Fees for Pension Sharing

Hello Everybody.

My wife and I are aiming to agree a pension sharing Order whereby she will get 100% of the funds of one scheme = about 50% of the total of my three schemes. All schemes are vanilla money-purchase pensions. The provider has quoted £1550 to implement a Pension Sharing Order. I was thinking I might be able to save money by first moving the funds to one of my two Stakeholders (Legal & General, Aviva). I'm still waiting to find out how much these two charge. Does anyone have any experience of fees in this are ?

Thanks very much

Martin

Martin

Your biggest hurdle is that to move the pension from one place to another you are compelled by financial services legislation to obtain regulated financial advice. For this, you need a financial adviser, an IFA [which incidentally I am not].

A financial adviser can only provide advice once they have gather sufficient information about an individual, their financial circumstances and most importantly, their attitude to financial risk. Regrettably, this is quite a long process and someone has to pay for the adviser’s time.

Unfortunately, you cannot assign or transfer a pension from one person to another but a court can make a pension sharing order, which should be drawn up by a lawyer. The provider’s £1,500 quotation for implementing a pension sharing order is probably only dealing with their administration costs, you will still need to have the court order made and I strongly suspect they will insist that you (or rather your wife) obtains regulated financial advice.

Please be very careful about moving the funds to one of your stakeholder pensions as you will build-up a series of charges in the process, which will erode the value of the pension. May I suggest that it might be worth you looking at swapping the pension for other assets unless the sums involved are large enough to bear the pension sharing costs.

Peter.

I shared a Prudential GPP defined contribution pension in 2006 - the Pru said there would be no charge for sharing.
The NAPF published a list of suggested charges - found by googling NAPF pension sharing charges - not sure if it's been updated.
Seems to be lucrative for some providers?

Received a letter today from Aviva [ex Norwich Union] in reply to my enquiry of 29th May confirming that they do not currently charge for implementing a Pension Sharing Order on my contract. (Stakeholder Pension).

One of the lessons I'm learning about this whole divorce process is that everything takes a long time.

Just to record what happened here. The original scheme eventually released the funds to Legal And General about two months after submitting the request. There were no fees charged by the sending or the receiving scheme. It took Legal And General about two months to implement the Pension Sharing Order. They did not levy any fees for this. All funds are single-priced, so there was no loss involved in the transfer. The only loss was that the management fees of the sending scheme were paid for my the Company, so each of us now pays our own management fees (just under 1%/annum). Main points is that it is a slow process, and it helps if you can get hold of people who know what they are doing in the pension providers.

It is very encouraging that many providers are not charging for implementing pension-sharing orders, but it is necessary to look a little deeper into the implications. By accepting such a transaction, you are effectively accepting and condoning earlier investment decisions. These are not necessarily appropriate for you and may not be appropriate in the current economic climate.

Most of the assets being discussed here are money purchase investments and they are therefore dependant upon the investment performance of the underlying investment funds. The fund might be wholly invested in Martian Widgets but that may not necessarily be the right investment for you! Then there is the issue of the provider. The playing field is a little more level if the investment is a stakeholder pension as law restricts the charges that are made. Nevertheless, there are still important differences that should be carefully and properly considered.

The question therefore is whether you are content to have your newly acquired pension investment held in XYZ & Co’s Martian Widget’s Fund or be happier with an investment that is more appropriate to YOUR needs and attitude to investment risk. These issues do not arise where the pension sharing order can only be implemented as an internal credit, as is the case with the public sector pension schemes. However, where there is a choice; as in the cases under consideration, by accepting the current investment choices you are effectively making an investment decision.

This is all rather a grey area in terms of who is “giving or receiving investment advice” in these circumstances. Were I a family lawyer, I would feel rather uncomfortable if a client contacted me in many years time because the investment performance of their pension credit had been disastrous. I would therefore make sure that my divorcing client fully understood that such investment decisions should be made having received appropriate professional financial advice – from an IFA. If the client chooses not to accept that recommendation, I would have at least fulfilled my professional obligations.

It should be remembered that pension sharing is a relatively new concept in terms of family law, as it only became an option at the turn of the century. Consequently, not many people receiving pension sharing order credits will have retired yet. Already, one of the major insurers to the legal profession is finding that inappropriate pension advice during divorce is the major cause of claims against their clients.

The message should be very clear – it is essential that appropriate professional advice be given regarding pensions. This will usually mean advice from an IFA (possibly with assistance from an actuary).

Peter.

Peter@BDM reported:
"Already, one of the major insurers to the legal profession is finding that inappropriate pension advice during divorce is the major cause of claims against their clients."

Please tell us more!!!
What sort of claims are being brought?
If for example the court orders a 50/50 division of the CETV and the pension scheme implements that order how can the solicitor/barrister be found negligent?

I speak as one who unsuccessfully complained that my solicitor was negligent in that she failed to secure the information I was entitled to under the Pension Information Regulations/Form P and had failed to establish the real value of the final salary pension I shared.
The LCS said that this was a matter of professional judgement and could not therefore be negligence.
Are the civil courts/insurers taking a different view?