Retired police officer pension sharing

Hi Mousey

You are not the first to be confused about how pension sharing works, and you certainly won’t be the last.

Pension sharing is done using the (capital) value of the pension when the order is implemented. Because you are drawing your pension a 50:50 capital share now will halve your pension. As for your wife, the other half of the capital value of your pension becomes a pension credit for her. The scheme takes this theoretical lump sum and creates a separate pension entitlement for your wife. From that point on, your two pensions are unconnected. Your wife’s pension pot will then be referred to by the scheme in terms of the retirement pension it will produce when she is 60. Her pension is what is called a deferred pension. These are sometimes incorrectly called “frozen” pensions. The reason why this term is incorrect is that the deferred pension escalates at 5% compound, or the increase in the Retail Prices Index (RPI) if lower. No deductions apply to her pension and therefore it would only lose value in real terms if RPI goes above 5%.

I cannot answer your question about whether the required share would be more or less than 50:50 if you opt for equality of income at 60. We would have to do the calculations to answer that question and that is somewhat outside the scope of this forum.

Whatever form of pension sharing order you opt for your pension will reduce immediately the order is implemented (within four months of it being made by the Court). This happens irrespective of the fact that your wife will not be able to draw her pension until she is 60. This is the unintended consequence I referred to in my earlier post.

If any of this still raises questions or uncertainty for you please do post again as it is likely that other wiki members reading this thread will be in exactly the same position.

Regards,

Peter.

Thanks Peter

This is helping clarify things for me. But would it be better for me to try to delay the divorce so that I can continue drawing on my pension for longer as I assume this would mean that my wife would get less in her pension pot if the split was on the value of the CETV since this is going down every month I am being paid my pension? Or does this not make any difference since I am receiving the pension I have earned? Also another comment mentioned the CEB rather than the CETV would be what is considered - can you explain what this means and if this is the case or not?

Hi Mousey

You are correct, delaying the divorce would mean that you could continue to draw your pension at the current rate. As you suggest its value will gradually erode the capital value of the pension over time and therefore there will be less available for you to share with your wife. This could suit you both, particularly if you are making maintenance payments of any sort out of your pension. Otherwise, it would be to your wife’s disadvantage.

A Cash Equivalent Transfer Value (CETV) is the value of a deferred pension that the member has a legal right to transfer to another provider, once they have ceased being an active member of the scheme. Typically, this applies when someone leaves one job and moves to another, they have the right to take the transfer value, which must go into another pension arrangement. Pension divorce legislation piggybacks this arrangement by using the CETV as the value applied for pension sharing orders etc.

Once a pension goes into payment there is no transfer right and therefore no pre-existing mechanism for valuing the pension. Therefore, in a divorce an alternative valuation basis is required and this is called a Cash Equivalent Benefit (C.E.B.). Interestingly, I was recently reading a legal textbook on this subject (yes, I know that is VERY SAD), in which it is said that when the pension is in payment any professional valuation of the pension can be used on form E. In other words, you do not have to obtain the value from the scheme but could obtain a valuation from your local friendly actuarial firm. If you do request the scheme itself to produce a valuation they can charge for this work, and most do. The charges are usually around £500 and the turnaround times are often measured in months.

Peter.

Hi Again Peter

This is very helpful and thank you for your very prompt replies.

Are you able to tell me if I was to split my pension with my wife at 50:50 would that mean that I lose half of my present monthly pension income when the split effectively takes place. Also what would my wife be likely to receive on a monthly/annual basis when she is 60 - would she get half my present monthly pension income plus the index linking or would she receive less given that women are supposed to live longer than men. My wife would like to know what she is likely to get on a monthly/annual basis when the time comes.

Also would it be cheaper and quicker to get an actuary to value the CEB rather than the Police pension scheme?

Hi M

Yes on a 50:50 split you will lose half your pension when the split takes place.

Your wife would not necessarily get half your present pension at her retirement. She would get half the capital value of your pension (the C.E.B.) and this would be converted into an annual/monthly pension using special factors that are age dependant. This pension will then be index linked through to (and beyond) her retirement.

We would need to do the calculations to know what her pension would be and that is rather outside the scope of this forum.

If all you need is a valuation of your police pension then our firm would charge £115 including VAT. This would give you a valuation only; it would not give you the pension sharing figures. Our turnaround time is five working days. I do not know what the Police Pension Scheme is currently charging for a CEB, but I suspect that our fees and timescales compare favourably.

If you need a pension sharing report that gives the respective pension incomes, assuming that you are only considering your police pension our turnaround time would be five to ten working days and the cost approximately £640 (including VAT). I am not sure whether the police scheme will give you the respective income figures before the pension sharing order is made, you would need to check with them to make the comparison. If your wife has any pensions of her own (apart from the basic state pension), then in the interest of fairness and equality these should be taken into account. Depending on what her pensions are, this will increase the cost of any pension sharing report that we might do.

Peter.

Thanks very much Peter this information has been really helpful - I will look to your services when the time comes and also get back to you should I need further clarification on any other points.

Meantime - greatful for your help.

I am replying to an old posting, as the circumstances and the replies given so far mirror my own situation, in as far as I am the stbx wife of a retired police officer.

He is in receipt of his pension and we are divorcing after 25 years marriage, plus 3 years co-habitation.

If I understand correctly, if I am awarded a 50% pension share, he will immediately lose 50% of his pension income. As I cannot draw my 50% until my age 60 some 9 years away, he is financially disadvantaged from day 1, whilst I gain no immediate income?

Would you therefore recommend that I instead suggest that he keeps his pension in full and pays me maintenance of 50% of that figure? He is no worse/better off and I have an income (I have nothing at present). I could possibly negotiate a smaller split, say 40% of current income, to make the proposition more attractive to him

One immediate point springs to mind:

Presumably if I go for the pension split, my rights are protected and I will receive an income, independently of him at my age 60, even if he were to die before my age 60
whereas maintenance would cease upon his earlier death?

also, if I were to remarry the maintenace would stop, but the pension fund would remain mine?

Many thanks for your advice and a fantastic site