As part of the work I do I am often contacted by solicitors, and clients going through divorce directly, to look at pension reports and to comment. The worry I have is that from this relatively small sample of what must actually be out there, is the number of basic errors and the poor methodology being used. It is frankly staggering.
The bottom line is that the unintended outcome will be one party losing out significantly. In many cases this can be very significant amounts of money be it pension income or capital, and it is not always that easy to spot at first glance.
Take one recent case I worked on. The expert in question was asked for an equality of income calculation but a quick check of the numbers showed that Mrs would receive approximately £6,000 per annum more than Mr. This was due to an understatement by the expert of the cash equivalent transfer value (CETV) by c.£300,000!!! CETV is the value for transfer purposes placed on the pension benefits by the pension scheme (and is often a poor measure of value) but is expecting the correct one to be used too much.
In addition, state pensions were ignored and with the changes coming down the line with the single tier pension this is in my opinion was also a mistake.
Now I might expect this from a basic pension report from an IFA dabbling in such matters but this was from an actuary – a respected one at that. I can point to at least 5 out of the last 7 reports I have reviewed where there has been a fundamental flaw which affects one of the parties considerably. These were from a mixture of actuaries, pension experts and IFAs.
So I wonder how are you differentiating between the experts out there? It would appear that cost is not a good determinant as it seldom is. Who are you using and what vetting process is in place? Are you finding the same problems?
Or is just me?
I am going to be sharing more of the issues I am finding here and showing you how to avoid the pitfalls.
Phil
P.S. I really think this is a can of worms.
