Posted May 19th, 2011
I am currently dealing with an interesting case which involves two parts of the same scheme.
Unfortunately, at outset the clients received two different cash equivalent transfer values (under separate cover) and the assumption was made that the schemes were different. This was a fair assumption at the time given that one scheme provided for money purchase benefits and the other defined benefits. An actuarial report was undertaken and it was agreed that each scheme would be shared differently (100% for the money purchase / 31% for the defined benefit).
What happened next was ridiculous. The credit member’s solicitors sent the two pension sharing orders to the scheme involved for pre-approval before submission to court and they were approved. Only when the orders were submitted to the scheme for implementation were they rejected with the scheme confirming that only one pension sharing order can be set against one pension scheme. The two schemes were in fact two sections of the same scheme.
Now we are left with the situation where we have two pension benefits which the clients have agreed to share in different ways (100% and 31%) and a single pension sharing order is too blunt an instrument to deal with sharing the benefits differently. The scheme is insisting on one pension sharing order and they will not allow for the benefits to be shared differently.
We now have to look at alternatives. The key is to check each pension benefit carefully before proceeding.
If you are experiencing difficulties with your pension sharing order and would like some advice, please do not hesitate to contact me on 01204 663904 or email phil@thedivorceifa.co.uk
Tags: Actuarial Report, Cash Equivalent Transfer Value, Defined Benefit, Money Purchase, Pension Scheme, Pension Sharing, pension sharing order | Posted in Pension Sharing |
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Posted April 1st, 2011
In the last few weeks an increasing number of clients have approached with pension sharing orders which need implementing as the existing scheme is not prepared to offer an internal transfer and they do not know what to do.
They themselves are members of final salary pension schemes (usually Public Sector) and have found out at the last moment of the divorce that their existing pension scheme will not allow their pension share to be transferred in.
So what next? - The pension transfer has to go somewhere and it is up to the client to set up a new pension arrangement to accept the transfer.
If this is you and you would like advice from a Resolution Accredited Independent Financial Adviser on how best to approach the implementation of your pension sharing order then call me on 01204 663904 or email – phil@thedivorceifa.co.uk
Tags: Divorce, Final Salary Pension Schemes, internal transfer, Pension Scheme, Pension Sharing, pension sharing order, Pension Sharing Orders, Pension Transfer, Resolution Accredited Independent Financial Adviser | Posted in Pension Sharing |
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Posted March 4th, 2011
“I am about to receive a pension sharing order and need advice about investment”
This is a very popular question and the first thing I always do is to double check the information provided on the pension sharing options with the existing pension scheme. The reason I double check is often the information provided to the spouse is appalling and it is often incorrect. I see misinformation provided on a daily basis!
Internal transfer or external transfer?
Sometimes the pension scheme will offer an internal transfer of benefits and you can remain in the scheme. Often the benefits on offer to you are good and worth staying in the scheme for. You should be looking for true shadow membership.
But if you have to exit the scheme (and this is very common) it is necessary to check what schemes are available for the pension credit to go into. Questions to consider are:
• Do you have any personal pensions already?
• Do you have a works scheme? And can this take the transfer?
• If not, what is on offer from the market.
Advice on the most suitable pension to transfer your pension credit should be taken. Ensure your adviser is suitably qualified. The Financial Services Authority insists on a certain level of qualification to undertake this work.
Investment
On an external transfer the investment of the pension will be important because you will be taking on two new risks – how it performs between now and your retirement and how much income you will eventually draw out at retirement.
If you are a long time from retirement you could consider investing in growth assets (equities/property) which tend to be more risky or if it is a short time to retirement more defensive assets (cash / gilts) to protect your capital value. Setting a goal in terms of retirement income is also advisable.
When working with my clients I undertake a thorough review of their attitude to risk and tolerance to risk, their options in terms of pension sharing and from this provide advice on the most suitable pension arrangement and investment strategy to meet their goals.
