Case Studies

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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