Pension

What a dilemma.

Either way one is definitely going to feel aggrieved. A question of trust?

I assume that you have been able to get these values from the Police scheme. Useful to know that they will provide values on two different scenarios. Did they charge?

I personally would be a bit nervous about the second value being lower. In fact, probably there is an argument to say they are both undervalued.

I think because of this I would be erring on the side of caution and be looking at an equality of income calculation.

I understand that this might not be universally popular.

Regards

Phil

The Divorce IFA

Although I am a Resolution Accredited Independent Financial Adviser my comments are given here as general guidance based on the (often limited) information available and does not constitute financial advice. They should not be seen as a substitute for detailed financial and legal advice.

My experience is that Judges have tended to apportion even in longer marriages, but that they are increasingly open to submissions that this is inappropriate, especially in longer marriages and bearing in mind that apportionment does not fairly reflect the realitiy which, in almost all cases, will be that the pension value will have increased more steeply in later years and the pension holder advances in his/her career and makes higher contributions.

I would argue that it should be based on the current value - if husband then makes a lifestyle choice which is not in his best fiancial interests, so be it.

I would also want advice from the actuary about what % split would be needed to acheive an equality of income in retirement, based on the current value of the funds, as this would give some indication as to how it would affect each of them.

www.mathiesonconsulting.co.uk/articles/E..._pension_accrual.pdf
I keep reading this - thinking it must apply to situations like this where the pension member wants to exclude pre-marital accrual?

Is there any hope of/point in trying to prove co-habitation from 1987?

I too am intrigued by the advice you've had that for this age - 46- the income outcome[!] can't be predicted accurately enough.
For years David Salter has been saying share pensions on the basis of income - that you only need the CETV to express that share to the pension scheme in the PSO.

I must confess that I have been gently provoked in to posting on this thread and I do so with some reluctance. Thank you friend – you know who you are!

I am not an actuary or IFA, nor am I a lawyer or mediator, so I’ll leave others to judge whether I have expertise or anything worthwhile to offer on this subject. As many will know, I work closely with actuaries (for my sins), and would argue that they do have expertise on pensions. That aside I will offer some thoughts on my understanding of this case and the questions posed.

The comments on income equalisation being too difficult for ages under 50 are of some concern. We work closely with a number of IFAs and believe that each can bring different skills and abilities to the subject, horses for courses approach. Some IFAs take a different view and are reluctant to pass cases on to actuaries for fear of missing out on potential fee income. The worrying consequence is that some will try to do pension sharing reports that might be a little outside their area of competence.

Inevitably, equalising incomes at some future point involves what is referred to as guestimates but the actuaries would describe as probabilities – actuaries are definitely experts in mathematical probabilities. The calculations where future income equalisation is the objective take into account assumptions about mortality, interest rates etc. These are all meat and drink to actuaries but not necessarily so for all IFAs. An actuary can make a professional judgement on such matters based on study and experience and applying actuarial techniques. Many IFAs are more than capable of doing the calculations but many would prefer to avoid the professional liability that will arise if clients rely upon such calculations. Call me cynical, but these issues might just colour ones views on the appropriateness of income equalisation.

I appreciate that what is sought here is real live court experience but another view on the possible approach may just assist. The values quoted for the husband’s pensions are apparently independent actuarial valuations and not the scheme calculated CETVs (or CEVs as the scheme now calls them if they are specifically calculated for divorce purposes).

The phrase equalisation of capital could have several different meanings. Does it mean equality of value as calculated by the schemes, or equality of value of the pensions post pension share? If the “redistribution” in this case is done on equality of scheme valuations then it is likely that the wife will lose out. By which I mean that the true value of her total pensions will be less that the husband’s. Arguably, the fairest solution might be to equalise on equality of (independent) pension values post pension share. To do this someone will need to do an independent valuation of her own pension and the police pension(s) post sharing. I am not certain that many IFAs are equipped to do these calculations, though some might have a stab using blunt instruments like replacement values.

Another complexity in this case is the relevant accrual period and it is understandable that this is a matter of dispute, as is the likely leaving/retirement age of the husband.

On the accrual period, I would suggest that the parties need to know the real impact of the different accrual periods being used so that they can negotiate. As there is also a difference of views on his retirement/leaving date the same applies, they really need to know how sensitive the results are to the different assumptions. Only with hindsight, can there be a definitive answer.

It is perfectly possible to do all the necessary calculations but inevitably, that will cost not insignificant amounts of money. Rather than do all the various what-if calculations, it should be possible to obtain some indicative numbers to aid the negotiations. But that will probably mean further input from the actuary, unless you know a very brave or exceptional IFA.

For the legal practitioner/mediator there are clearly many challenges and potential pitfalls in cases such as this. Advising the wife to accept a pension sharing order based on equality of CETVs (scheme valuations) is likely to cause financial harm to the wife. The professional liability issues for the practitioner, if and when the wife discovers what she might have otherwise got, are horrific.

I would suggest that all this gives some idea as to why the Courts appear to be inconsistent or at best unpredictable on such matters. As stated on an earlier posting, appeals on such cases are rare and therefore sparsely reported.

It would be very helpful if the outcome in this case were posted here.

Peter.

Thanks for your comments and the information.

Out of interest how did our EPV value compare to the two given by the other actuary?

P