For many years the largest asset that a separating couple held was often ignored: pension rights. Lawyers are not trained actuaries nor pension experts and so they did not know enough to know what would be fair and the law did not allow pensions to be shared so they were always left with each spouse.
Astute lawyers would sometimes take into account pensions through ‘offsetting’ which was often on the basis of rudimentary evidence such as the Cash Equivalent Transfer Value ‘CETV’ but once it became possible to ‘earmark’ a share of pension, pension experts started to be routinely consulted to give a view as to what earmarking (deferred sharing) was needed. The government eventually recognised that transferring pension was far better than delaying a share of pension and made it possible to ‘share’ pensions at the time of divorce.
It usually requires a pension report to establish exactly what rights are held and Pension On Divorce Experts can explain the values and the options.
Some schemes are ‘defined contribution’ (you know what has been invested) and others are ‘defined benefit’ (you know what you should get) and as with much in life, ‘the devil is in the detail’ so even schemes which the trustees say have similar Cash Equivalent Values (CEV) may have very different bundles of rights attached. Simply looking at two CEVs, adding them together and making a balancing payment is usually a very inaccurate way to make pension rights ‘equal’. ‘Negligent’ would often be the word for that approach!
As well as schemes being defined contribution (DC) and defined benefit (DB), some schemes are ‘unfunded’ which includes some pensions paid on behalf of the UK central Government. Unfunded schemes rely on the payer having an income stream rather than a ‘pot’ that has been invested.
For more information around pension sharing and offsetting, please get in touch with our leading team of family and divorce solicitors today.
Particular care needs to be used when considering public sector schemes such as for the uniformed services of the Army, Airforce and Royal Navy as well as with the Police, the NHS and the Civil Service. These schemes are generally based on service, rather than on cash paid in.
Sometimes by sharing the pensions, there is a net increase in value, due to the details of the schemes. We know enough about pension rights to know that people need expert help and where to go for it. Lawyers from MFL were consulted as part of the Pension Advisory Group’s network of professionals who contributed towards the landmark ‘Guide to the treatment of pensions in divorce’.
That report published in July 2019 has been circulated to all the family law judges as well as interested professionals such as solicitors, barristers and actuaries.
We know how to ask the right questions to get our clients a fair share of pension rights as part of their agreement or Court Order. Pension transfer always requires a Court Order, even when it is agreed. Our team can provide you with cost effective guidance around your pension and protecting your assets. Get in touch today for a free 45-minute consultation with a leading north east divorce solicitor about your pension and offsetting
