The CETV you receive at the start of a divorce may not be the figure eventually used to implement a Pension Sharing Order.
A pension CETV valuation is calculated at a particular point in time, so the figure can change as the divorce progresses. For divorces in England and Wales, it helps to understand how the valuation is used during financial disclosure, negotiations and implementation.
If you are unsure whether the pension valuation being used in your divorce is still suitable, call The Divorce IFA on 0800 092 1229 or complete the form below to arrange a confidential, free consultation by phone or online.
Stage 1: Pension CETV valuation during financial disclosure
The first CETV is normally obtained during financial disclosure.
In England and Wales, pension information may form part of Form E or a voluntary exchange of financial information.
Pension schemes are allowed up to three months to provide a CETV for divorce purposes (six weeks if they are told it is needed for court proceedings), so requesting the information early can help prevent delays.
If the case goes to court, the court rules allow a pension valuation to be used if its valuation date is no more than 12 months before the first court appointment. That does not necessarily mean an older figure will still be the most useful valuation for settlement discussions if circumstances have changed.
When the valuation arrives, check:
- The valuation date
- Which pension scheme it relates to
- Whether all relevant pension benefits have been included
If pension sharing on divorce is being considered, this first valuation can help establish the pension position before different options are discussed.
Stage 2: What happens if negotiations take a long time?
Financial negotiations can continue for many months, which means the CETV obtained during early disclosure may be much older by the time an agreement is being finalised.
That does not automatically mean the figure can no longer be used.
An updated pension CETV valuation may be useful where:
- A significant amount of time has passed
- Pension benefits or investment values have materially changed
- The scheme has updated the factors used in its calculations
- The pension has started to be paid, or soon will be
- The pension represents a significant part of the proposed settlement
Pension schemes may charge if more than one CETV is requested within a 12-month period, so another valuation should not be requested without considering whether it is actually needed.
If a significant change in value could affect the proposed settlement, a Pension on Divorce Expert may be asked to explain whether the change is significant enough to affect the settlement.
The aim is to make sure the pension information being used still gives a suitable basis for the decision being made.
Stage 3: Which valuation is used for a Pension Sharing Order?
A Pension Sharing Order in England and Wales is expressed as a percentage, not as a fixed cash amount.
For example, a pension may have a CETV of £500,000 during negotiations and the parties may agree to a 40% Pension Sharing Order.
It would be easy to assume that the former spouse will receive a pension credit worth exactly £200,000.
The eventual pension credit may be different.
Once the Pension Sharing Order has taken effect and the pension scheme has received the required documents, information and charges, the implementation process begins.
The scheme then selects a valuation day and calculates the relevant cash equivalent again. The percentage stated in the order is applied to that value.
For example:
- CETV during negotiations: £500,000
- Pension Sharing Order: 40%
- Implementation value: Recalculated by the pension scheme
- Pension credit: 40% of the implementation value
The statutory implementation period is normally four months once the scheme has everything it needs.
This means the final monetary value of the pension share can be higher or lower than the amount calculated using the earlier CETV.
With many defined benefit and public sector schemes, the pension credit is then used to provide a pension within the same scheme rather than being moved elsewhere as cash.
Our information on pension sharing order calculation explains this process in more detail.
How The Divorce IFA can help
At The Divorce IFA, we help clients understand how pension valuations fit into the financial divorce process.
We can review the pension information you have received, help identify when an updated valuation may be useful and work alongside your solicitor or mediator where further pension analysis is needed.
If you are unsure whether the CETV being used in your case is still appropriate, call 0800 092 1229 or complete the form below to arrange a confidential, free consultation by phone or online.
Frequently Asked Questions
Not automatically. The age of the valuation, any changes since it was produced and how important the pension is to the proposed settlement all need to be considered.
A change does not automatically mean there has been an error. The reason for the movement needs to be understood first. If the change could affect the proposed settlement, updated pension analysis may be useful.
A Pension Sharing Order is expressed as a percentage. The pension scheme calculates the relevant cash equivalent again during implementation and applies the percentage in the order, so the eventual pension credit can be different from an earlier cash estimate.