Pension Advice on Divorce

Discussion in 'Armed Forces Pension Scheme' started by CplClaymore, Mar 12, 2006.

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  1. Where can I get good advice on my pension if I get divorced which is looking likely... i know she'll be entitled to half of the pansion accrued during the marriage, but is this just the basic pension, what about the resettlement bit?? very confusing.

    I don't want to pay a solicitor £50 an hour for him to turn around and say he knows bugger all about the Army and the pensions ect..

    anyone have a good firm or place for RELIABLE advice..

    Cheers
     
  2. Have you seen your local pay office yet? They might help. Also, Citicens Advice is free.

    Hope you get it sorted, mate.
     
  3. Be careful on this one and take advice. Under English law, she gets half your pension, including the bit you earned before you even met her! Under Scots law, only the pension you accrued during the time of the marriage. Scots law makes so much more sense!. But, as I said earlier, I am no pension lawyer, just someone that paid out under the English system and you need to get some advice.
     
  4. BiscuitsAB

    BiscuitsAB LE Moderator

    There are many types of pensions that can be divided on divorce and the most complex are defined benefit schemes. A defined contribution scheme will be easier to divide between the parties. Both the state basic pension and state earnings related pension scheme (SERPS) can also be divided on divorce although administratively this could take considerably longer to achieve than the other pension arrangements.



    Defined benefit scheme
    These are the most complex pension arrangements to value on divorce because the benefits at normal pension age (NPA) are based on the number of years of service and the final salary of the scheme member at that time, with no ongoing fund value to work with.

    Defined benefit schemes are only provided by employers as part of the occupational pension scheme for the employees of the company and are commonly known as final salary pensions. No funds are specifically accumulated for each individual member, however an actuary must calculate the benefits paid to the members at retirement age and ensure that the pension scheme as a whole has enough money to pay the pension obligations now and in the future.

    This means that various actuarial assumptions must be made about inflation, investment return, earnings growth, discretionary benefits, future allowances for career progression and salary increases of members as well as the maturity of the scheme population and the balance between the cash flow received and paid out of the scheme. There are also obligations to meet the minimum funding requirement (MFR) that aims to ensure all defined benefit schemes are not underfunded or have an excessive surplus.
    During ancillary relief proceedings the court will in the first instance require the cash equivalent transfer value (CETV) from the provider of the final salary pension. This figure assumes that the member will leave service at the point of valuation that is usually an incorrect assumption and can greatly underestimate the fair value of the members pension rights. This means where the CETV Method is not sufficient, expert evidence may have to be used to determine a suitably adjusted CETV reflecting the circumstances and specific needs of the parties. This can be achieved by appointing a pensions expert to conduct a pension audit of all the pension arrangements.

    Defined benefit schemes have been established from a number of different sources. To attract and retain the best employees most 'blue chip' companies have in the past provided final salary pensions. These have typically been set up with a 1/60th accrual rate and this means that the employees must work for 40 years before they can receive the maximum Inland Revenue benefits of 2/3rds final salary, of which part can be commuted to a tax free lump sum.

    Public service schemes also offer a final salary pension with an accrual rate of 1/80th plus a tax free lump sum in addition. This means that if the member works for 40 years this arrangement will be equal to the maximum Inland Revenue benefits of 2/3rds final salary. The third type is the Armed Forces Pension Scheme that is also a final salary pension but is governed by prerogative instruments and derives their authority from the Queen rather than by parliament.

    Whatever the source of the defined benefit scheme, on divorce the valuation process will be similar and a pensions expert will have to consider the actuarial assumptions of the scheme together with other benefits such as discretionary and death in service benefits to arrive at a fair value, from which the former spouse will receive a percentage applied as an earmarking order or pension sharing order.


    Defined contribution scheme
    There are a great variety of defined contribution schemes provided by employers or established by individuals as private pensions. The most common employer pension schemes are group personal pensions (GPP), group stakeholder pensions, occupational money purchase schemes and additional voluntary contribution (AVC) schemes.

