Posted March 13th, 2013
Technically speaking the cash equivalent transfer value (CETV) represents the expected cost of providing the member’s benefits within the scheme.
In divorce settlements, thought needs to be given as to whether the CETV is the most appropriate method of valuing the overall pension benefits. Consideration needs to be given as to whether the CETV accurately reflects the benefits on offer and if certain benefits are not counted within the CETV, what should be done about it.
In the case of money purchase benefits, this is generally straightforward – it is the accumulated contributions made by and on behalf of the member together with investment returns. (There can be exceptions).
But with defined benefits (like final salary), the CETV is a value determined on actuarial principles, which requires assumptions to be made about the future course of events affecting the scheme and the member’s benefits.
So when negotiating settlements it should be noted that it is not that the CETV has been inaccurately valued but that it may not be the most suitable valuation to use for divorce purposes.
Look at the definition again and note that it states “the expected cost of providing the member’s benefits” The CETV may therefore be valuing the member’s benefits but not the spouse’s. (Spouse’s pensions can often be very valuable). Trustees will also provide a CETV based on the normal retirement date of the scheme, even where it is likely that the member will retire early.
Of course, agreeing on a higher valuation does not mean that there are extra funds available as the CETV is the only value the scheme will place on the pension. However, when completing a pension sharing order it is possible to take a higher pension share (based on the higher valuation agreed) to compensate.
So what does this all cost and surely every actuary/pension expert would take all this in to account? Firstly, for no more than a few hundred pounds a second opinion valuation can be obtained. Secondly, unfortunately not and many reports I see only work of CETVs thus potentially undervaluing the pension assets at the most crucial stage!
My approach is to work hand in hand with an actuary to ensure that you get the best result. It should be noted that on several occasions we have managed to increase the valuation considerably (doubled it one case) resulting in a significant pension sharing increase for our client.
So before proceeding any further why not allow me to review the pension CETVs (for free) and see if we can improve the settlement today.
Posted November 27th, 2012
We all know, or know of people that have managed to get married abroad. It probably doesn’t work out much more expensive than a lavish ceremony on these shores. Wouldn’t it be curious to find an agency set up to help you get divorced abroad?
“They got divorced? When did that happen?”
“Yeah they’ve been divorced a couple of months now, they got divorced in the Seychelles!”
“Pffft…..it’s alright for some, me and the ex had to make to do with a divorce in Wolverhampton!”
In reality though, the only money held abroad in divorces tends to be offshore bank accounts that Mr. Taxman doesn’t know anything about……….yet!
That is, until a disgruntled soon to be ex-partner tells him about it, and handsomely rewarded they will be for it as well. Of course, marriage, or the dissolution thereof, doesn’t have any relevancy when it is an ex business partner blowing the whistle. However, according to HMRC, there are significant number of tip offs are coming from ex partners.
As the waters separating the terms “evasion” and “avoidance” get ever muddier (avoision if you will) it’s a made up word intended to nod at the notion that evasion and avoidance are becoming entwined but I’ll change it to aversion if you think it would make more sense, let’s not debate here on the rights, wrongs or other loopholes surrounding the whole Tax debate currently.
Fact is, it’s more incumbent on you to be up front. Hiding money from the tax man is one thing – and it can land you in prison. Hiding money that is due to a disgruntled ex is positively like dicing with death!
Be up front, and then you might avoid finding yourself being upfront in front of a Judge.
image credit: flickr.com/banjo_d
Posted November 20th, 2012
…..and that figure is unnervingly low. There are nearly twice as many women over 50 without a pension when compared with men over 50.
It seems clear then, that many women are not even asking the question upon agreeing a divorce settlement. It is more important now than ever before that the question of sufficiency in retirement is tabled during in settlement talks. It is just as relevant as child care and the split of matrimonial assets.
It’s pretty straight forward. If you have sacrificed a career to raise children, or even settled in a job just to help make ends meet within the marriage, there is a fair question of income equalisation after retirement that needs to be asked and answered.
I am an IFA with expertise in the field of Pensions on Divorce. If you are going through a divorce and need advice, or if the issue has never been raised for you and you feel that this is something that you would like to talk about then please get in touch:
Image credit: flickr.com/tax credits
Posted August 24th, 2012
My attention was drawn to an interesting Twitter debate recently with regard to 0% pension sharing orders. The premise being that this prevents any further comeback on maintenance variation by way of pension income.
My concern here is that this is heresay, however, it is possible for a 1% pension sharing order to be completed which would dispel any future claim on the pension. It should be noted that you cannot have a pension sharing order on a pension that already has a pension sharing order on it.
Practically though, how would a 1% transfer value work, and it also should be noted that the costs might outweigh any benefits. However, it could be argued that this is a reasonably innovative way of dealing with pension sharing.
Posted August 16th, 2012
I was recently contacted by a client who had not implemented their Pension Sharing Order since 2003.
Not only was this a breach of the original order, there were a number of consequences that had occurred since the order was made. These were:
- The Cash Equivalent (CE) was recalculated at £213000 rather than the original £280000.
- Therefore my clients share of the CE was considerably lower, by £67000.
