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Case Studies for the Treatment of
Pensions Advice on Divorce 
The following are some of the situations where the
advice of Collins Actuaries has been sought regarding pension
scheme rights on divorce. Taking advice can save you and your client both time
and money.
Case Scenario 1 Sharing the Right Pension
Collins Actuaries
was instructed to provide a pension sharing report on behalf
of the wife. The
husband had two pension arrangements with CETVs of
approximately £100,000 each. One was a final salary scheme and the other a money
purchase pension arrangement. Both arrangements offered an external share only. Only the money purchase scheme charged to implement a
pension share implying the share should be from the final
salary scheme. However,
further investigation revealed that sharing the final salary
scheme resulted in a pension debit for the husband of
approximately £5,800 whereas sharing the money purchase
scheme would result in an estimated pension debit for the
husband of only £3,000. There was no difference to the wife which pension was
shared. Clearly
it was far more advantageous to share all of the money
purchase scheme to the wife and for the husband to retain his
final salary scheme.
If no advice had been sought the husband could have
potentially been nearly £3,000 per annum worse off at
retirement.
The charges levied for pension sharing are only one
part of the decision.
Case Scenario 2 Incorrect Police CETV
Collins Actuaries were asked to check a Police
Scheme CETV. The
CETV quoted by the scheme was £233,000. Our check revealed an error in the calculations which
the Police Scheme acknowledged. A revised CETV was issued for £378,000. This represented a disparity of some £145,000. Furthermore Collins Actuaries obtained a SERPS
valuation that hadn't been disclosed, which came back with a
value of £4,400.
If offsetting had been used, the wife would have missed
out on nearly £150,000 of pension benefit. Only actuaries, who understand how CETVs are
calculated, would be able to pick up and query this sort of
error.
Don't forget
SERPS. With few exceptions, there will always be a SERPS
value.
Case Scenario 3 Pension Sharing in the Public
Sector
Collins Actuaries was contacted on the telephone by
a solicitor regarding a pension share in a public sector
scheme. Both the
husband and wife were in receipt of a pension from the scheme
having retired early due to ill health. Now aged 55, they wanted to implement a pension share
to achieve equality of pension income and the solicitor was
making an enquiry about a pension sharing report. With our extensive knowledge on pension sharing, we
were able to immediately identify that, in this scheme, the
wife would not be able to receive any benefit from her pension
credit until she reached age 60 although the husband's
pension would reduce with immediate effect, thus creating an
income gap for 5 years until the wife reached age 60. This advice, provided free of charge, led the parties to
consider an alternative method of settlement and avoided a
costly mistake.
Pension Sharing in public sector schemes is cost
effective but not always practical.
Don't leave pension discussions to the end - it
could be costly and too late!
Case Scenario 4 SERPS Valuation not Disclosed
Collins Actuaries was asked to advise in a seemingly
straightforward case involving just two personal pensions for
the husband. The
total pension assets disclosed were valued at £122,000. A SERPS forecast (from Form BR19) had been provided,
but not the value of those SERPS benefits (from Form BR20). When Collins Actuaries received the SERPS valuation it
was for £10,300.
Don't forget SERPS. Check your divorce cases now. Is there a SERPS valuation?
Is there such a thing as a straightforward case when it
comes to pensions?
Case Scenario 5 Forgotten Pension or Poor
Disclosure?
Collins Actuaries was approached with a joint
instruction. Both
parties were asked to complete an employment history form. The husband stated that his only employment had been
with the police. Collins
Actuaries requested from the Department for Work and Pensions
a SERPS forecast and valuation fully expecting for the
forecast to show no additional pension entitlement and for the
valuation to show a SERPS value in the low thousands of
pounds. The SERPS
valuation showed no value, which was clearly anomalous with
the pension history of the police officer concerned. On clarifying this with the DWP it was discovered that
the husband had an earlier employment during which he was
contracted-out of SERPS. Further investigation by Collins Actuaries revealed
that the husband had a deferred pension in a private scheme
for which the CETV was £10,600.
If the only pension is in a contracted-out scheme then
there should always be a SERPS value. If there is no SERPS value, there could be another
pension.
To untrained eyes, valuable pensions can be easily
overlooked.
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