A well respected, award winning social enterprise
Volunteer run - Government and charity funded
We help 50,000 people a year through divorce

01202 805020

Lines open: Monday to Friday 9am-5pm
Call for FREE expert advice & service info


What are we each entitled to in our divorce settlement?

What does the law say about how to split the house, how to share pensions and other assets, and how much maintenance is payable.

What steps can we take to reach a fair agreement?

The four basic steps to reaching an agreement on divorce finances are: disclosure, getting advice, negotiating and implementing a Consent Order.

What is a Consent Order and why do we need one?

A Consent Order is a legally binding document that finalises a divorcing couple's agreement on property, pensions and other assets.


Do you need help sorting out a fair financial settlement?

Our consultant service offers expert advice and support to help you reach agreement on a fair financial settlement quickly, and for less than a quarter of the cost of using a traditional high street solicitor.


DIY CETV estimate for final salary pension

  • maggie
  • maggie's Avatar Posted by
  • Platinum Member
  • Platinum Member
More
19 Jan 08 #11133 by maggie
Topic started by maggie
www.sharingpensions.co.uk/pensions_simplification.htm
"For defined benefit schemes such as final salary pensions the scheme must calculate the value of the pension to determine the maximum tax free cash. The calculation used by the HMRC is a 20:1 value for converting a defined benefit scheme to cash. Therefore assuming a pension accrued of £15,000 per annum, this would represent a cash value of £300,000"
Could you use this HMRC formula for sharing/offsetting a pension based on salary?

  • maggie
  • maggie's Avatar Posted by
  • Platinum Member
  • Platinum Member
More
19 Jan 08 #11137 by maggie
Reply from maggie
Only thinking aloud on this- but in my case for our deferred defined benefit pension the HMRC 1:20 formula gives a CETV about £150,000 higher than the one quoted for pension sharing purposes by the pension scheme.
If this formula is used by HMRC/the Government to value final salary pensions why isn't it used for sharing final salary pensions on divorce?

  • Nigel@BDM
  • Nigel@BDM's Avatar
  • Premium Member
  • Premium Member
More
21 Jan 08 #11361 by Nigel@BDM
Reply from Nigel@BDM
I'm always wary when HMRC simplify things, so I did some actuarial numbers on this (occupational hazard).

For a good pension (inflation-linked, 50% spouse's pension on death) the ratio if a male retires at 65 is closer to 25:1, if he retired at 60 its 27:1, and if he was lucky enough to retire at 50 it would be 32:1.

The ratio for a female would be higher as they live longer, but it would be lower if the pension only increased at a low rate in payment, or if the retiree was in ill-health.

That's the value at retirement, if you're not there yet the ratios are lower as it will be some time before you get your money. And £1 now is worth less than £1 in the future.

In general pensions are probably worth enough to do a bit more (and a bit more than just geting a CETV) to get them right.

Moderators: wikivorce teamrubytuesdaydukeyhadenoughnowTetsSheziLinda SheridanForsetiMitchumWhiteRoseLostboy67WYSPECIALBubblegum11