Pension Sharing Orders - equality of income in retirement?

[MrsMcBoatface]

Can anyone tell me what this entails?

The situation is broadly:

• party one, civil service pension, CETV value 300k approx
• party two, civil service pension, CETV value 100k approx.

Both parties are still working and still paying into pension schemes.

Other asset include equity in the family home, proposed split 75/25 in favour of party 2.

The proposed settlement states that there will be a pension sharing order to achieve equality of incomes in retirement. Does this mean that if party two chooses to stop working or paying into the pension, and party one continues to contribute, that party one is working towards a better income in retirement for the benefit of party two, or is 'equality of income' assessed when the divorce is final?

I've googled but can't find an answer. Just to be clear, I'm 'asking for a friend' -- as my divorce settlement was a clean break 50/50 split and I never needed to look into the details of pension sharing. I'm finding it baffling.. as friend has asked for advice, I'm wondering if they should pay for some advice from an actuary before agreeing 'equality of income in retirement'!

Out of interest, why is the house a 75/25 split? Also, is the difference in pension due to age, salary, contributions paid?

Many thanks Familylawsolicitor , I was hoping that there would be a straightforward answer! An actuary will be instructed but it is my understanding that the equality of income would be agreed prior to this, and my concern is that party one will have already agreed less from the sale of the family home.

Soonto be60 I'm at a loss to explain the 75/25 split, it seems generous to me but both parties are in their early 50s and party two earns less. This is by choice as it's part time. I would have thought that 50/50 or even 60/40 would be a more appropriate split, there are no young children. There's a choice of accepting this offer or going to court (which would cost more than either can afford) . Party one just wants to move on.. but my instincts are saying that using the threat of court might backfire for party two if there is a risk that they come out with less equity plus the cost of court!

Ive just had an actuary report. It was £2000 and took 3 months to complete (normal!). The report really clear and suggests that the equality of pension means its calculated when we both reach 60. The Pension sharing process would mean i have a lump sum from his pension and i draw, at 60 from that sum. (Public sector)
Its worked out so we get same amount yearly, even though our individual pension pots different.
The offset amount difficult as mine was worked out and clearly we would not be able to use that calculation as not enough (equity /other assets) in pot. The actuary gives you options to offset or pension share and, as in my case, only the PSO would be possible.
The 75/25 split sounds really generous, particularly as no young children but the figures are really complicated in every case, and with a public sector pension, needs careful calculations.
Sorry, it doesn't really help with your question!

Many thanks Chumpnomore its very helpful. 3 months seems a long time but makes me wonder if they should get the actuary report before agreeing any split or division, as I'm pretty sure that a clean break would be preferable and the offset value (I assume that this is different to the CETV) may clarify the position. I just think that with equality of the pension amounts there should also be something more approaching equality with regards to the equity split.

At the pace they are going they might be very close to 60 by the time this is resolved!

Do NOT agree to a sharing order or anything like that on a final/average salary scheme without a proper actuary report.

The sharing order will be on the value on the day it comes into effect or thereabouts and the person getting the new share will effectively be a separate member of the scheme. They will not normally be able to pay anything further into the account.
Whatever each person does thereafter about other pensions savings, salaries, etc is their problem and does not affect the other.

Good luck. The actuary report was the best money I’ve ever spent.

PS - we shared our assets like the house etc according to me having the kids and I got more than him as a result and then the pensions were treated for equality in retirement.

there are no young children

Were there young children though?

Was party 2’s career / earning potential impacted because they were bringing up children hence why they now earn less & have a smaller pension? Was party 1 free to further their career because party 2 took care of the family?

Just wondering if that would account for the equity disparity.

Meeeh good advice. It sounds like they shouldn't agree to anything before the report is available and that's going to be a few months wait. I don't know why they weren't advised to instruct this already.

Lightstars yes there were children but they've now grown up. I'm basing it on my own experience which was a 50/50 split, as the children had left home and I could get a job, even though I was earning about half of what exH was earning. We didn't use solicitors but I was advised that 50/50 would have applied in my case and I was just happy to be out of the marriage. I probably could have asked for more but I love my life now, no regrets!

The judge looked my ex in the eye and told him outright that he’d have given me more than what I asked for. My ex is still being a knob and makes out like he got nothing.

@Meeeh really helpful to hear your experience of being in front of the judge.
I guess this may be one of the pitfalls of phone FDR ad judge can't see the parties involved.
My actuary report very clear and im not worried about this at FDR but im now turning thoughts to what is likely to happen with splitting equity /assets. Because i looked after 4 children over 20 years, my earning capacity has obviously been impacted. In your experience, did it appear 'usual' for a judge to consider this when suggesting or agreeing to the settlement? My solicitor has not really talked to me yet about getting more than 50% so id be really interested to know /hear that this is feasible when earning capacity is less for one party (im 50 now and although work, earn a quarter of my OH salary) thanks for any advice!

@chumonomore is variable, there are no rules. Our process was that we each had to submit an offer prior to the hearing. We saw the judge first thing - he provided some guidance, then we were sent out to negotiate a deal, cane back in. He advised on sticking points and an agreement was reached.
The only people who left happy were the solicitors but I do not regret the money I paid for a great barrister as it meant she did the negotiating and I didn’t even have to see his fugly face and he could scream at her instead.

@meeeh i agree with you there. Obviously we would all love to do this without solicitor and barrister, but they know what they are doing and i don't!
Thanks for writing about your experience with the process and about the judge. It really does help to know what others have experienced!

