Chance of widow's pension lost on divorce

Chance of widow's pension lost on divorce
MCA 1973 s25
(h)in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
Will the scheme's own CETV always exclude the widow's pension benefit?
NB the pension I shared was not with LGPS - I'm just wondering if the GAD advice quoted here is universally applied - even in "hick" company schemes.
from LGPS:
www.lge.gov.uk/lge/aio/56454
ANNEX 7
HOW IS THE VALUE OF BENEFITS TO BE CALCULATED?......
"GAD have confirmed that the reason the calculation should be based on a marital status of 'single' is that "one of the principles underlying the pension-sharing legislation is that it should impose no additional costs on pension schemes.
This is the rationale for assuming that a member is unmarried when calculating a cash equivalent for divorce purposes.
If the member were assumed to be married, the calculation would 'crystallise' the value of additional contingent benefits which would not otherwise be payable, and make them available to the former spouse.
Pension schemes would effectively be paying widow(er)s' benefits in respect of divorced members who were both single and alive. ...."
If CETVs for divorce specially automatically exclude widows' pensions should the loss of the chance to acquire that pension benefit be formally dealt with separately from pension sharing?

Hi Maggie

A very good point and one upon which I am quizzing my solicitor(!!!!)who has not the first clue.......

On STBX's CETV (wrong calculaton BTW as pension in payment should be a CEB but hey ho) it shows a contingent widows pension of 50% of the pension in payment. This is considerably more than STBX is proposing to offer as a pension attachment.

Should I somehow refuse the divorce, as if he drops dead I would get more by remaining married than divorced? Is it possible to do this? He is 16 years older than me BTW?

Bears thinking about ......or does it???#

How would attachment work for a pension in payment - ie ? the court orders the pension scheme to split the pension - your ex loses your % share of the payments - if it can't pay you a pension yet - what happens to your share?

Sorry braindead for rambling - no direct experience of attachment - so more rambling coming up:
can't get my head round how attachment works where the member is already taking a pension and where under scheme rules the ex-spouse is too young to be paid a pension directly by the scheme.
I suppose the usual riskier remedy would be periodical payments aka spousal maintenance from your ex's pension income until you reach "pensionable age" and can be paid directly by the scheme?
My only acquaintance with attachment is as a possible way of earmarking a future lump sum/death benefits -but if the pension's already in payment presumably the lump sum is already in the marital pot for sharing?
A recent case showed that the pension trustees can choose who gets what after the member dies- ie a court Consent Order has no more/?less sway than a Will.

All this uncertainty makes pension sharing the safer option?
Looking back - I should have paid more attention to what was excluded from the CETV and added them to my list of things lost to be retrieved.

Hi Maggie

Yes a pension share would be safer, as it would be in a separate pot with my name on it.

However, as I have no money and I am a few years away from being 60 I have no option but to go for a pension attachment/earmarking order.

My understanding is that x % is allocated to me, from the pension in payment. Indeed it is my understanding that the pension HAS to be in payment for an earmarking/attachment order to be effective. This is one of the main drawbacks with this arrangement. If your STBX dies/defers taking a pension, you are stuffed.

However, in my case the pension is in payment. The only (ha ha) drawbacks are if he dies, then my income stops or if I re marry (never). I can insure against his premature death.

So unless I have completely misunderstood, where there is an urgent need for immediate income a pension attachment/earmarking is the best solution, although with the drawbacks noted above?

Hi,

Just some thoughts.

The key with pension sharing is that it does give you complete control. The pension will be your asset and in your name and you can decide if and when you want to draw it (subject to any scheme rules such as age 60) if you remained in the scheme. Given your need for income now this is unlikely but still might be the most appropriate option from a pension advice standpoint.

Control and your choices are increased if an external transfer is taken. If a pension share is transferred into a personal pension plan (PPP) for example, that plan becomes yours and you can draw it when you like (i.e. before 60) if you are age 55+ you can draw the pension immediately via an annuity and not have to wait until age 60. But you can also defer it. Should you die before drawing the pension it is possible for the pension value to pass to your children or other beneficaries.

When you are ready to draw an income from the PPP this can be done via an annuity (now) or directly, from the plan itself. The point here is that again you can control how this is set up which is extremely useful. i.e. you can build in death benefits and even add in spouse benefits (if appropriate).

Attachment gives no control. An order can be placed against a pension NOT in payment and it only comes into payment to the ex spouse when the member puts into payment which in some circumstances can be a long time. A member could defer taking the pension to deliberately impoverish the ex spouse. Short term maintenance could solve this.

In your case, where it is in payment already that is not an issue, and it will pass to you under the terms of the attachment order and what % you agree to. One drawback is that the pension is taxed in total based on your ex spouse's income. If this is higher rate and you are basic rate then this will reduce the amount paid to you.

The major drawbacks are the ones you have raised - death or remarriage. It is possible to insure against one but not the other!

To answer your final point, where immediate income is needed (and you are aged over 55) you can do a pension share rather than look at a pension attachment order. I am working on two cases right now where an annuity will be purchased immediately on transfer.

There are costs involved but these can be taken from the plans involved as commission rather than a fee being paid. Of course, care is needed to work with with a trusted adviser.

I would suggest that it is worth having a chat with a competent IFA about your options before proceeding with the attachment order. You may be eligible for a more flexible pension in retirement.

Regards

Phil

Could I ask about this:
"In your case, where it is in payment already that is not an issue, and it will pass to you under the terms of the attachment order and what % you agree to."
About attachment:
If a pension is in payment to the member, can the court order the pension scheme to pay a pension directly - ie "attach" part of the member's pension - and immediately to an ex-spouse even if the ex-spouse is too young to take a pension under the scheme rules?

In the back of my mind is the famous case of the army wife who believed that because her husband's pension was in payment that whatever her age on divorce she would be able to take her share of the army pension into payment as soon as she divorced; the pension scheme wouldn't pay her because she was younger than the age dictated in the scheme rules for ex-spouses to be allowed to take a pension on divorce.
I'm aware that recent changes made it possible for pension schemes to pay a pension to a pension credit member at age 55 ? - but only if scheme rules are changed to allow it?
Is it different for attachment?

Sorry to muddy the waters again/egg sucking lessons? - just worried about pension attachment getting you where you want to be ... ie "immediate" income. Have you checked directly with the pension scheme that they will pay you directly your share of the pension income as soon as they have implemented the pension attachment order and you've confirmed you wish to take your pension?
Have they confirmed that in writing to you?
If they do will it be an actuarially reduced amount - ie a smaller "early pension"