The division of matrimonial assets on separation can be extremely complex and stressful. After the marital home, pensions are usually the next most important consideration. Sometimes, pensions can be the most valuable assets and this is particularly true when dealing with Military Pensions.
There are 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 and cannot be turned into cash, unless the pension holder is over 55. 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. Some pensions are valued according to what has been paid in, these are called “money purchase schemes”. Some pensions are valued according to the benefits provided and these are called “defined benefit schemes”. Armed Forces and public service pensions are defined benefit schemes, and the transfer values given need careful scrutiny.
What if the pension was accrued partly before the marriage? What if there was cohabitation prior to the marriage? In every case, the court looks at the length of the relationship and will include a period of cohabitation.
What if you want to keep your pension? How can you set off the value of your pension against other marital assets? This is important for Armed Forces personnel who have served 18 years or more and are in the process of taking an Early Departure Payment.
Therefore, for these cases, Maxwell Hodge would recommend consulting an independent actuary to work alongside your legal team. 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.
It is important when dealing with valuable assets, such as military pensions, to not only take prompt legal advice but to get expert advice from an actuary to ensure that any division of a pension is properly considered.
If you need advice and assistance, please contact one of our offices listed below to arrange an appointment:-
Aintree – 0151 526 9321 Formby – 01704 872156
Heswall – 0151 342 6447 Huyton – 0151 489 6161
Kirkby – 0151 548 7370 Maghull – 0151 526 7131
West Kirby – 0151 625 9254 Woolton – 0151 421 2400
Michael Pratt in our Family Team is an accredited pension specialist with Resolution.