My wife and I are splitting our assets equally but she wants to offset a second property against my pensions, one of which is a final salary pension scheme. She is happy to accept the CETV of my pensions for this purpose.
Her solicitor says that if I insist on having a pension share arrangement then it will be necessary to have an actuaries report done. Her solicitor says that this will take from 8-10 weeks and that we should cancel the FDR which is planned in a couple of weeks time. Her solicitor says that if I do not agree to the instruction of a pension actuary then an effective FDR cannot take place and she will draw my conduct to the attention of the court and advise my wife to the possiblility of applying for a wasted costs order against me.
Firstly, is it necessary to have an actuaries report for the purpose of a pension share?
Should they do it will they be succesful in applying for a wasted costs order if I go ahead with the FDR?
Most solicitors will insist on an actuary''s report for final salary pensions as in some cases they are undervalued by the CETV. If you object your wife''s solicitor can indeed point this out at FDR and the judge is likely to order that you get the report. She might also get the costs of the wasted FDR and you will also have wasted money on the hearing.
I would agree to the actuary''s report but make sure that you have at least some input into the instruction letter that goes to the actuary. For example, the value of final salary pensions goes down as the retirement age goes up. Because my scheme had increased the retirement age between the CETV and the actuary''s report, I was able to point this out in the instruction letter and ensure it was taken into account. I was also able to insist that he took into account that my salary had recently dropped. As a result the value of my pension was actually less when calculated by the actuary than in the CETV.
The prescribed valuation WRPA 1999 method is the CETV - but for sharing - often equalising income from the pension at the date of divorce -it seems to be that only an actuary can determine how to do that - ie calculate the percentage of the CETV required to produce the desired amount of income for the non-member half of the equation.
Something I''ve never really understood: where a final salary pension is under consideration - if both pension sharing and pension offsetting are being considered to see which s best - say the CETV offered by the final salary pension scheme is £200,000 and the actuary''s valuation is £400,000 which value will the court use for offsetting if that''s what''s ultimately agreed?
Will the judge ignore the actuarial valuation for offsetting but use the actuarial valuation to set the percentage share for e.g. pension sharing on an equalising income basis....?
Are valuations for offsetting and valuations for sharing entirely different/non interchangeable?
As far as I know, valuations for offsetting and for sharing are entirely interchangeable. Why would they not be?
I would have thought that if there is only one pension, the final salary one, and if you are going to share it, then you don''t need an actuary''s report if the person getting the share is allowed to retain the share in the main scheme with the same benefits. This is because the usual things about gender and life length predictions don''t apply to final salary schemes: the only things that matter is the final salary (in this case at the point of divorce) and the years of service. So the actual value of the pension is irrelevant if it is simply being shared. This is a lot of ifs, though.
In my case we did have an actuary''s report as he had a money purchase pension which was offset against my final salary one. We therefore needed the actuary to calculate what percentage he should get under different scenarios (including only sharing the pension accrued during the marriage) that took into account an estimate of what he would get from his own pension. In the end we settled for a split-the-difference compromise, but we used the actuary''s calculations to achieve this.
If you are offsetting the pension value against other assets then I think you (or, rather, your wife) really do need an actuary''s report. Suppose the CETV says that the pension is worth £200k and the other assets £200k. This would suggest (ignoring arguments about how long you would have to wait to take your pension) that one person could have the pension and the other the assets. However, if, as can be the case, the CETV undervalues the final salary pension, it could actually be worth £300k. This would mean that the person getting the assets would get a really bad deal. In your case this would be your wife, so of course her solicitor wants an acturial valuation.
I think it is very unlikely that a judge would ignore an acturial value for offsetting. They might, though, accept the argument that the pension value should be discounted by some amount because it is not an asset that can be realised immediately.