BDM researching pension offsetting

Great News
Grateful Thanks to John Bolch for the news.
Grateful Thanks to Bradshaw Dixon & Moore who have done more than anyone to break the code and make information accessible.
"Family Law (Divorce) - Pension offsetting Research
written by John Bolch on Friday, March 26, 2010

I have received the following press release from Bradshaw Dixon & Moore:

"Actuarial firm Bradshaw Dixon & Moore has launched a research project to study attitudes to offsetting pension values in divorce. In the first phase, practitioners are invited to participate in an anonymous five-minute on-line survey.

The survey consists of four different case studies and participants are asked to say what values they would consider appropriate for offsetting, depending on whether they are advising the husband or the wife. As there is some anecdotal evidence to suggest that the approach to offsetting values differs across the UK, the survey is designed to identify any regional trends.

BDM plan to publish the survey results and analysis to encourage informed debate on the subject. All practitioners with an interest in this area are invited to participate in the survey, which can be accessed from BDM’s blog site"

//www.ancillaryactuary.co.uk/

Can't wait for the results of this. Unfortunately I possibly can't wait.

Pension offsetting has been the greatest financial trauma of my divorce, if I'd known what was typically accepted and could refer to research to back it up, I'd have alot more confidence in the decisions I need to make.
C2

Following with interest given the delays pensions held in my own case! Good luck all.

E

Be great if we could supply BDM with the wikivorce experience of offsetting?
I haven't been offset - my ex wanted the lolly/distress from selling the house.
Anyone willing to tell the year they were offset, how much% and maybe court area?
Anyone done offsetting without giving up any of the value of the CETV quoted by the pension scheme?
Did offsetting never arise or did you shoot the idea down?

Come to think of it, offsetting was the only idea on pensions my solicitor put forward - she drafted an offer letter that said if I could have sole ownership of the family home he could keep the pension - I rejected it on some instinct about final salary pensions and pensions were barely mentioned by her after that.

I too am watching this thread with the greatest of interest.

Ex's solicitor have discounted his pensions by 75% - so will be interesting to hear how judges actually view pensions for offsetting.

Confusing food for thought fromt interweb:


www2.batesadvice.com/site/knowledgebank/...d_pensionoffset.html
"James and Madge are divorcing. Their assets are a house worth £300,000, £60,000 in cash and other assets as well as John’s pensions rights which have been valued at £320,000, ie total ‘assets’ of £680,000. In a Clean Break settlement, the court's starting point might be that James should retain his pension fund plus £20,000, and Madge should have the house plus £40,000, probably with some adjustment to these figures for the impact of tax.
Last Updated 25 November 2009"



www.manches.com/practices/family/service.php?id=147
"Off-Setting
Off-setting involves assessing the value of the pension fund, then using other assets to compensate the person without the pension for their loss of pension support. The money or asset which the party without the pension receives can be used to make provision for retirement. This has been the most common approach to the problem of pensions in the past, but it can happen only if the couple have substantial assets which they can divide up relatively easily, leaving both parties with enough to live off, and somewhere to live, until both pensions mature. Even in such cases, the Court of Appeal's recent comments about the unfairness of leaving one party with the pension while the other receives more liquid assets will presumably make off-setting more rare. Offsetting also raises particular problems in regard to valuing the pension, and to assessing the parties' likely future circumstances, mentioned above. The parties can, of course, agree to off-set, having taken proper legal advice, if that suits their personal circumstances.
The cost of pension sharing, and the adverse effect of women's longevity upon what pension they can buy, may meanthat for some offsetting remains the best solution."



www.bv-ifa.co.uk/pages/divorce_pension_offset.htm
"Pension Offset
The pension holder keeps his or her pension, but the ex-spouse receives a greater portion of their combined assets to compensate for loss of pension benefits. This method suffers from poor valuations of benefits and often means that the ex-spouse has difficulty in setting up suitable pension provision for his or herself.
This is still the most common method used in divorce settlements despite the potential inequality."




www.familylawcollaborativedivorce.co.uk/tags/moore/
"Why the Value of a Pension fund is Reduced when Offsetting
An existing pension has already enjoyed tax relief on the contributions made into it. This means for example, that if Spouse A had a £10,000 pension and Spouse B had £6,000 in cash and was a higher rate (40%) tax payer, the £6,000 could be turned into a £10,000 pension fund through tax relief on the contribution. That would then equalise the value of the pension funds.

In addition, Spouse B with £6,000 in cash has the choice to use that money today whereas Spouse A must wait until retirement age before he has use of it and even then only 25% of the fund can be paid as a lump sum with the rest as an income for life; where the payment term is uncertain and where there is often no value on death.

One of the leading court cases on pension offsetting is Maskell v Maskell where Lord Justice Thorpe established that the value of pensions and the value of other liquid assets should not be compared on a like-for-like basis. The Judge directed Maskell and Maskell back to mediation to sort out the right value for offsetting rather than provide guidelines. As a result, it is not uncommon in a contested divorce for the lawyer acting on behalf of the spouse with the pension to argue, incorrectly in my opinion, that no value should be apportioned to pensions.

The Reduction Factor

In terms of how much should be offset, it seems that in practice values apportioned have ranged between 25% and 80% of the pension. So if one spouse holds £100,000 more in a pension fund than the other, the range of potential cash offset could be between £25,000 and £80,000. That’s quite some spread and not particularly helpful for divorcing couples.

Solutions to Potential Arguments over the Value of Pensions when Offsetting

This leads me to two points.

First, I was pleased to see that Bradshaw Dixon Moore, a firm specialising in actuarial reports for divorcing couples, announced on 30th September 2009 that they now have a Pension Offset Report service available. The report factors in both the tax issues and the importance of cash. They use actuarial principles and utility theory in reaching an adjusted value for the pension and the report can be used in Court. It costs £200 + VAT and for any party who feels very concerned about how the value of pension funds have been offset, this could be a useful solution.

Secondly, the variation in offsetting values highlights that there is great potential for a raging argument over how to fairly separate assets on divorce. If you are at the stage of wondering what type of divorce may suit you best, it is worth noting that one of the key attractions of a collaborative divorce is that both parties can work with a highly qualified and experienced Financial Neutral to work out how to split assets fairly and make a joint and informed decision on what value to apportion to pensions. A Financial Neutral can also help you decide whether pension offsetting is the best option, explaining the relative advantages and disadvantages of pension sharing for your circumstances.
Miles Hendy is a Chartered Financial Planner and Resolution accredited Divorce Specialist at Fraser Heath Financial Management."



www.financialadvice.co.uk/pensions/Pensions-amp-Divorce.html
"1. The first method is called Pension Offsetting and is by far the simplest. One partner's pension is "traded" against other assets to an agreed value.
Example: The husband's pension fund totals £50,000, and the home is worth £50,000. If the property is jointly owned, it could be agreed that the wife keeps the house and the husband keeps the pension. This is because they are the same value. This option is used frequently because it is straightforward."

Thanks everyone for the interest in our offsetting survey. Although the survey itself is directed at professionals – who are invited to participate in our survey through our blog site at www.ancillaryactuary.co.uk - we would be interested in anecdotal evidence of how cases are actually dealt with at the sharp end. If you would like to send us a short email setting out the circumstances of your case and the outcome, we can consider this data in our research.

Sorry but this is not an offer to assist or comment on individual cases. I can promise that confidentiality and privacy will be respected, we will not identify any individuals in our survey results.

If you would like to send an email, please use the following email address This email address is being protected from spambots. You need JavaScript enabled to view it..

Peter