    For individuals the most common types are personal pensions, stakeholder pensions and retirement annuity policies (RAPs). All of these pension arrangements can be divided by the court on divorce and are much easier to determine their value compared to a defined benefit scheme. This is because the cash equivalent transfer value will usually be an acceptable valuation of the transferable fund from the pension arrangement.

    The value of a defined contribution scheme is dependent on the contributions made and the underlying investment growth so the CETV is an accurate value, less any charges, of what the pension is worth. The only exception would be an occupational money purchase scheme where there may be additional death in service benefits provided by the employer to the employees. It would be the court decisions as to whether the cost of a pension audit could be justified by the value added to the former spouse.



    In terms of value the matrimonial home is usually the largest family asset, however, where there is a long marriage or one or both of the parties is a high earner the value of retirement benefits can be substantial.

    In most cases of divorce, nullity or judicial separation of marriage the court will have to satisfy the needs of the parties from limited resources.
    Where the assets are substantial the principles established in White v White (2000) where the needs of both parties are easily satisfied from a small proportion of the assets, the courts should first consider an equal division of the assets and depart from this conclusion only if there is good reason for doing so.

    These principles can also be applied during ancillary relief proceedings relating to pension rights between the parties as shown in the step-by-step guide. Although the courts may start with a 50/50 division of the retirement benefits, other factors set out in section 25 of the Matrimonial Causes Act 1973 (MCA 73) may influence the court to decide on a different division.

    There are many types of pensions that can be divided on divorce and the most complex are defined benefit schemes. A defined contribution scheme will be easier to divide between the parties. Both the state basic pension and state earnings related pension scheme (SERPS) can also be divided on divorce although administratively this could take considerably longer to achieve than the other pension arrangements.

    The simple answer is you need a good financial planner who is competant in this area. A starting point would be www.unbaised.co.uk which is the web site for IFA promotions, which not suprisingly promotes Indepant Financial Advice. You'll get a first meeting free but then expect to pay, if you take on a specialist it will not be cheap.
     
  5. Cpl, you won't even get a trainee solicitor for that! Try more like £170 p.h. and London rates would probably be much higher.

    8O
     
  6. More yet if you want an even half decent Family Division Lawyer. My advice, go for the very best it will be cheaper in the long run.
     
  7. Cpl

    Sorry to be the bearer of more bad tidings but it gets worse. When you apply to Pensions section at Glasgow for the forecast you will have to provide for her solicitors , they also charge you for the privilege...... Its like being a hooker in in a lift..... you get screwed at every level.... :cry:
     
  8. vauxhall

    vauxhall Sponsor

    The Forces Pension Society has found Michael McCreide of Biscoes Solicitors and Tina Day or Chris Upfield of Coffin Mew to be good with Service pensions. The phone number for Coffin Mew is 02392 388021 - the phone number for Biscoes is 02392 660261. These are both Portsmouth numbers, and I have no idea whether you live in the South, but it is a start.
     
  9. Cpl,
    Sorry to hear your bad news. My advice (for what it is worth) is to get the best legal advice/representation you can afford.

    I believe that she is entitled to ASK for up to 50% of your pension, but the amount is decided on in court. A friend recently got divorced and she got the following: just over half the house (approx 60%); a fixed sum "maintenance" for the next 3 years AND 25% of his service pesnion even though he left the service several years BEFORE they got together. All of this despite the facts that there are NO children, she is fully fit and in full time employement.

    Remember to get a "Consent Order - Clean Break" at the Decree Absolute stage because this stops her coming back for more!

    Good luck mate,

    Tubs

    Edited for mong spelling.
     
  10. Out of curiosity, if she is entitled to half of your pension, does that work both ways. If she is in receipt of a pension, are you entitled to a share of it, depending on the same criteria etc?
     
  11. RGJ,

    My understanding is that BOTH pensions are put in a pot and the court then decides on the split between the two. The pensions are then divided up according to the judges award. E.G. If my pension was worth £15k and hers was worth £10k, if the judge awards a 50/50 split i would only lose £2.5k of mine.

    T
     
  12. Interesting info. At one time Mrs RGJ and myself were considering a split but we are reconciled now. It never got to a stage where I needed to seek advice but I did wonder about the pension bit. Thanks for that.