- The reason for this was that her husband had drawn benefits and as a consequence of this she was unable to take any lump sum from the pension.
- As the order was over 7 years old she had no recourse to go back to her solicitor for redress.
Therefore if you have a pension sharing order and are looking to implement it, my advice is to do so immediately. In the case of my client she has lost out on £67000 of CE and 25% pension commencement lump sum of the higher share figure £280000 / 50% (c.£.35,000)
Don’t let this happen to you please get in touch today!
Posted July 26th, 2012
This is insanity!!!!!
Divorce isn’t quite the ugly word it once was. It’s worrying that it has crept in to society with a creeping normalcy. Death by a thousand cuts if you will. These days, if you are in a marriage that has stacked up a good share of air miles, particularly if it’s a first marriage, you are in somewhat of a minority (or at least a blissfully silent majority). Bitter ex-wives, greedy ex-husbands. Mud slinging, smear campaigns, petty (often unfounded) accuations, mysterious hidden bank accounts (so well hidden that even the accused has no idea about them). Where does it stop????
Divorce may be the end all, but it certainly isn’t the be all. So things didn’t work out and your dreams of co-habitual bliss have fallen by the way side? That doesn’t have to be forever. Nobody wants a lengthy drawn out divorce, yet couples increasingly move on to the playing field and stay there long after the final whistle should have been blown – the level of injury time would make even Sir Alex Ferguson blush:
This grab all, keep all or destroy all mantra that besets otherwise reasonable, rational individuals almost appears comical – that is if it were not so tragic. If we took two people (often it could be argued that there is really only one arbitrator behind the proceedings) who were fighting an issue out in this way outside the realms of marriage and divorce dispute, then surely psychologists would be brought in to assess the mental health of the individuals involved. In other words, under what circumstances is it ever ok for two, grown adult human beings to think it’s ok to behave this way? However, when the finances aren’t quite up to this sort of level, another more sickening form of leverage takes its place:
This report may be somewhat sensationalist. Yet it’s hardly surprising. Children are often used as leverage in a divorce with both parties claiming “I’m putting the children first!” Destroying childrens relationships with the respective paternal and maternal familes is tantamount to abuse. It’s unjusitifiable and has to stop. I believe it’s high time the courts and authorities started taking these matters a little more seriously. In fact, scratch that. The courts are already clogged up with petty squabbles between divorcing couples with often less sense of reasoning than the children involved. It’s actually more accurate to say that the adults involved need to start acting like adults.
A smooth, bloodless divorce is not a bad thing. I would never advocate divorce generally. But if a divorce is inevitable (and some things can never be reconciled or forgiven – that’s life) then I can help smooth the path and get you what’s right and fair. However, if your ex-wife or ex-husband is intent on entering in to battle with you then all I can say is don’t join in. The war will carry on without you.
Image credit: flickr.com/O5com
Posted January 6th, 2012
Cash Equivalent Values (CEVs) from the public sector are currently on hold.
We received further information from the actuaries we use (Bradshaw Dixon Moore) on the subject which is worth sharing here – http://www.ancillaryactuary.co.uk/home/2011/12/29/public-sector-pensions-green-shoots.html
What was interesting was that they had quite rightly in my opinion taken the decision not to continue with estimated values for pending reports. Although, this inconvenienced clients and solicitors it was an important stance to take.
I received this response from Peter Moore at BDM when further questioned.
“Publication of the transfer club factors vindicated our stance. We understand that the mortality rate changes for some schemes are material and vary by age and gender. We believe that this provides a reasonable guide as to how the CEVs will change, scheme by scheme; but want to see the actual scheme factors and some new basis valuations before we can be certain.
One of the big issues from our perspective is professional actuarial integrity. If an actuary writes a report and cannot be certain that key numbers and results are reasonable and correct, there is a professional obligation to clearly state the position. Our view is that although such a report can be produced and be compliant from an actuarial perspective, we do not feel that such a report would be acceptable to a court that would wish to place reliance on it as expert guidance – ie Expert Witness Reports. From our perspective, we want our reports to all be fully compliant and avoid reports with too many caveats.”
So if you are involved in a divorce where an old or estimated CEV is being used I would be very cautious. If you would like to discuss this issue in more depth, why not get in touch for a free, no obligation chat on 0800 092 1229 or email us firstname.lastname@example.org
Posted September 26th, 2011
I have recently completed a pension sharing case where the length of time for the work from start to finish was 14 months. This is not unusual.
In this time the clients Cash Equivalent Transfer Values, and her share of them has increased by 12%. Not bad considering what the markets have done in the intervening period but more luck than judgement.
This is not always the case, and often the value of pensions etc can reduce over this period of time. So we have actually been quite lucky here.
With the implementation period being up to 4 months, it is important to get your Pension Sharing Order, Consent Order and any other documentation required by the ceding scheme to get the pension credit implemented as soon as possible. The quickest I have managed to get a pension
order and consent order implemented is less than three weeks from start to finish.
If you need assistance with your pension sharing why don’t you get in touch on 01204 663904 or email me Phil@thedivorceifa.co.uk