@thedivorceifa.co.uk
Tags: Divorce, Final Salary Pension Schemes, internal transfer, Pension Scheme, Pension Sharing, pension sharing order, Pension Sharing Orders, Pension Transfer, Resolution Accredited Independent Financial Adviser | Posted in Pension Sharing |
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Posted March 11th, 2011
Sometimes I am staggered by the enquiries I receive and the lack of knowledge and understanding shown by the pension trustees and companies involved in divorce towards the spouse. This one involved the Local Government Pension Scheme and highlights what can happen when the information provided to the ex-spouse is incorrect.
“I have a share of my ex-husband’s LGPS pension which I am very grateful for. He will receive his pension at 60 – 3 months before my 60th birthday. Although I have received (incorrectly as it now seems)information for 6 + years stating that I would receive my “share” at 60, I have now been told that the scheme only pays out at 65 unless I take a substantial reduction. If we had still been together this money would have all been paid at my ex’s 60th. I am only able to work part-time due to health issues. I am 54 now and struggling somewhat. I will have to take my pension at 60 regardless. I have no other income. Is there anything at all I can do? It seems so strange that something meant to even out financial situations should discriminate so much. Thank you for your time.”
This issue has a name – income gap syndrome – and it refers to the fact that the existing member will receive his pension benefits at age 60 but the pension credit member cannot access her pension on the same terms until age 65. She has to take a reduction to draw it at 60. Therefore, there is a gap which should be bridged. However, it was too late to go back as the pension sharing order had been implemented and she confirmed:
“I will take the pension credit at a reduced rate when I am 60. It is just so unfair that the LGPS sent me incorrect information which I based my future plans on.”
So check exactly what is being offered in terms of your pension sharing benefits and when they will be paid!
If you would welcome some assistance on your pension sharing options, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk
Tags: Divorce, Income Gap Syndrome, Pension, Pension Sharing, Pension Sharing Options, Trustees | Posted in Pension Sharing |
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Posted March 7th, 2011
“As a result of divorce, I have a pension sharing order and will have £123,000 to transfer into a pension fund. I do already have a Standard Life Personal Pension with just a few hundred pounds in it. I’ve now got the next 3 months to set up a pension fund so I want to ensure that I find the right pension.”
Following on from my previous blog this is an example of why checking – what type of pension scheme is involved and finding out what the pension sharing options are – is so important. The client was under the impression that she had to transfer the benefits externally and was worrying about investments, charges, etc.
Once I had established that the scheme involved was the Police Pension Scheme I was able to advise her that the only option available was an internal transfer. The decision making was over and it was a relatively simple exercise implementing the pension credit within the Police Pension Scheme.
Why wait until the pension sharing order has been agreed before finding out what your options are?
If you would welcome some assistance on your pension sharing options, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk
Tags: Divorce, internal transfer, Pension, Pension Fund, Pension Sharing, Pension Sharing on Divorce, Pension Sharing Options, pension sharing order, Personal Pension, Transfer | Posted in Pension Sharing |
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Posted March 4th, 2011
“I am about to receive a pension sharing order and need advice about investment”
This is a very popular question and the first thing I always do is to double check the information provided on the pension sharing options with the existing pension scheme. The reason I double check is often the information provided to the spouse is appalling and it is often incorrect. I see misinformation provided on a daily basis!
Internal transfer or external transfer?
Sometimes the pension scheme will offer an internal transfer of benefits and you can remain in the scheme. Often the benefits on offer to you are good and worth staying in the scheme for. You should be looking for true shadow membership.
But if you have to exit the scheme (and this is very common) it is necessary to check what schemes are available for the pension credit to go into. Questions to consider are:
• Do you have any personal pensions already?
• Do you have a works scheme? And can this take the transfer?
• If not, what is on offer from the market.
Advice on the most suitable pension to transfer your pension credit should be taken. Ensure your adviser is suitably qualified. The Financial Services Authority insists on a certain level of qualification to undertake this work.
Investment
On an external transfer the investment of the pension will be important because you will be taking on two new risks – how it performs between now and your retirement and how much income you will eventually draw out at retirement.
If you are a long time from retirement you could consider investing in growth assets (equities/property) which tend to be more risky or if it is a short time to retirement more defensive assets (cash / gilts) to protect your capital value. Setting a goal in terms of retirement income is also advisable.
When working with my clients I undertake a thorough review of their attitude to risk and tolerance to risk, their options in terms of pension sharing and from this provide advice on the most suitable pension arrangement and investment strategy to meet their goals.
