Pension - explanation required!

[Febo24]

Hello!

Is there an easy explanation for someone easily confused about this subject (me) on how the pension thing works?

I'm separated and our assets are likely to go 50/50 as we both earn similar now and have the kids 60/40. In my initial consultation, the solicitor thought that I'd likely get some of my ex's pension, which would account for the years working part time etc raising kids.

I just don't understand what that means though! Does that mean when he cashes in his pension, I get a share? Or does it mean I get something now/at the point it goes through?

Any good explainer websites out there?

I'm an intelligent woman, but pensions have forever foxed me.

It means part of his pension is awarded and transferred to you and you have to invest in your Own pension

Or yiu could try to negotiate a higher share if house equity / other assets to offset that to equalise your overall share of assets

Do you mean, rather than go for the pension share?

Thank you by the way!

I think be careful about taking the pension as it will grow tax free for you.

So you can’t take the pension share as cash now. You have to invest it in your own pension
This may be something you want to do

Alternatively you may agree to leave pension alone but have say 60% of house equity instead of 50% ( just as example) in order to achieve overall a 50% share of total assets

We had an actuary value the pensions and determine how to split it so our incomes are the same at retirement. I get more than 50% as I was at home with children and was not able to build up a significant pension. When the financial order is sealed that percentage of the fund comes to me and is put in a pension of my choosing.

Talk to your lawyer about whether this is something you want to do.

@mostlydrinkstea are the pensions valued at a different value to their face value? So if a pension is £100k in the bank, is it valued at more or less than that for divorce purposes?

Pensions are a mystery to me too. I do know that my pot amount was different to my CETV amount and the CETV one was the figure used during negotiations.

Depends what you mean by divorce process. We got CETV values and then sent them to the actuary and they came up with the percentages so that we would have equality of income in retirement. We didn't ask the question about how much pension could be offset against the value of the house. My understanding is that it is not like for like. If there was a CETV of £200k and half the house was £200k you cant just say fine I'll have the house and leave the pension. That is the limit of my understanding.

Getting the CETV value really is the starting point as that is what is used in the process.

Is the cetv value more or less than the current value of the pension pot? I’m not sure what cetv is - is it what the pension would be worth at retirement? Is it what you paid in?

A massive difference is if it’s a money purchase / stakeholder type private pension in which case the CETV is effectively the value. Though an actuary may advise I different allocation in the pension sharing order to account for differences in ages etc. The idea is to give an equal retirement provision.

A whole other ball game if someone has a public sector, final salary pension that can have all sorts of bells & whistles that can mean the actual value is much greater than the CETV. so people in NHS, emergency services, local authorities etc etc. In which case hugely worthwhile spending the couple of grand to get an actuarial report.

I think it's valued differently if final salary or personal pension

I had no idea pensions came into divorce, so you've got one up on me OP!
I doubt DH knows either though, so I'm probably OK...

@RagzReturnsRebooted

I had no idea pensions came into divorce, so you've got one up on me OP! I doubt DH knows either though, so I'm probably OK...

Mate, I'm not sure I'm much wiser! But I'm glad you've benefitted.

Actually, I am, thank you all.

He's a civil servant so it might be worth while looking into it rather than the equity in the house. It's so tiring just thinking about it!

The pension asset can often be more than the house asset so you must bring it into consideration and get proper valuations

The CETV is the Cash equivalent Transfer value presently, against the pot value which is an assumption of what the pension value will likely be at the time of retirement.
Eg the pension pot may be £100k estimated at retirement if things remain, and the CETV may be £10k. In the divorce the amount is worked out on the CETV value as that is 'real world' money currently so a potential percentage of that would be transferred in to either parties pension, allowing for the maturing to maintain an equal amount at retirement. Only 'actual' money currently in the pension can be transferred as the rest is just an estimate of what might be. All manner of things could happen between now and retirement eg loss of income, reduction or increase in Pension contributions, failing of the stock market in which the pension is invested in, inflation etc.
Hope that helps someone

OP if he’s a civil servant it more than “might” be worth looking at. It’s imperative that you get expert advice. Many women lose tens of thousands but not appreciating the true value of their husbands pension pots in divorces. We can get very focused on the family home, keeping it etc at the expense of what can sometimes be a much more valuable asset.

Thanks for this thread. I am in similar situation and have requested CETV for my pension, stbx is doing the same for his. Has anyone used an actuary that they would be happy to recommend please?

You can read more here:
pinningtonlaw.co.uk/financial-settlements/pension-sharing/pension-sharing-order/

But others have it correct. You can get a future pension based on part of his pension (sharing) or get more of other assets instead of that (offsetting).

A civil service pension could be worth hundreds of thousands if he's been working a while -- much less if shorter time, or joined a more recent version of the scheme(s). As a very rough ballpark, number of years in work x salary divided by 4 will be some kind of guide for general public sector schemes.
Also, any sharing may depend on how long married and how much was accrued before you married.