Urgent Pension explanation for dummies please ?

[52andblue]

I want to legally Separate from H (in Scotland) as a prelude to Divorce.
I am receiving Legal Aid but lawyer is awful (& changing is difficult)

I have now obtained H's pension details.

Total value of final salary benefits is: 121.6K @ todays date.
they add Pension under relevant age (he is 57) 51K
spouses pension 2.5K
So Total 165K

He is giving me a choice - Separate now and I get 50% of this pension (how much would it be anyway I have no idea and have no pension of my own as I've been a SAHM to 2 kids with SN for 18 years) or stay married and I can share his pension till his retirement (which may be in 5 years or may be in 10 he is not sure yet). He moved out last July. I have been paying the interest only mortgage monthly & all bills. He is paying child maintenance at the correct rate for his income (£30 p/a)

I feel ridiculous asking this but I have no idea what these figures mean. Lawyer won't help, cant afford a financial advisor & the local CAB doesnt have appointments for weeks.

Can anyone give me an idiot proof idea please?

I cant help im afraid but if you dont get any replies you could try martin lewis money saving forum, ive asked pension questions on there recently and got some really good advice

In a way they're irrelevant given it's a final salary pension . How much does he earn and how many years has he been employed at a final salary employer?

@titchy- he earns around £28/30k per annum. I don't know how long its been final salary but he's a local authority employee and his pension terms have been the same for the 21 years he's been there?

Ok so assuming an average salary of say £22k over the 20 years worked and say 5 more to come, that gives him a pension of around £7k a year. Does that help? Maybe post on the moneysupermakr forums for further advice. The mortgage being interest only is possibly of more concern tbh - what repayment plans do you have? Can you sell?

www.moneyhelper.org.uk/en Call the helpline - they have pensions and divorce specialists

What do you mean by share his pension until retirement? It’s not in payment yet, so what are you sharing?

A Scottish Separation Agreement is similar to rhe financial part of a Divorce, so the pension share is agreed now, prior to it being payable in due course.

How are you going to pay for the house in the end? Interest only means you're not paying any of the capital.

@52andblue

A Scottish Separation Agreement is similar to rhe financial part of a Divorce, so the pension share is agreed now, prior to it being payable in due course.

Perhaps my question wasn’t clear. Yes, I understand that splitting the pension now is Option 1. I don’t understand how you’ve described Option 2 - stay married and share his pension until he retires. Share what until he retires?

@HollowTalk I can't pay off the mortgage so I'll have to sell the house.

@Cocomarine - I meant if I just stay married, then I will qualify to share his pension for the whole period before he retires in 10 years).

Except we had to speak today (jointly attended something to do with both kids). During this he casually mentioned he might 'cash in 25% of his pension upfront' this autumn !

Don't panic! If he's in a Local Government pension scheme he can take 25% as cash, and many people do, but NOT until he retires.

He seems to believe he has access to this money now. He doesn't. Pensions pay out at state pension age.

Spouses pension is what the scheme would pay you, if you remained married, after he dies (in retirement) until you die.

In a divorce the starting point is 50:50 of assets. I don't know how pension transfer work in practice but with a £165k pension you are looking at £80k to invest in your own SIPP.

Step 1 is to check your own entitlement to a state pension.
Step 2 is for him to ensure he has completely his Death in Service nomination form. This means that if he dies while still being employed by the Council, they know who to pay his life insurance to.
Step 3 is to get the house valued. You need this so you both can work out a fair division of assets. It's complicated in Scotland as the actual selling price can be 20% over valuation. Tell the Estate Agent you need the value for a divorce and they will be able to assist further.

If you have any further queries, post on the Divorce and Separation board. There will be a wealth of advice there.

How old are your DCs?

@JamMakingWannaBe in the Local Government Pension Scheme it is possible to take payment of benefits from age 55 so if he’s over that age then yes it is possible for him to take his lump sum this autumn. He can’t just take the lump sum though, he would have to retire and take pension payments as well and it sounds like he doesn’t fully understand that.

Thanks for the correction.

Agreed that the OP's STBXH doesn't understand his pension arrangements. OP stated he might retire in 5 or 10 years time. I think with the current squeeze on living expenses, most people are going to have to work on longer than intended.

So he’s suggesting that you either take 50% of his pension as accrued today or you stay married and you take 50% when he retires (as yet date unknown).

