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 January 21st, 2011
The lifetime allowance is back in the news and will from April 2012 reduce from £1.8m to £1.5m.
But how does the lifetime allowance work in the context of divorce and pension sharing? In particular, how does it affect pension credits and pension debits now? And how will this reduction affect pension sharing orders going forward?
Pension Credits
Where a pension credit is awarded this becomes an asset of the new owner and will form part of their overall pension entitlement which (at some point in the future) will be tested against their lifetime allowance.
Therefore, it is advisable to check (in high value cases) to see if the amount of the credit will take them over the lifetime allowance. If it will, then they may want to consider an alternative strategy or reduce the amount of the pension share.
Pension Debits
A pension debit does not count towards the lifetime allowance of the member whose pension was shared. This means it is only the benefits that they actually receive that will be tested against the lifetime allowance.
If already in payment, the ex-spouse can apply for an increase in their standard lifetime allowance as the pension has already been tested against the lifetime allowance. The increase factor is found by dividing the pension credit by the standard lifetime allowance in force when the pension sharing order is made.
Where a debit arises then rebuilding of lost pension may be advisable.
Future Pension Sharing Orders
With a reducing lifetime allowance it will be even more important to make checks before proceeding. The limit will be lower and therefore, potentially more people will be affected.
If this issue affects you or your client, please contact us on 0800 092 1229 or email phil@thedivorceifa.co.uk
Tags: Asset, Divorce and Pension Sharing, Future Pension Sharing Orders, Lifetime Allowance, Pension Credit, Pension Credits, Pension Debit, Pension Debits, Pension Entitlement, pension share, Pension Sharing, Pension Sharing & the Lifetime Allowance, pension sharing order, Pension Sharing Orders, Standard Lifetime Allowance | 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 August 27th, 2010
So the pension share has been agreed. You have your settlement in place and are now looking at your options on what to do next?
What can go wrong you ask? Well unfortunately, plenty of things.
In the last few months, I have dealt with a range of problems, including:
• The pension sharing order didn’t appear – whose responsible?
• The pension sharing order was drafted incorrectly.
• The receiving scheme insisting that financial advice is taken – why can’t they just implement?.
• Delays in implementation.
I intend to expand on these issues in subsequent posts but if this affects you or you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Financial Advice, Implementation, pension share, Pension Sharing, pension sharing order, Pension Sharing Orders, Receiving scheme, Settlement, the divorce ifa | Posted in Pension Sharing |
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Posted August 13th, 2010
Impaired life annuities provide a greater pension income to those with shorter life expectancies than would be available from standard annuities. Impaired annuities are intended for serious conditions such as:
• Chronic heart disease
• Cancer (secondary and some primary)
• Chronic Lung Disease
• Parkinson’s Disease
• Alzheimer’s Disease
Please note this list is not exhaustive.
Enhanced annuities also provide an increase over the standard rate available and are given for lifestyle conditions such as
• Diabetes
• Heart attack
• Chronic asthma
• High blood pressure
• High Cholesterol
Again, this is not an exhaustive list.
The market is maturing and there are providers who specialise now in areas such as smoker annuities and more recently, postcode annuities. These work on the basis that statistically, people in different parts of the UK have different life expectancies.
Many people when taking their pension share on divorce decide to purchase an annuity. If you are considering purchasing an annuity as part of your pension share, please stop and consider whether you might benefit from one of these annuities.
If you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk
Tags: Alzheimer's disease, Annuities, Annuity, Cancer, Chronic asthma, Chronic heart disease, Chronic lung disease, Diabetes, Divorce, Enhanced annuities, Greater pension income, Heart attack, High blood pressure, High Cholesterol, Impaired life annuities, Lifestyle, Parkinson's Disease, Pension, Pension and divorce, pension share, Postcode annuities, Shorter life expectancies, Smoker annuities, Standard annuities, Standard rate | Posted in Annuity, Ill Health |
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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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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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