If you would welcome some assistance on your pension sharing order, your options and how to get it implemented, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk
Tags: external transfer, internal transfer, Investment, Pension, Pension Credit, Pension Scheme, Pension Sharing, Pension Sharing on Divorce, Pension Sharing Options, pension sharing order, Personal Pension, Retirement, Shadow Membership, Transfer | Posted in Pension Sharing |
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Posted February 24th, 2011
Are you struggling to understand the content of your actuarial report? Have you appointed a joint expert to report on pension sharing and now you are more confused than ever?
You are not alone. Many clients approach me with questions about their actuarial report – the percentages used, the cash equivalent transfer values and more general issues around the terminology used. You may even be thinking why have we had this report done because it has confused me even more.
The most important questions are often simple – what does it mean and how will it affect me?
Why delay? I offer a free, no obligation review of your actuarial report. I will provide you with some initial comments to help you decipher your report and give you some context to the actuary’s comments.
Why not call me now on 0800 092 1229 to arrange or send your report by email to phil@thedivorceifa.co.uk and I will let you have my thoughts.
Let me demystify your pension sharing report today.
Tags: Actuarial Report, Cash Equivalent Transfer Value, Joint Expert, Pension, Pension Sharing, Pension Sharing Report | Posted in Pension Sharing |
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Posted January 24th, 2011
This month I was approached by two clients with issues surrounding the timeliness of the implementation of pension sharing orders.
Case 1 – Pension Sharing Order not implemented since 2003
Originally the client agreed a 40% share in her ex husband’s Armed Forces Pension back in 2003 and eight years later she is still awaiting its implementation. She should have become entitled to her pension in 2008. In the meantime, her ex husband has continued to receive his pension with no deduction.
What has exacerbated the issue is the change from RPI to CPI revaluation (see my blog on this here) and so the Armed Forces Scheme will not implement whilst they revisit the valuation.
Unfortunately, there was not a lot I could do to rectify this situation other than to advise her to complain through the scheme’s internal dispute resolution and failing that approach the Pension Ombudsman.
Case 2 – Pension Sharing Order - Delaying Tactics?
It is not unusual for some trustees to use every excuse in the book to avoid implementing pension sharing orders. This case had the lot:
- They lost the pension sharing annex and new copies had to be sent.
- They claimed that they had not received all the Regulation 5 info, and requested originals to be faxed through only for them to accept they had them all the time.
- Claimed that the annex had no date (but the date was on there and it was stamped and sealed).
- Once all this was cleared up decided that the pension sharing annex was on “the wrong form.”
Again, there was little I could do after the event.
If any of these issues affect you or you would like more information about how we advise on pension sharing, please contact us on 0800 092 1229 or email phil@thedivorceifa.co.uk
Tags: 40% share, Annex, Armed Forces Pension, Implementation of Pension Sharing Orders, Pension Sharing, Pension Sharing Annex, pension sharing order, Trustees | Posted in Pension Sharing |
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Posted January 21st, 2011
The lifetime allowance is back in the news and will from April 2012 reduce from £1.8m to £1.5m.
But how does the lifetime allowance work in the context of divorce and pension sharing? In particular, how does it affect pension credits and pension debits now? And how will this reduction affect pension sharing orders going forward?
Pension Credits
Where a pension credit is awarded this becomes an asset of the new owner and will form part of their overall pension entitlement which (at some point in the future) will be tested against their lifetime allowance.
Therefore, it is advisable to check (in high value cases) to see if the amount of the credit will take them over the lifetime allowance. If it will, then they may want to consider an alternative strategy or reduce the amount of the pension share.
Pension Debits
A pension debit does not count towards the lifetime allowance of the member whose pension was shared. This means it is only the benefits that they actually receive that will be tested against the lifetime allowance.
If already in payment, the ex-spouse can apply for an increase in their standard lifetime allowance as the pension has already been tested against the lifetime allowance. The increase factor is found by dividing the pension credit by the standard lifetime allowance in force when the pension sharing order is made.
Where a debit arises then rebuilding of lost pension may be advisable.
Future Pension Sharing Orders
With a reducing lifetime allowance it will be even more important to make checks before proceeding. The limit will be lower and therefore, potentially more people will be affected.
If this issue affects you or your client, please contact us on 0800 092 1229 or email phil@thedivorceifa.co.uk
Tags: Asset, Divorce and Pension Sharing, Future Pension Sharing Orders, Lifetime Allowance, Pension Credit, Pension Credits, Pension Debit, Pension Debits, Pension Entitlement, pension share, Pension Sharing, Pension Sharing & the Lifetime Allowance, pension sharing order, Pension Sharing Orders, Standard Lifetime Allowance | Posted in Pension Sharing |
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