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What happens to a final salary pension on divorce? Any actuary here?

63 replies

numbbrain · 20/01/2018 23:16

Me and Ex are divorcing and have had mediation sessions to discuss finances.

There is one question that the mediator cannot answer:

With the Final salary pension we have a cetv. But if say half that sum is taken and given to me. When he retires in say 10 years time, how is his pension calculated. Will he still get 1/60 times total years at work.


OP posts:
Ilovetolurk · 21/01/2018 07:59

He will get his 60ths less a fixed debit worked out at the time the pension is split and given to you

MrsBertBibby · 21/01/2018 08:27

You need an actuarial report as half his fund won't give you half the income. A report will advise on fair division, and he will see the impact. He won't be losing out on the pension he earns in future, just what he has earned to date, if that makes sense.

It's not cheap, so if you are young (under 40) and/or the pensions are small (under 100K) it may be overkill. For those getting closer to retirement it's essential. Where there are defined benefit schemes (as in your case) It's even more likely to be helpful.

Have you both got state pension forecasts? You will need those, and they can be slow. Complete form BR19.

SandyDenny · 21/01/2018 08:58

I would think it's going to be very complicated whatever you do but couldn't you have a set %age for the years that you were married and he was in the scheme.

So if you were married for 10 years and he ends up working there for 20 years you get 1/2 of the monthly payments when he retires.

Or do you want a lump sum now to invest in your own scheme?

numbbrain · 21/01/2018 21:47


ou need an actuarial report as half his fund won't give you half the income - what do you mean by this and how much are actuarial reports?

His CETV for divorce is 500k after 15 years. He has about 8-10 years to retirement.

I'm tempted to get an actuarial report but he says that is what he has already requested from the pension actuaries.

Sandy - I'd like a clean break situation with my own money to invest

OP posts:
MrsBertBibby · 21/01/2018 23:08

So it is £500K now? And he is over 50?

Get proper advice from a family solicitor, but that is screaming get an actuarial report to me.!

There are several reasons why an equal split of pension won't produce an equal pension income, but mainly, you would be buying pension with your share in the ordinary money purchase market, whilst his share would sit in the much better defined benefit scheme. You also need go factor in what state pension you both expect. Also, the CETV is done by his pension actuaries, who have a vested interest in keeping the CETV low, to depress the value they may have to shell out to your scheme.

Cost of a report depends on several factors, usually £1500 to £2000, but could be less or more.

numbbrain · 21/01/2018 23:13

He says it's a divorce settlement valuation, rather than a straight forward transfer value. So if I got 250k, to buy an annuity wuld only give me 4-6k/year.

Thankyou for your comments

OP posts:
MrsBertBibby · 22/01/2018 06:30

Oh transfer values are all for divorce: the point is, the pension scheme's actuaries can make all the assumptions in the calculation in favour of the scheme, which needs the figure as low as possible, thereby minimising the cost to the scheme.

Please get proper advice from someone who can see all the papers. There's too much at stake to risk a mess.

Ilovetolurk · 22/01/2018 06:42

OP do you know if the scheme is in deficit ie not fully funded? Many schemes are

If it is they cannot make you transfer out your share and you would get the option of a fixed credit payable from the scheme normal retirement age instead

Would probably be more than the annuity you could buy with the transfer value if you are in good health

I agree you need some proper advice on your options

Ilovetolurk · 22/01/2018 06:47

MrsBert most trustees of private schemes now offer fair value transfer values as they want to encourage transfers from the scheme to reduce the overall scheme liabilities at a saving to the buyout cost

There has been a big upturn in transfer activity for members close to retirement as a result

MrsBertBibby · 22/01/2018 08:02

I'm sure you are right lurk, but it is a different dynamic for divorce situations than for getting scheme members to ship out.

Anyway, the bottom line, OP, is get a decent family solicitor who can see all the papers to advise you properly..
Good luck!

pinkhorse · 22/01/2018 08:18

I'm a pensions actuary op. Transfer values are calculated on a best estimate basis. Scheme funding liabilities are calculated on a prudent basis to ensure any deficit in the scheme is dealt with correctly.

A pp said that if a scheme is underfunded then you are able to remain a member of the scheme in your own right with your share of the cetv but this is only if the scheme has had an insufficiency report and is currently restricting transfer values.

When you divorce, the actuary will calculate a pension debit (reflecting the share you have taken) and deduct this from your husbands pension when he reaches normal retirement date.

If you have any questions I'm happy to help

notapizzaeater · 22/01/2018 08:47

My mum and dad got divorced recently, they paid for an actuary report and im glad they did, my mum ended up with about 72% of the pot as dad is still working (mum isn't)

GeorgeTheHamster · 22/01/2018 09:27

If his fund is 500k you need to get an actuarial report. Ask your Solicitor about it. Please whatever you do, don't do this settlement without getting legal advice just for yourself.

numbbrain · 23/01/2018 20:29

Thank you so much for the replies.

It really is a minefield. Pinkhorse, how would I go about finding out about if the scheme has had an insufficiency report and is currently restricting transfer values?

I have been in touch with someone today and they said a report is around £2k.

How are pension values offset against house equity. We have about 250k?


OP posts:
pinkhorse · 23/01/2018 20:54

Your husband will be able to ask the trustees if there is an insufficiency report in place restricting transfer values. Do you have a pension to transfer the money to or would you prefer to become a member of your husbands scheme?

numbbrain · 23/01/2018 21:42

Apparently I can;t become a member of his scheme.

OP posts:
pinkhorse · 23/01/2018 21:47

Oh that means they aren't restricting transfer values. You need to transfer your share to your own pension policy

numbbrain · 24/01/2018 01:01

Thanks Pinkhorse

So who decides what is a fair percentage for me to have. I have 3 years of teachers pension from 20 yrs ago. Then looked after children.

His pension is after 15 years and he has another 10 to accrue. Does the solicitor come up with that or is that what will come from the actuary report.

Also what are the £80 reports available?

Sorry for all the questions.

OP posts:
notmrscookie · 24/01/2018 02:33

You may agree an % and have to transfer it out if u go against house..I got 15 % of his pension but all of house ..he got savings and his massive pension .. I do have savings too. ..remember it will cost to spilit too

pinkhorse · 24/01/2018 06:49

The courts / solicitors will decide what % to award you. As actuaries we just tell you what the CETV is. The % you are awarded is decided by looking at all the other assets etc in the marriage

MrsBertBibby · 24/01/2018 07:49

An actuarial pdnsions report in divorce does far more than calculate the CETV!

It looks at all pension assets and advises on how to divide them to achieve various outcomes, (equality of fund, equality of retirement income at various ages, etc) whilst maximising total pensions and minimising total cost.

The solicitor has to ensure the actuary is asked the right questions, then helps you understand the report and negotiate your settlement.

GeorgeTheHamster · 24/01/2018 07:59

You need to get proper legal advice about all this.

numbbrain · 26/01/2018 00:08

I will talk to a solicitor. I am gathering as much info as I can so that when I see a solicitor, I can ask the right questions and not spend my money learning.

We had a good chat this evening and we differed on how pensions are looked at. He thought they took the current cetv and worked on that whereas i thought the solicitor would look at future potential and then work out a %.

OP posts:
MrsBertBibby · 26/01/2018 07:31

He is correct there, the Court looks at what he has accrued so far, not what he might accrue in future.

GeorgeTheHamster · 26/01/2018 07:56

Yes but the CETV is a blunt instrument and there needs to be a comparison of what the respective shares could do. Final salary schemes can vary quite a lot compared to the CETVs provided

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