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:
In addition, they also provide useful information and comment on divorce matters at:
If you require further information on The Divorce IFA, please call us on 01204 663904 or by email email@example.com
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.
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.
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 firstname.lastname@example.org