Posted July 12th, 2010
As a Resolution Accredited Independent Financial Adviser (IFA) I am often asked to provide a summary of how we can work with clients through the Collaborative Law process. Below is taken from a flyer which is provided to the lawyers at the Greater Manchester POD.
HOW THE IFA WILL WORK WITH YOU AND YOUR SOLICITOR:
IFAs will be accredited by Resolution to work in the collaborative area, having undertaken training on the technical and cultural aspects involved, and passed an examination on the subject.
The IFA acts as a ‘financial neutral’ – rather than representing one party, their role is to assist all parties in highlighting issues and providing information that enables the collaborative process to move quickly and smoothly.
In addition to their specialist technical knowledge, IFAs can outline options to parties and comment on risk factors (eg in terms of pension options) which solicitors are unable to do as they are not authorised to give financial advice.
IFA’s can attend a first meeting with the Solicitors present, so as to display to the parties how they may add value to the process. At your discretion, IFAs can subsequently meet you without your solicitor being present, so as to control total costs.
EXAMPLES OF WHERE THE IFA IS ABLE TO HELP:
• Tax efficiency and mitigation if assets or investments are being sold as part of the agreement (eg ISAs, Capital Gains Tax issues).
• Pension-sharing issues under occupational final salary schemes, for both the scheme member and the ex-spouse.
• Issues surrounding individual pensions, including retirement options.
• The cost of replacing items under an employee benefits package for the ex-spouse (eg life cover, critical illness cover, private medical insurance).
• Mortgage availability and costings in relation to the marital home.
• Assessment of endowment policies and the options going forward.
• General financial education
• Budgeting exercises and lifetime cashflow projections to determine whether the agreed settlement will be sufficient to support the financial requirements of each party over time.
If you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Budgeting exercises, Capital Gains Tax, Collaborative Law, critical illness cover, Employee benefits, endowment policies, Ex Spouse, Final Salary, financial education, Financial Neutral, Greater Manchester POD, IFA, ISAs, life cover, lifetime cashflow projection, marital home, Member, Mortgage, Occupational Final Salary, Pension, Pension Sharing, POD, private medical insurance, Resolution Accredited, Resolution Accredited IFA, Settlement, Solicitor, Tax efficiency | Posted in Financial Advice |
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Posted August 20th, 2009
Since 2000, a pension sharing order has been available as an option on divorce. With the ability to achieve a clean break this should be the option of choice for most divorce cases where the pension benefits are significant (and earmarking / offsetting have been discounted).
A lot of focus is rightly given to ensuring that an equitable pension share is achieved and here the use of a suitable actuary is advisable. However, in my opinion, less time is given to the options available once the pension share has been calculated and many clients approach this stage with unnecessary fear and trepidation.
Options
With a pension share there are two options – an internal or external transfer – and either option can have its merits depending upon circumstances.
With an internal transfer the pension does not physically move from the existing scheme but a debit and credit is created to satisfy the pension share. Most importantly, the internal scheme benefits can differ significantly. For example, some final salary schemes offer shadow membership whereby the same defined benefit rights generously apply to the new member whilst others provide poorer value money purchase equivalents.
With an external transfer the fund value of the pension share is physically transferred to a new arrangement in the individual’s name, with the associated issues of understanding the investment and annuity risks involved but having the benefit of control.
Considerations
Here are a few suggested considerations which will assist in deciding which type of transfer is appropriate.
* How flexible is retirement and who decides when retirement can start.
* How much pension income will be payable at retirement and how secure is it.
* How much risk is involved / could my pension fall in value.
* What are the death benefit arrangements and who will ultimately benefit.
* Can future pension contributions be paid.
* What are the charges involved.
If you would like more information on how we deal with pension sharing, please call us on 01204 663904 or contact us by email on advice@thedivorceifa.co.uk
Tags: Actuary, clean break, death benefit, Divorce, earmarking, external transfer, Final Salary, internal transfer, offsetting, Pension, pension share, pension sharing order | Posted in Pension Sharing |
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Posted July 9th, 2009
I have attached below a very useful checklist for lawyers to use when working with clients with Public Sector pensions.
Public Sector Scheme Checklist
This checklist has been produced by Bradshaw Dixon Moore Limited and they have kindly given me permission to post it here. You can access further information on their actuarial services below:
www.bradshawdixonmoore.com
In addition, they also provide useful information and comment on divorce matters at:
www.ancillaryactuary.co.uk
If you require further information on The Divorce IFA, please call us on 01204 663904 or by email advice@thedivorceifa.co.uk
Tags: Actuary, Bradshaw Dixon Moore, Final Salary, Pension, Public Sector | Posted in Actuary |
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Posted June 29th, 2009
When considering how to deal with pensions within a divorce settlement it is important to be aware of the many different factors which can affect the transfer value. Recent events in equity markets coupled with changes in regulations are proving that these values are rarely static. Clients, lawyers and advisers need to be vigilant when dealing with transfer values, particularly if the settlement takes time to agree.
Pensions can be separated into two main distinct types – money purchase or defined contribution or final salary or defined benefit. Depending on which type of pension you are dealing with has a major bearing on the issues surrounding transfer values.
Final Salary
Changes in the way in which actuaries calculate cash equivalent transfer values are having major impacts on settlements going forward. Since October 2008 the basis on which these values are calculated has switched from a broadly uniform one (under actuarial guidance note 11) to an individual scheme decision taken by their trustees.
So much so that values have been seen to double or halve depending on the circumstances and the schemes involved. Therefore, it is important to consider the following:
• Clients need to be aware of the potential fluctuations and their expectations managed.
• Up to date valuations are vital especially should the current valuation pre date October 2008.
• The cost of a new valuation might be a small price to pay to avoid future conflict.
Money Purchase
When dealing with money purchase pensions such as personal pensions the surrender value of the plan should be treated as the transfer value. This value can often be much less than the more readily quoted current value. Penalties, Market Value Adjustments and product charges on these contracts can affect these values and will change over time.
The key determinant of whether the fund value will move (up or down) is the amount of risk being taken within the fund. This will depend largely on how, where and what it is invested into. Therefore, it is just as important to understand what risks are being taken within these types of pensions as to worry about the overall amounts involved. It is not unusual to find within self invested pensions – high risk investments such as AIM shares or property.
My experience of risk tolerances using the FinaMetrica profiler (see www.finametrica.com) is that men’s risk tolerances are often much higher than women’s. Do your clients truly understand the amount of risk being taken within their (or their husband’s) pension?
Perhaps it might be sensible to find out their risk tolerances and consider switching investments to a less risky strategy for the duration of the divorce proceedings.
If you would like more information, please call us on 01204 663904 or contact us by email on advice@thedivorceifa.co.uk
Tags: Cash Equivalent Transfer Value, Divorce, Divorce Lawyers, Final Salary, FinaMetrica, GN11, Money Purchase, Pension, Personal Pension, Transfer values | Posted in Transfer values |
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