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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Posted March 29th, 2010
Of all the things that need to be understood in the context of pensions and divorce I consider this one to be the biggest. There is a major difference between the Valuation Date and the Valuation Day and it is imperative you understand it.
In England, Wales and Northern Ireland, the date on which the transfer value request, Cash Equivalent Transfer Value (CETV) or Cash Equivalent of Benefit (CEB), is received by the trustees or scheme provider becomes the Valuation Date.
This becomes the value which all of the negotiations for your settlement will be based on. For example, if you are advised by your solicitors, having received an actuary’s report, that the pension needs to be split 60:40 this will be done on the basis of the value on the Valuation Date.
However, this is NOT the value which will be used when the final benefits are calculated. The actual value will be calculated at some point within the four month implementation period and this date becomes the Valuation Day. The implementation period starts on the Transfer Day, which is the day the pension sharing order takes effect, or, if later, on the day the pension scheme has the prescribed information needed to implement the pension sharing order.
The period of time between the Valuation Date and the Valuation Day can be considerable and a lot can change in a pension during this time, which can have knock on effect on the valuation and subsequently the benefits derived from it.
If you would like to understand more about how the Valuation Date and Valuation Day might affect you and your benefits, call or email me for a confidential chat.
phil@thedivorceifa.co.uk or 0800 092 1229
Tags: Cash Equivalent of Benefit, Cash Equivalent Transfer Value, CEB, CETV, Implementation Period, Negotiations, Pension, Scheme Provider, Settlement, Transfer Day, Trustees, Valuation, Valuation Date, Valuation Day | Posted in Transfer values |
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