Pension actuary report

[Catsruledogsdroolokay]

Hello - need some advice on getting a pension actuary report
The mediator has said we need to sort one out but I'm really struggling to find any information out there about what they actually do!
I know they look at my pension and his pension....... but then how do they split it? I have 100K, he has 400K. Will they say he has to give me 150K so we both have 250K?
He earns substantially more than me and with 20yrs left to work he will accrue a much bigger pot at retirement age. Is this just something I have to accept? Or will the pension actuary take that into account and potentially give me MORE of the pot?
Don't get me wrong, I'm relieved that the law allows for me to equalise our pensions to date (mine is much lower because I gave up my career for the kids and for his) but need to mentally prepare myself for his anger if they say I get more than 50% of the total pot......
Anyone been through this and can give me some advice?

P.S We have agreed NO OFFSETTING should be taken into account

Do either of you have a final salary pension scheme, even if it’s no longer being paid into?

The actuaries value the pensions that's all. Current value terms might differ from the balance showing. Division of pensions like other assets is decided jointly in mediation or by a judge if you go to court.

It sounds like you both have defined contribution schemes, so I don’t know why you would need an actuary. They specialise in defined benefit. I can’t imagine that just a normal financial adviser or similar wouldn’t be able to run the calculations you need.
Having said that, have you tried contacting the big actuarial firms just to see what they say? E.g. Hymans Robertson.

They may do a pension prediction so if he is earning more and inline for a much bigger pension that may be reflected in the report rather than just current value. (Or not).

As far as I know (got divorced several years ago, reasonably high net worth):

It is fundamentally a negotiation around a rough idea of ‘fairness’ which both solicitors know. It is rare it goes to court as, if it goes through the full court process, it can cost 10s or even 100s of thousands.

If there is sufficient funds for you both to maintain your current lifestyles with assets, then you can start to discuss extra marital assets etc. But, if that is not the case, which is far more common, and the marriage has been long, generally the assets are split so both parties can continue with their current lifestyle as much as possible (normally both suffer a loss of lifestyle, at least at first).

Pensions aren’t just considered the same as cash. They are normally discounted, as there is thought to be a value in readily available funds. The closer you are to pension age, the closer they get to cash.

Ultimately, you need to think of what would be fair going forwards BUT be prepared to negotiate around it. Your STBXH should do the same. It is human nature that you will both err in your own favour in your idea of fairness, so be guided by your solicitor and ask them unloaded questions.

Unless there are many millions at stake, court is best avoided.

You won’t automatically get 50% of pension, most likely not more than that.

it will depend on other assets and both parties respective needs, and the type of pensions, length of marriage, ages of children etc

and with 20 years left you’ll be expected to also be able to build your own pot up more too, so they won’t necessarily be ‘equal’ by retirement.

They will also look at your ability to build up a pension over the next few decades, so you will be expected to work full time & pay into a pension. You won’t necessarily get half or more of the total pot if your future earning power is good.

I'm not an expert, just someone who has been through this and obtained a pension sharing order as part of the divorce. My understanding is that the actuary looks at the detailed rules of the pension schemes involved and does lots of calculations involving annuity rates, predicted growth, inflation etc and estimates the pension income each pension is likely to give.

A defined benefit (final salary) scheme with a cash transfer value of £400k could give a very different pension income compared to a defined contribution (money purchase) scheme. So to give a massively over-simplified example, your £100k pot might have a predicted pension income of £4k a year, but your husband's £400k pot might be £20k (i.e. more than 4 times yours) and the actuary then works out what share of his pension needs to be transferred to you so that you both get £12k a year (if the aim is to equalise income in retirement).

Thankyou - this is helpful
I am now working full time to maximise my pension contributions but my salary isn't even in the same ballpark as his so from this point on our pension pots will dramatically diverge
So the equalisation of income is based on what has been accumulated to date?
In your example, we both get £12K from our pots up until now and then whatever else we put into our pots between now and retirement is 'extra'?

I'm concerned because he does not want to use a solicitor for anything - he has recommended a DIY firm to 'save money' - but I don't know what I should be asking for to make sure that the pension report is 'fair......

@Catsruledogsdroolokay ,

With the amount of assets you are talking about, I would definitely use a solicitor.

Even if you only use 2-3 hours, you will know what is fair and what you should be negotiating around.

Do either of you have a final salary or defined benefit scheme? This is a really key question to answer as it is those schemes that need valuing.

The fact he is avoiding a solicitor suggests he thinks he will lose out if you do so...

It will essentially be in equalising what there is now.
then you are two separate individuals making contributions to your own independent finances

again, it will depend on alot of factors, especially needs rather than wants

"he has recommended a DIY firm to 'save money'"

No, he has recommended a DIY approach to get a better deal I think. Will save him money for sure, but could cost you a lot.

So it's a tad complicated
We both have multiple pensions
Each of us has a single DB. Mine is from my first job which was only for 3 years on a low wage. I will get £250 a year from it! Incidentally it's from before we were even together.......His is more recent - only for 6 years but a higher wage and I think from what the CETV says is £6K a year. The other pensions are all DC ones.

For a DC scheme you use 4% as the rule of thumb so 6k Pa equates to £150k fund value. Actuaries will take many more factors into account to get an accurate value.

i’d be very cautious wrt cutting corners here.

But should the negotiations take into account the fact that when we both retire his pension will be much larger than mine because he has 20 years of a very high wage to fill his pot up from?
Would the pension actuary factor that into their report?
If not, does this put me in a position to ask for more of the house equity/savings with the argument that I need it for my retirement? I have a serious health condition too. Could this impact things? I'm not confident I can work till 67.

We had complicated pensions so we asked the actuaries to work out how to equalise our pension income at 65. I got a chunk of his pension as a result.

It will depend on a whole bunch of answers

eg length of marriage
ages of children
respective incomes and earnings potential
the assets available and whether enough to provide needs. It won’t leave one party with the assets and the other having to build back up, and will factor in risk ( eh you can’t assume he will always be able to earn what he does, while you might not)

there could be a case for you to get more liquid assets now and offset this against pension but again this is not £1:1 as pensions have a large variability in valuations and go down as well as up if defined contribution.

its hard for anyone here to really comment

the mission actuary will look at the income projection if the pot now at retirement age. Your solicitor will negotiate what % of assets they think is ‘fair’

when you say he has large income, what’s his salary?