If you would welcome some assistance on your pension sharing order, your options and how to get it implemented, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk
Tags: external transfer, internal transfer, Investment, Pension, Pension Credit, Pension Scheme, Pension Sharing, Pension Sharing on Divorce, Pension Sharing Options, pension sharing order, Personal Pension, Retirement, Shadow Membership, Transfer | Posted in Pension Sharing |
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Posted February 28th, 2011
This month I have received an increasing level of enquiries concerning pension sharing orders and in particular, where is my pension?
What seems to be happening is that a pension share is being agreed (without any guidance) at a certain percentage (this month they seem to be ranging between 35% and 55%) and then nothing is happening with regard to any paperwork.
To get your pension share at retirement it is important to conclude the paperwork at the time of divorce, otherwise you can encounter problems later – See my previous blog on a shocking pension sharing case – http://www.thedivorceifa.co.uk/pension-sharing/pension-sharing-more-recent-issues
So if you have agreed a pension sharing order it is important to do the following:
- Contact the pension scheme involved and ask them to confirm how they deal with a pension share and what paperwork they need completing.
- Organise the correct court paperwork – pension sharing order, consent order, decree absolute and any other paperwork (existing and/or new pension scheme).
- Pay the pension sharing charges.
If you complete this paperwork then implementation of the pension sharing order should occur. Don’t wait to your retirement to ask where is my pension?
If you would welcome some assistance on your pension sharing order, your options and how to get it implemented, please feel free to contact me on 0800 092 1229 or email me phil@thedivorceifa.co.uk
Tags: Pension, Pension Scheme, pension share, Pension Sharing, Pension Sharing Case, Pension Sharing Orders, Retirement | Posted in Pension Sharing Order |
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Posted December 10th, 2010
Do you know what the default option is when considering pension sharing?
In my previous blog I detailed the difference between an internal transfer and an external transfer. The default option is the underlying option that the pension scheme will implement should the pension credit member not decide how to implement the pension sharing order.
Sometimes, this can be an internal transfer or more often, it is an external transfer to a pension arrangement of the pension scheme / trustees choosing.
So, to avoid having your pension sharing order implemented by someone else or receiving a poor pension by default it is important to check your options first and let the trustees/pension scheme know what you want. It really is a case of taking the bull by the horns!
I keep a check on which pension scheme offers what. If you would like to know more about default options and pension sharing, please contact me on 0800 092 1220 or send me an email – phil@thedivorceifa.co.uk
Tags: Default Option, Default Options and Pension Sharing, external transfer, Implement, Implementing the pension sharing order, internal transfer, Pension Arrangement, Pension Credit, Pension Credit Member, Pension Scheme, Pension Sharing, pension sharing order, Trustees | Posted in Pension Sharing |
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Posted December 3rd, 2010
Do you know the difference between an internal transfer and an external transfer in relation to pension sharing?
It is important that you do because the consequences of choosing the wrong one can be expensive.
Internal transfer – this is where the pension scheme deals with the pension share by way of an internal transfer of benefits between one party and the other (no benefits transfer away from the original pension scheme).
A pension credit is created and this will either be dealt with by offering shadow membership (i.e. matched benefits with the existing scheme – final salary for example) or alternative benefits will be offered. Sometimes these can be significantly less valuable than exact shadow membership and so it is worth checking first. Sometimes you have a choice other times you don’t.
The other route is an external transfer – this is where the pension scheme involved deals with pension sharing by way of an external transfer. i.e. they insist that the pension credit be transferred out to a new arrangement of the pension credit holder’s choosing. Therefore, these benefits are automatically different to the existing (final salary) scheme but which scheme should you transfer to?
So it pays to check what is on offer when pension sharing before entering negotiations. If you know that shadow membership is available this can be very valuable. But what if you have to transfer out would you know what to do?