The latter is somewhat generous of him… are you sure that’s the proposal? It makes no financial sense to him, to pay up to 10 years more of contributions, all the while knowing half of that is going to someone he has to all intents and purposes split up with.

Why would he offer that? That’s why I’m suspicious you haven’t understood.

I also don’t understand the figures you’ve given. They don’t add up to £165K, for a start.

Spousal benefit 2.5K - what’s that? A local authority payment to a widowed spouse is often generous.

Is that a valuation or a full CETV? Your wording that you have obtained “details” doesn’t sound too official.

It would probably be useful to blank out any personal details and post a photo of it on the MSE forum, Pensions board, and ask for help to understand it. Keep in mind also that there is usually lots of really clear, easily accessible and OFFICIAL info online, when a pension in local authority.

Looking again, is the spousal £2.5K the annual amount paid to a widowed spouse?

Looking randomly at Strathclyde LA pension rules (many LAs have similar terms) the survivor pension is the deceased’s final salary, divided by 160 and times the number of years service.
£30K / 160 x 21 would be closer to £4K.
So just be sure that you understand the scheme rules exactly! And what is on this “statement”?
Of course that’s only paid if you are still married.
But, you need to keep this in mind. If you choose to stay married and split the pension later, and he dies before retirement - you might be left with just that spousal widow benefit - not half of his pension. Does he also have a death in service benefit?

You need to understand all scenarios before deciding.

I think the £2.5k is the part of the transfer value in respect of the spouse’s pension. The CETV value of a spouse’s pension could be lower than the actual value of it because the factors used in the transfer calculation will have assumptions built in about how likely the spouse’s pension is to actually get paid out.

@JamMakingWannaBe
@ChessieFL
@Cocomarine

thank you for replying.

yes, apparantly he wants to retire this autumn, cash in the 25% to use for a deposit for a 4 bed flat. He then plans to go back & work part time, either for the same Co (lots of his mates have done so he says) or for another firm (he's a bus driver).

2 kids, 1: 17 & 1: 14 Both have Autism & get DLA at a rate sufficient that I am their Carer & receive Carers allowance. exH doesn't cope with them, hardly ever sees them -says the 'spare bed' he wants is so 'they can share if they ever stay over' (he lives 8m away & had them at his once in the last 12m) other bedroom is for a 'Hornby train room' apparantly...) sorry for bitter side rant, thank you for pension info x

If he’s retiring this autumn, then why would he suggest that you take 50% of the pension now or 50% when he retires?
Why are you choosing a Separation Agreement instead of just divorcing the useless dick?
Why are you even talking about 50% when you could certainly argue the case for more?

I’m not an expert so huge disclaimer to check, but… I’m fairly sure that if you have a Pension Sharing Order, HMRC only let one of you take 25% tax free (either as lump sum or via drawdown). I think it’s considered administratively too complex to allow both. If that’s correct, then in actual net cash terms, even a 50/50 split would be more to him. So I’d argue a larger share on that basis.

You can argue that you should get more as he has more chance to add to pension in next 10 years than you do before retirement (I’m assuming your “52” username which has been live for a few years means you’re mid/late 50s too?)

What is the situation with the house?

@ChessieFL

I think the £2.5k is the part of the transfer value in respect of the spouse’s pension. The CETV value of a spouse’s pension could be lower than the actual value of it because the factors used in the transfer calculation will have assumptions built in about how likely the spouse’s pension is to actually get paid out.

Good point - though it seems on the low side, given women live longer than men and that sounds like less than a year’s survivor payout. Not a pensions actuary though 😉

Still not sure how it adds up to £165K?

Hi @Cocomarine

I am 54. He is 57. Married 20 years (same length as pension too)

The house has a mort of £138K. Value: £150K so no equity really.
He currently says I can 'have the house' (but as no equity & mort not being paid off so that's not as great as it sounds).

Lawyer said I 'could ask for more than 50% as I am a Carer (for nearly 18 years) 'not worth it as so little money involved'. The Separation Agreement doesn't even mention the kids SN which bothers me. The main reason the marriage broke down is that H refused to consider job share / child care share so I 'had' to do 100% of that as he found it too hard & we couldnt' afford specialist nursery fees etc. So basically H has lived as a 1950's throwback & not cooked a meal or changed a nappy etc for 18 years so I wanted it mentioned but changing lawyers on Legal Aid isn't so easy & it was hard to get one to take me on. I'm rural & disabled myself so I'm a bit isolated.

