From a determination in Nov 2007 by the Pensions Ombudsman
“If Mrs Clark were to receive a 25% pension share the benefits would be calculated as follows: CETV @ 31.05.2004 is £661,612.56 x 25% = 165,403.14
165,403.14 = 137,950.90 1.1900
11.93 + (3 x 0.85) = 14.48
137,950.90 = 9526.99 pension 14.48
9526.99 x 3 = 28,580.99 lump sum "
The information was provided by the scheme administrators.
Is 9526.99 Mrs Clark's predicted annual pension income from a possible 25% pension share?
Do most pension sharers get an income prediction like that from the pension scheme on which to base negotiations before the pension share percentage is decided?
My interest in this case is that the aim was to equalise pension income and lump sums at age 60/retirement.
It also reveals some of the nuts and bolts of how DB pension shares are calculated.
The Consent Order read:
"(b) The basis of the pensions sharing order shall be equalisation of pension incomes at age 60 (to include the Respondent’s projected future service based on his current pensionable salary, under his PCSPS pension and his AVC with Scottish Widows, …
(c) The pension lump sums resulting from paragraph 4(b) shall be equalised in accordance with paragraph 2(c) above.”
In other words it is possible to base the pension share percentage on the predicted retirement income of each spouse - and it is possible for the person responsible for the pension arrangement to predict, in time for the FDR,the income and lump sum available to the spouse without/with the lesser pension from the pension share.
According to David Salter this is the fairest way to share pensions both in payment and not in payment which are after all about income after age 60/65.
This settlement also appears to include future increases in pension.
In this case the Civil Service pension administrator seems to have volunteered the information on the effect of a 25% share so that the effect of sharing on retirement income can be predicted.
The Regulations / Form P should ask pension arrangements to predict the pension income and lump sum from a 25% share for the ex-spouse and the resulting reduced pension benefits for the pension member so that people can see how sharing affects both.
Thank you for putting that post up. At the moment the calculations are totally incomprehensible to me. I know they mean something and perhaps one day I'll get to grips with it but I wondered whether I was alone in thinking that all these projections and factors are actually worthless to the individual?
They seem to be based on statistics and may be useful for anticipating trends by covering the mean of a large population sample but for one single person the act of trying to equalise retirement pensions is in my opinion like trying to guess how many tuppeny pieces they may have in their pocket/purse at 12.00 pm on 12th August 2027.
Is it just me or does anyone else here feel that when the parties are in their 40s or younger, the effort spent on pension splitting/sharing/predictions in divorce proceedings is disproportionate to the parties' needs? I mean, what is relevant is cash now - how are they going to live - now?
God only knows what is going to happen in the future.
There is an awful lot of sense being written by people posting on this topic. I may be about to buck the trend!
David Salter is a highly respected practitioner and I am very reluctant to question his views, particularly as I don’t know exactly what they are on this subject. Maggie suggests that sharing pensions based on the income they produce at a given age is considered the fairest method and in some respects, I would agree. On the face of it, each party having exactly the same amount of pension at a given age, is a fair solution. But is that still fair if one partly can retire ten years earlier than the other can and therefore receive the pension for ten years before that of their partner? Is that still fair? And what if they can both draw the pension now thereby achieving equality, but because of gender and age differences, one partly is likely to draw the pension for longer than the other?