I keep a check on which pension scheme offers what. If you would like to know more about internal and external transfers when pension sharing, please contact me on 0800 092 1220 or send me an email – phil@thedivorceifa.co.uk
Tags: Alternative Benefits, external transfer, Final Salary, internal transfer, New Arrangement, Pension, Pension Credit, Pension Credit Holder, Pension Scheme, pension share, Pension Sharing, Shadow Membership | Posted in Pension Sharing |
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Posted November 8th, 2010
I was approached this week by a lady wanting to know whether she could share a pension which she thought might be in the Pension Protection Fund (PPF).
The scheme in question, the Turner & Newall Pension Scheme, applied to go into the PPF in April 2006. Despite four years passing this pension scheme has not been transferred into the PPF which for the lady in question was good news.
This is because under current legislation a pension in assessment for the PPF can have a pension sharing order implemented against it whilst one that has transferred into the PPF cannot. This might seem ridiculous but it is to do with the “pension rights” changing to “compensation payments” after acceptance into the PPF, hence a pension sharing order cannot be applied.
There is good news on the horizon though; the PPF should be in a position from next April to implement pension shares for schemes which have transferred with effect from April next year (assuming that the draft legislation is implemented).
So if your divorce involves a pension which is in assessment for the PPF or is already in the PPF the timing of a pension sharing order is important. For more information on this issue, please feel free to contact me.
Tags: Assessment, Compensation Payments, Divorce, Pension, Pension Protection Fund, Pension Rights, Pension Scheme, Pension Shares, Pension Sharing, pension sharing order, PPF, Turner & Newall, Turner & Newall Pension Scheme | Posted in Pension Protection Fund |
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Posted October 10th, 2010
I am often asked what the differences are between defined benefit (or final salary) schemes and defined contribution (or money purchase) schemes and why those differences are important in the context of pension sharing and divorce.
Defined benefit / Final salary
As the name suggests the final pension received in retirement is defined in advance, based on an accrual basis (for example, 1/60th or 1/80th), the length of pensionable service and the level of pensionable salary at retirement.
So for someone with 40 years service on a final pensionable salary of £40,000 in an 80ths scheme the pension payable in retirement will be £20,000 per annum.
This pension will increase each year in line with the escalation provided by the scheme (this can vary) and the employer / pension scheme carries the investment and inflation risks.
Pension Sharing
The benefits provided on pension sharing vary between schemes and these should be reviewed carefully before proceeding as often the risks of providing the benefits change hands!
On an internal pension transfer, sometimes the benefits available to the pension credit member are defined benefits, which is the case with the Public Sector Pension Schemes. These defined benefits are often very valuable to the pension credit member and it would be unusual not to advise that these should be taken.
Alternatively, the pension transfer may be placed in a money purchase arrangement often known as the default option. Here, the risks pass to the pension credit member (see below).
On an external transfer, there will be no defined benefits available (unless an annuity is being purchased) and the pension share will be placed in an individual pension arrangement. Again the risks are passed on.
Defined Contribution / Money purchase
In a defined contribution / money purchase arrangement the amount being paid into the pension scheme is defined at say 3% or 5% of salary but the final benefits are not fixed.
Instead, the final pension available is a function of the amount invested in, the investment return and prevailing annuity rates. Therefore, the pension scheme member carries all the risks.
Pension Sharing
When looking at pension sharing and money purchase schemes it is important to check what internal options are available and to check these against what is available in the pensions market.
There will be no guarantees on the income payable until an annuity is purchased and the associated risks need to be considered in the context of retirement planning goals.
If you require further information on defined benefit or defined contribution schemes, please contact us here. You can find further information on pension sharing here.
Tags: 1/60th, 1/80th, 40 years service, 80ths scheme, Accrual basis, Annuity, Default Option, Defined Benefit, Defined Contribution, Divorce, external transfer, Final Pension, final pensionable salary, Final Salary, individual pension, individual pension arrangement, inflation, internal options, internal pension, internal pension transfer, Investment, Money Purchase, Pension Credit, Pension Credit Member, Pension Scheme, Pension Sharing, pension sharing and divorce, Pension Transfer, pensionable salary, pensionable service, Public Sector, Public Sector Pension Schemes, Retirement, Risks | Posted in Pension Sharing |
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