Pension offsetting

Hi everyone. This is the first time I have ever posted anything on a forum so hopefully this turns out OK!

I have a query regarding pension offsetting and I am hoping one of you can advise. The CETV of my husband's pension is around £200,000. Mine is around £35,000. Neither my husband's nor my scheme is I believe linked to final salary. My husband's is unit-linked based on contributions into the scheme and mine is purely by virtue of contracting out of SERPS between 1986 and 1996 when I gave up my career to be a full time mum to our children. Presumably the CETV would then be reasonably reliable in both cases? The equity in the matrimonial home is around £225,000 (near Tunbridge Wells). Rather than taking a share of my husband's pension, I would rather have the matrimonial home and am therefore considering pension offsetting. It is my husband's and his solicitor's view that his CETV should be valued down to around a 1/4 to 1/3 of the CETV before offsetting. I have also been advised that the local district judge favours this treatment. Could this be correct?

My understanding is the CETV is often likely to be less than the actuarial value, because they are really a value for a different purpose. This is particularly likely if the pension is a final salary or salary related and to a lesser extent when the pension is a money purchase scheme. In principle the court can't depart from the CETV , but can be persuaded to take other matters such as lost benefits into account when supported by expert evidence.

In the case Maskell v Maskell it was said that unrealisable assets are not the same as liquid assets and only 25% could be seen in capital terms. Some District Judges adopted Maskell, others didn't. However, there has been a growing concern that you can't simply take the CETV and offset it against the hard assets. There is much to be said for seeking actuarial valuations and advice on how much should be offset to achieve a fair outcome.

Thank you Fiona for your advice.

As an actuary I'm clear that an actuarial value for a pension is a current value as real as the value of a house or stocks and shares. Even a CETV, though it has other flaws, is a current value.

Take your pension worth £200,000 in investments and let's say it was cash. We can agree £200,000 of cash is worth £200,000. Now invest that cash in a pension (and we'll ignore expenses). You still have £200,000, but in pension investments. Its true you cannot get your hands on that money now, but it still exists. And why did you put the money in the pension? Not to decrease its value by 75% or noone would invest in pensions. It was to gain valuable tax-benefits given by the Government on pension investments. I say its still worth £200,000.

Hello PMV,

I have recently gone to the full Final Hearing and therefore can give you an idea of what the court may view the value of the pension as. Just to give you a little bit of background - I wanted to do exactly the same as you - offset. The other sides solicitors "downgraded" the pension - the CETV gives a good indication of its worth but cannot be offset pound for pound (his barrister's argument). I think the figure you state is unfortunately how the court would view it, not on a pound for pound basis.

If you have children living with you in the matrimonial home they will be given priority, this may help your case more than it did mine.

Don't be alarmed but you have been well informed and it is better to have the knowledge and work with it. My solicitor did not at any stage tell me that offsetting pound for pound was not a realistic option - this gave me a false view - the CETV as as it says a Cash Equivalent Transfer Value should the pension be transferred into another scheme but it does not give a "today" value. This can be misleading.

Courts today seem to favour pension sharing as it is easy for them to order a pension share - it demonstrates "fairness" and cannot be argued really! Focus on your realistic mortgage capacity - the court will ask for this - they will work towards both parties being able to re-house, if your husband has a higher earning capacity then this will kind of go in your favour.

Try and avoid court if you can - very often what is decided in the court could have been agreed between the parties and it is usually only stubborness on the part of possibly one side that forces the issue to end up at a Final Hearing. By the way - orders for costs are not as far as I am aware, taken into consideration nowadays - the law changed in early 2007.

If I can be of any help please let me know - I am not trying to be an expert but have had very recent experience of the matter!

Hello Nigel,

I have read your reply to PMW and am a little concerned that although your example is right that is not how the court would view it. They deal with liquid (house/assets) and illiquid assets. A pension is an illiquid asset and therefore courts tend to pension share rather than offset which is what PMW is seeking to do.

The case of Maskell v Maskell is quoted and was in my case, the judge must have taken that into consideration but still chose the pension share option anyway. This cannot be argued against in the fairness stakes - it gives both parties an equal share of the pension as is today - the same as ordering the sale of a house - 50% to each party - that will be whatever the house actually sells for and the equity split equally - who could argue with that?! There is no ifs and buts about what the house may be worth over time or what the estate agent says it worth - it's what it actually sells for. I see this the same as a pension - if an order is made to pension share then it's shared at today's CETV, as in my case - no maths required by any judge!

I am mindful that anyone reading your example may be mislead into thinking that that's what a court would see it as - cash today which is not the case - when annuities come into play it's not straightforward.

Take your pension worth £200,000 in investments and let's say it was cash. We can agree £200,000 of cash is worth £200,000. Now invest that cash in a pension (and we'll ignore expenses). You still have £200,000, but in pension investments. Its true you cannot get your hands on that money now, but it still exists. And why did you put the money in the pension? Not to decrease its value by 75% or noone would invest in pensions. It was to gain valuable tax-benefits given by the Government on pension investments. I say its still worth £200,000.

Yes exactly. Although here in Scotland only the pension accrued during the marriage is a consideration the value is accepted £4£ with no differential between liquid and unrealisable assets.

50% to each party - that will be whatever the house actually sells for and the equity split equally - who could argue with that?!

Elizabeth, when it comes to pensions for different reasons some people are successfully arguing with that. Someone just in the last week achieved a 65% share because she needed more to provide the same income in retirement and wouldn't have the same benefits as her husband. .