He has obviously got more info than he shared with me, from what he was saying yesterday but as far as I understand he has 15 years final salary pension then 5 years contributory (?). Figures I've seen from his LA pension fund say:

Final salary benefits? £106K plus lump sum £9.6K plus spouse pension so total value of £121.6K
CARE benefits pension £51K, spouse pension £2.5K total £53.5K

So = £175K but adjustment for period of marriage (as 1 year less than pension) so final figure of: £164.7K.

The 'take 25% now' idea was new to me yesterday. He seems to think he can get 'around 50K now' and says he will 'give me half'. I am currently receiving Income Support as I cannot work around my Carer duties (and he never bloody helps!) so that would mess that up I think? Ugh what a mess. He only ever thinks of himself.

OK, so again I’m going to stress that I’m not an expert - just someone who is interested in pensions, and has been through Pension Sharing under English law!

It’s not unusual that your lawyer (legal aid or not) wouldn’t advise on the value of the pension. If you can’t afford a financial advisor, can you get an appointment with CAB to see what help they can give?

But first up… don’t be bullied into anything.

You keep mentioning LA, but am I right in thinking that the actual pension is part of the LGPS? (Local Government Pension Scheme). A wee bit of Googling bus companies in your area suggests that.

In which case, you actually have two options I believe, on sharing:

1. Transfer the money as cash into another pension scheme
2. Leave the money in the LGPS (called a Pension Credit) and take benefits under that scheme

I’m both cases: money in a pension is ignored for benefits.

Do not allow him to give you cash from his own withdrawal
You’re right - that will fuck over your benefits - Income Support if that’s what you’re actually still on, or UC when you eventually migrate.
I don’t believe it impacts Carter’s Allowance through.

I’m going to post in several parts as I sometimes lost posts 😉

So, going back to your 2 options.

Cash transfer to new scheme vs Pension Credit in LGPS. And the good news is, if you choose the latter, you do have 12 months to change your mind and transfer out cash instead! So don’t panic.

How much do you know about pensions? Can you please excuse me interfering if you know this bit? ☺️

There are two types of pension:
DC / Defined Contribution. This means you pay cash in (and often your employer does too) and then there’s an actual exact pot of money that belongs to you. When you’re old enough to access it (currently 55, for you) you can:

• use some or all of it to buy an annuity, with gives you a guaranteed amount each year for life (so you lose out if you die young!)
• go into “drawdown”, which means you can take amounts as and when you wish, until it runs out. Every withdrawal you make, you get 25% of that withdrawal tax free. You leave the rest invested hoping it will grow, and your kids can inherit it.
• take the 25% Tax Free Lump Sum all in one go then gradually withdraw the rest. Same deal - leave the rest to grow, if you die your kids can inherit it tax free if you’re under 75, subject to tax thereafter.

DB / Defined Benefit. Split into Final Salary and CARE (Career Average Related Earnings).
Final Salary means your pension is based on your last salary at retirement.
CARE - the calculation depends on the scheme, but it means an average taken of various years. It’s cheaper to pay out, so a lot of schemes forced in this change, like his.

In your ex’s case, his last 5 years’ salary in the CARE scheme - I’d take a guess that his salary in those 5 years has been pretty similar to before the change.

Now, whether it’s FS or CARE, what the benefit is, is actually a promise to pay you £x per year for life, including an annual increase to theoretically reflect inflation (though it can be lower than inflation).

In the vast majority of cases, it is far more valuable to have a DB pension. It won’t ever run out, you know what you’re getting, it will increase annually. There’s nothing left for children to inherit - but still, it’s usually the best option.

I’ve been reading about LGPS and divorce, and when a valuation is requested, they should provide both the CEV (the cash sum you could transfer into another pension and details of what a Pension Credit within the LGPS DB scheme would pay you annually.

So if you haven’t got that from him - make no decision until you have!

I’ve been looking at Lothian Pension Fund.
I can’t guarantee that’s the right one!

But just in case, this is the request form, and you can see that members can request a free valuation once per year, but if it’s for matrimonial purposes a small fee is payable. I’m going to bet he’s only gone for the free one.

www.lpf.org.uk/media/01sft1ns/divorce-and-dissolution-form.pdf