Posted January 13th, 2012
I have recently been asked to assist in a challenging divorce case involving a client who was in serious ill health. Serious ill health is defined as life expectancy of 12 months or less and there are strict rules surrounding the payment of benefits in this situation.
I was asked to provide guidance on a number of scenarios:
- The benefits are drawn now based on normal health.
- The benefits are drawn now based on serious ill health provisions.
- What happens on death.
- What benefits might be paid to children.
- What benefits would be payable if the pensions were subject to 100% pension sharing orders.
Where the planning opportunities arose was in the difference between benefits that been crystallised (i.e. in payment) and uncrystallised (i.e. those that were not).
For uncrystallised benefits it is possible for a tax free lump sum to be taken in lieu of the whole of the pension benefits. But for crystallised benefits this is not
possible and either ill health retirement provisions apply for final salary benefits or impaired life annuities or drawdown for money purchase with the option
for lump sum benefits to be paid upon later death.
It was important to understand each client’s needs and what they were looking to achieve. Then it was a case of balancing the desire for a tax free payment now versus protecting the value of the benefits that had been accrued to date.
If your divorce settlement / pension sharing case is affected by these issues why not get in touch for a free, confidential, no obligation chat on 0800 092 1229 or send an email advice@thedivorceifa.co.uk
Tags: Crystallised, drawdown, Final Salary, Impaired life annuities, lump sum, Money Purchase, Pension, Pension Benefits, Pension Sharing, Serious Ill Health, Uncrystallised | Posted in Pension Sharing |
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Posted April 6th, 2010
Clients often worry about whether the cash equivalent transfer value (CETV) they have been quoted represents fair value. It should be noted that there can be two types of challenge to the fairness of the CETV but in many cases, such challenges will have a low chance of success.
1. Does the CETV itself represent fair value
It is important to understand that the CETV may seriously undervalue the total pension benefits due to a variety of reasons (for example, it may not cover all the pension benefits or it may have been discounted due to the state of the scheme’s funding). It is therefore, possible to argue that another (higher) figure should be used which represents a fairer valuation.
The CETV itself cannot be changed and so a higher proportion of pension benefits may be shared or other marital assets may be distributed more favourably.
To prove undervaluation it would be necessary to present expert actuarial opinion and to negotiate strongly on this point. This should not to be confused with..
2. Does the split of the CETV represent fair value
Where equality of outcome is desirable (i.e. both parties want the same income at an agreed retirement age) a 50:50 split of the pension assets may not represent fair value.
Here a split in favour of the wife may be greater than 50% to take account of a number of factors, but mainly that women have a greater life expectancy than men.
Of course, it should be noted that it is likely that the final benefits received will not represent the same values quoted due to the time lag between the valuation date and the valuation day.
If you would like to know whether your CETV represents fair value, please call or email me for a confidential chat.
Tags: 50:50 split, Cash Equivalent Transfer Value, CETV, CETVs, Discounted, Fair value, Fairer valuation, Pension, Pension Benefits, Scheme Funding, Split, Undervalue, Valuation Date, Valuation Day | Posted in Transfer values |
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