I am a pensions on divorce expert and provide actuarial pension valuations and sharing reports. I am Authorised / Regulated etc. I specialize in pensions but also trusts, hedge funds, commercial real estate and private company ownership and valuation issues. I was a City fund manager for 18 years.

I cannot comment on an individual case, but an actuarial pension report is absolutely and categorically essential- if there are any Defined Benefit pensions involved. But even the
sharing of most Defined Contributions pensions, will also benefit from an independent analysis and report. Most women should receive the benefit of a life expectancy adjustment - often 53/47 for a couple in late 40s / 50s. But I find this adjustment routinely left out of most male-dominated ‘amicable’ agreements.

It will almost always be in a woman’s advantage to instruct a report. If your ex refuses or quibbles over price, I would just go ahead - and instruct on your own. I cannot recall a case where the cost of a pension report has not been repaid many, many times over - and that is without a neutral specialist picking up on some other incorrect calculation or valuation in the wider financial settlement.
I am happy to answer enquiries
Please get in touch - George Case - www.cfclimited.co.uk

You say it will almost always be to a woman's advantage to instruct a report. Is that always the case when hers is DB and his DC albeit hers is half the size? I heard that DB are more valuable and in the above situation it may not be advantageous

The actuary report doesn’t care about her/him. It works out what the future outputs are on the final salary pension vs the other pensions and then recommends what the split should be to achieve equality at the point of divorce, NOT down the line. So the person receiving the sharing order will become a member of the scheme themselves.
It is likely that the person with the final salary pension will try to negotiate down and I personally gave up more of the house than the pension as it’s worth more in the future.

But there is no male/female bias in an actuary report - that’s the whole point. You get the pension issue off the table and then other assets like the house can be split and this is where children living home etc might come into play, but not the pension.

If W has a Defined Benefit pension from Teachers/NHS / Local Govt - then this could have a high capital value - so if H only had a DC pension, this could be a position for W to stay quiet and NOT instruct a pension report - best to ask an expert that question- which they will do for free , before going ahead “My pension is DB with annual payment of £8000 - is there a possibility that a report could end up giving a higher valuation compared to my ex-H who has only DC pensions worth £300,000? answer probably yes in this case - Capital value of DB pension with inflation increases can be more than 50 X annual income (recent case 62 times)

Totally agree and that’s what H tried to do in my case. Form E asks for the CETV but does not consider the difference between DB and DC.

@Pensionexpert I have a question but couldn't click through to your website. Is it ok to DM you here? Essentially, I want advice in the case that one party has a serious medical condition that is almost guaranteed to lead to early retirement and additional caring costs. Parity of income might not be fair and it's hard to predict retirement age.

@Pensionexpert

If W has a Defined Benefit pension from Teachers/NHS / Local Govt - then this could have a high capital value - so if H only had a DC pension, this could be a position for W to stay quiet and NOT instruct a pension report - best to ask an expert that question- which they will do for free , before going ahead “My pension is DB with annual payment of £8000 - is there a possibility that a report could end up giving a higher valuation compared to my ex-H who has only DC pensions worth £300,000? answer probably yes in this case - Capital value of DB pension with inflation increases can be more than 50 X annual income (recent case 62 times)

That is basically my situation. The ex's pension is worth twice my DB one on CETV but he is older and has been paying in longer. I'm now in a DC scheme but only just...at the point the PODE was instructed I was still DB. Does that matter that we now both have DC? Im worried that it will suggest my pension income at 60 will be huge even though I'm not in it any more?

@ShimmyAndShine that’s what an actuary report is for. It analyses the value of each at the point of divorce and suggests amounts to achieve equality. Then you get divorced. What happens thereafter is what it is.

I’m in a serious legal pickle over pensions. Married 25 years.

STBEX has 2 pensions. A SIPP and a Defined benefit scheme which cannot be transferred across to me.

We both jointly instructed a pension sharing report, which came back showing equality in income at various stages of our ages.

Trouble is, he gets the DB scheme, which he says is underfunded, and miscalculated in the report etc and I get the more flexible SIPP. In monetary terms, I ‘win’ as I have more money...but I’m younger, too.

He’s also complaining that he won’t be able to leave any £ to our son as inheritance.

He’s desperate we get the report done again which my SHL is dead against, as it undermines the original report, and will shoot me in the foot financially.

Meanwhile, H is now refusing to negotiate on any other matters in the financial split.

Any advice? Can’t believe we’re the first couple in this mess.

@byebyemissamericanpie sorry to hear that. My ex is doing the same with his business valuation. Trying to get the expert to down grade the valuation. It's so exasperating.

Anyway, we are now heading to court because he wouldn't negotiate. Oh well. It will resolve eventually.

@HosannainExcelSheets (excellent name btw)

I’m sorry to hear you’re heading to court. I’m trying v hard not to go down that route, but it increasingly looks like we may have to.

Mine keeps wanting to do a negotiation over the kitchen table FFS.

I'm interested in timing.
STBX wants to separate. He has a huge DC pension, I have 2 small DB pensions. He is 62 and has said he wants to separate within the next 4 years when he will retire. I plan to continue working.
He has a health condition that he is in denial about (liver cirrohsis).
I want to know when to do the pension actuary report?
Will a share of his pension still be availble to me if he retires sooner and takes his pension? If he does devulge that he has a serious health condition and his pension payments are adjusted accordingly, can I still take a share of the pension.
The advice I have received so far is that I would be entitled to a 50:50 split. We have a house and savings which will be easy to split. It's the pensions I am unsure about.