After the family home, pensions are usually the next most important consideration on the breakup of a marriage. Sometimes pensions can be the most valuable assets.
Dealing with pensions on the break up of a marriage can be extremely complicated. There are so many different types of pension schemes. Complications arise if one party has been contributing to a pension scheme before the marriage, or if a pension is already in payment. Unlike other matrimonial assets, pensions represent funds secured for future retirement. It is therefore vitally important that pensions are assessed correctly.
The starting point is to request a cash equivalent transfer value statement for every pension. The statement represents the total benefits of the pension scheme in a single figure. This then allows a comparison to be made between the relative value of pension schemes if there is more than one.
However, the method of preparing a cash equivalent transfer value can vary between pension providers and in some circumstances the cash equivalent transfer value provided is not a true market valuation. This is especially true in public service pensions.
Other complications arise if the pension was accrued partly before the marriage. What if there was cohabitation prior to the marriage? The court looks at the length of the relationship and will sometimes include a period of cohabitation.
What if you want to keep your pension? How do you value your pension if you are going to offset other assets against it?
Therefore, for these cases Maxwell Hodge would recommend consulting an independent actuary to advise on how to deal with pension assets. A qualified actuary can provide a more accurate assessment of a pension’s value, or advise on how two different pensions can be reconciled. In some cases, a true market valuation provided by an independent actuary can sometimes be as much as 50% higher than the cash equivalent transfer value provided by the pension scheme.
Another situation where an independent actuary’s advice would be needed is where it is intended to share pension assets to produce an equal income stream on retirement. An independent actuary’s advice would be needed because men and women have different age expectancies and individual pension schemes have differing factors which affect the pension which is paid on retirement.
At Maxwell Hodge we have specialist matrimonial finance advisers who can help you with this aspect of a divorce.