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 February 8th, 2010
In many occupational schemes (especially the statutory ones – e.g. Police, Armed Forces) there has been a disparity between the normal retirement age of the member and that given to a pension credit member (the ex spouse). For example, the member can retire from the pension scheme at age 52 but the ex spouse cannot retire until age 60.
In addition, where the pension is in payment, there will be an immediate reduction of benefit for the member but the ex spouse’s pension will not kick in until age 60 (which could be many years away).
This issue has been neatly termed as “income gap syndrome” and it has been found not to go against the anti discrimination provisions of European Law.
Of course, this assumes that the ex spouse decides upon an internal transfer as the means to facilitate the pension share. There may be many reasons why the other option (an external transfer) is appropriate, but there will many situations where the only choice available is an internal transfer.
Regulations which came into force in April 2009 made provision for a partial solution to this issue which some of the statutory schemes are now starting to implement. The NHS scheme will now permit pension credit members to draw benefits after age 50 (or 55 from 6 April 2010) whilst an Armed Forces (2005) pension credit member can draw benefits at age 55. It should be noted that actuarial reductions will apply for early payment.
From a financial planning point of view it is wise to review the drawing of a pension credit benefit in line with your overall goals and objectives to ensure that any reduction is understood and budgeted for.
For more information on this please contact me on 0800 092 1229 or contact me by email, phil@thedivorceifa.co.uk
Tags: Actuarial Reductions, Armed Forces, Divorce, Early Payment, Ex Spouse, Financial Planning, Income Gap Syndrome, internal transfer, NHS Scheme, Normal Retirement Age, Occupational Scheme, Pension Credit, Pension Credit Member, Pension Scheme, pension share, Police, Spouse, Statutory Scheme | Posted in Pension Credit |
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