Background
Our client, Mr A approached us to assist with the division of pensions in his divorce.
His pensions were significantly more valuable than Mrs A’s pensions on a cash equivalent transfer value (CETV) basis (£600,000 v £140,000).
Concerns
Mrs A’s existing IFA had put forward an approach whereby the division of the pensions would be done on a capital value
basis. i.e. £600,000 – £140,000 / 2 = £230,000.
Therefore, Mrs A would receive a pension share of c.£230,000 or 38%.
Mr A was concerned that this was too simplistic and unfair to him because his benefits were in personal pensions whilst Mrs A’s pension was final salary.
What We Did
We reviewed the CETVs and ascertained that Mrs A’s pension was an NHS Pension.
Their CETV calculations are on a single life basis.
This undervalues the true pension benefits which are joint life benefits.
In addition, providing like for like benefits for Mr A is expensive using his personal pension (He needs much more capital to produce a similar income to Mrs A).
We put forward equalising the pensions on an income basis as being a more fair approach to both.
The Results
Mrs A’s IFA accepted the approach.
He was able to negotiate a 27% pension share to be taken from his benefits or £162,000.
Ultimately, he was able to retain a further £68,000 of his pension capital.
