Value of pensions.. is this reasonable?

Hi,

I am the respondent in a (hopefully) amicable divorce and am trying to prepare a fair offer.

The main areas to split are the Home (which is being sold), the pensions (I have 5) and any alimony payments.

So, it's all about cash plus pensions. I'd like to get to a Clean Break and pay all alimony up front if I can. I think this will become feasible as she will receive a pension plus any work income next year (giving her a greater disposable income than me, at least for as long as she works).

I have CETVs on all of my pensions. I am a deferred member in each and the valuations look sound for each one. We are looking at splitting the pensions (so she gets a value transferred into her own scheme)

However, my wife will be 60 this year. I am 52. We have been married for 30 years.

I have been considering the pension CETV values to be the same value as cash from the house sale so far.

However, it occurs to me that the value to me of each pound in a pension plan is lower than it is for her (because she can draw down cash next year and/or start to claim a pension, while I have to wait).

"Cash now" is more valuable than "cash later", isn't it?

I don't want to overstate this, and I think it is fair that the settlement benefits her more than it does me (because I have higher earning power). I want a fair settlement for her. At the same time, I don't want to sell myself short, either.

I am looking at the figures and thinking that it would be reasonable to assign a notional value to my "share" of the pensions at 90% of the full value, while her "share" remains at full value (as she can take it almost immediately).

Just to be clear, if she wants 50% of my pension, I am still offering a full 50%. She will also get over 50% of the asset value of the home. However, what this does is to represent the overall "value" of her share of the assets more highly in percentage terms.

If I then take the difference in "value" between her share of the pensions and mine (rather than the actuals), this is helpful in explaining how I have already given enough in terms of future alimony (when we include her share of the house, which is greater than 50%).

Anyway, that may be confusing (sorry!).

Let me give some numbers.

Value of all pensions:.350K
Split (both receive):..175K
Value of this to her:..175K
Value of this to me :..157.5K
In effect, she gets.:..17.5K more value

This 17.5K could be seen as a contribution to alimony.

My question is, is this reasonable? Is it reasonable to reduce the value of my share of my pensions by 10% (or at all) in these circumstances?

Thanks for any advice!

Hello

In general pensions don`t have the same pound for pound value as a cash asset (anything that can be sold for cash) however at your respective ages they have a higher value that say if you were 40 and your wife fifty,

How to agree what is fair for both is quite complicated and much detail is needed in general the starting point for division after a long marriage such as yours would be half each then other factors such as age income and future income potential are considered and the balance of division moved accordingly,

Probably the best way forward is if you both speak to a mediator who can take all the details and help you both reach a fair and equitable settlement without the need of court or the expense of legal professionals,

One last point with a combined CETV of 350k you may need to have the pensions valued by an expert an actuary unless of course you can both make agreement, if you can`t the court may well ask for actuary reports which can be quite expensive,

Pay a mediator a few hundred quid and let them do the work for you.

Dukey is spot on in many cases the CETV undervalues a pension quite significantly and it necessary to have valuation carried out. If you read around the posts in this section you'll discover how complicated pensions are.

If the aim is to achieve equality in income in retirement rather than capital your wife will almost certainly require a greater share of the pension. She is older and nearer to retiring age and women statistically live longer so she will get paid for longer, so her pension will pay her less per annum.

Thanks for the input so far.

mediation may the way forward. First, I think we will try and arrive at a sensible agreement between the two of us (though I do think an IFA will be needed, in any case).

Fiona, that is a good point! Yes, she may need more in the way of pension. We will have to see where her priorities are.

Thanks again

Are any of your pensions final salary pensions Alistair?
Other than basic State Pension does she have a pension in her own name?
What's the current difference in your incomes?

Also : are you currently contributing to a pension?

Hi Maggie,

Yes, two of my pensions are (or were at one time) final salary (which is probably why the CETV is over 4 times the fund value).

My wife does have a pension in her own name. However, it is small (around 45K). I need to see the details on it, as I don't know much about it. It is an old pension, so I would expect that to be final salary, too.

The difference in income is quite large. She can earn around 20K, while I am on 65K.

I am contributing to a pension, but it only started in January and is a very basic scheme, so no real value there.

Having said all that, I am starting to look more closely at pensions and it seems to me that I was coming at it the wrong way. I had hoped for a "quick and easy" way of equating pension assets and cash assets. I am beginning to see that they are quite unlike, and that two pensions can also be quite unlike one another.

Instead, I am trying to model potential income from her share and relate that to her needs going forward. It's a useful learning exercise, and a potential offer is beginning to materialise. It does look as if I will have to roll my sleeves up and take a detailed look at each pension, though! At least I'll then know what to ask an expert when I meet one

Resolution accredited IFAs are well worth searching for - Divorce IFA on this forum is a fine specimen of this rare breed - IFAs who understand divorce and pensions.
Finding them is still difficult because for some reason they're not listed on the Resolution website - not the last time I looked anyway.
They were trained so that collaborative law style divorces could call on the services of a divorce savvy IFA.
The Ancillary Actuary website is always worth the effort.