• The fairness of a cash equivalent transfer values (CETV).
• Internal transfer or external transfer?
• Moving target syndrome?
• Default options.

Therefore, it was a refreshing change to be contacted by a client this week who had received notification from her pension provider (Prudential) that she HAD to take financial advice before they would agree to accept the pension sharing order.

To avoid the pitfalls above it is important to take financial advice from a competent adviser, preferably one who is a Resolution Accredited Independent Financial Adviser (See link here).   You may also wish to employ the services of an actuary that advises on pension and divorce cases.

If this is you and you are looking for financial advice on a pension sharing matter or if you require further information, please contact me on 0800 092 1229 or email advice@thedivorceifa.co.uk

Given that it can take up to four months for implementation to be completed it is a good idea to get this started as soon as possible.  In my experience, sharing orders either complete in the first month or the fourth!

But often the pension sharing order may be badly worded or incorrectly drafted and this often leads to it being immediately rejected by the pension scheme involved.  They will issue a postponement of implementation notice summarising why the pension sharing annex has been rejected and what is required to amend it.

Recent examples of cases I have worked on where the order was rejected (before I got involved!) are:

• The title of the pension scheme was incorrectly stated (Part C- Form P).
• The trustees of the pension scheme were incorrectly stated (Part C – Form P).
• The former names section of the order was incomplete (Part B – Form P).
• The new pension arrangement is not stated (Part F&G – Form P)

Once advice is taken, it can often be a relatively straightforward matter to get the order amended but it does need to then go back to court to be restamped, which can add to the time delays. 

If you are considering how to draft your pension sharing order or you require further assistance on a incorrectly drafted pension sharing order, please contact me on 0800 092 1229 or email advice@thedivorceifa.co.uk

Under the regulations, the court should send the pension sharing annex (form P1) within 7 days of the making of the pension sharing order or of decree absolute (whichever is the later) to the pension scheme involved.   

This is immediately where a breakdown in communication can occur because the implementation period will not start until the pension scheme has all of the documentation necessary and received payment of its implementation fee.  This documentation will not only include the decree absolute and the pension sharing annex but also birth certificates, and often,  where the share is being dealt with by way of an external transfer, details of the new pension arrangement and a trustees indemnity.   There can be other requirements. 

I am often approached by clients who were not aware that they even had to make a decision on a new pension arrangement.  This can hold up the process or even result in the existing scheme deciding upon a default option, which may not be appropriate.

I have even had on one occasion a client pass me a court stamped pension sharing order which had been kept safe in her drawer.  It was 4 years old!

So it is important to keep tabs on where your pension sharing order is and who is responsible for making sure the order is implemented in a timely manner.

If this affects you and your pension sharing order has disappeared or you are unsure of what to do next, please contact me on 0800 092 1229 or email advice@thedivorceifa.co.uk

What can go wrong you ask? Well unfortunately, plenty of things.

In the last few months, I have dealt with a range of problems, including:

• The pension sharing order didn’t appear – whose responsible?

• The pension sharing order was drafted incorrectly.

• The receiving scheme insisting that financial advice is taken – why can’t they just implement?.

• Delays in implementation.

I intend to expand on these issues in subsequent posts but if this affects you or you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

With some divorces taking years to conclude it is important to consider what risks are being taken within the SIPPs.

One of the highest risk investments that could be encountered is private equity or unquoted shares.  This is an investment into a private business often one which the SIPP member has a stake in privately or an interest in.

The key here is that this is usually a small business with a closed shareholding which are not quoted on a recognised stock exchange.

Unquoted shares

The attraction of holding unquoted shares in a SIPP is that any profits (which can be high given the high risk being taken) are free from capital gains tax.   However, the risk of failure is very high and so for many SIPP providers this is an investment which is to risky for them to allow.

The main issue for the providers is the lack of liquidity and the difficulty of obtaining a valuation.  Just like business valuations such investments need to be handled with care and the use of an accountant who specialises in business valuations is highly recommended.

If you would like an impartial review of the SIPP involved in your divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

However, they have only recently (April 2007) become regulated and there are risks associated with SIPPs which are worth knowing. This is especially so if you know that the financial aspects of your divorce will take time to be agreed.

The list below illustrates the broad range of investments available.

• UK and overseas shares
• Gilts and overseas securities
• OEICs and unit trusts
• Exchange Traded Funds
• Investment Trusts
• Insurance Company Funds
• Unquoted shares
• Warrants
• Hedge funds
• Deposit accounts
• Commercial Property

With such a wide range of investments available and the potential for these to fall in value over time, it would be prudent to understand what lies beneath. I will expand on this issue in future blogs so watch this space.

If you would like an impartial review of the SIPP involved in your divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

It should be noted that the valuation will only be provided to the scheme member and not their spouse. The pension scheme will usually allow for one free Cash Equivalent Transfer Values (CETV) quotation to be provided each year.

However, there are occasions when a charge will be applied and I have set out some examples below:

•  When a further valuation is requested within the one year time frame.
• Where the pension is in payment. Because a pension in payment cannot be transferred a CETV is irrelevant. The correct basis is a cash equivalent of benefit (CEB) and there will be a cost.
• When the valuation is needed more quickly than the scheme’s normal turnaround. For example, the NHS pension scheme usually works to a 3 month turnaround time, although, they will provide it in less than 6 weeks for a charge of £300 plus VAT.
• When the member is within 12 months of normal retirement date.
• Servicing members of the Armed Forces Scheme who already qualify for immediate benefits as soon as they retire. For those members with reckonable service of more than 16 years for officers and 22 years for other ranks the scheme levies a charge of £150 plus VAT. Where the service is less than 16 years and 22 years respectively there is no charge.

The National Association of Pension Funds (NAPF) has set out guidance for pension scheme trustees on charges and you can find further information here. NAPF gives a range of charges for you to judge how much you are being charged against. Note that it is only guidance and that some schemes will charge more.

If you would like further information on CETVs, valuations and charges, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

• Chronic heart disease
• Cancer (secondary and some primary)
• Chronic Lung Disease
• Parkinson’s Disease
• Alzheimer’s Disease

Please note this list is not exhaustive.

Enhanced annuities also provide an increase over the standard rate available and are given for lifestyle conditions such as

• Diabetes
• Heart attack
• Chronic asthma
• High blood pressure
• High Cholesterol

Again, this is not an exhaustive list.

The market is maturing and there are providers who specialise now in areas such as smoker annuities and more recently, postcode annuities. These work on the basis that statistically, people in different parts of the UK have different life expectancies.

Many people when taking their pension share on divorce decide to purchase an annuity. If you are considering purchasing an annuity as part of your pension share, please stop and consider whether you might benefit from one of these annuities.

If you require any further assistance, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

It can reasonably be argued that based on longevity a pension asset in the hands of someone with a shorter life expectancy has less value than it would in the possession of someone with an average life expectancy. It is anticipated that the pension income will be paid out for a shorter period of time.

In a divorce, it would seem an appropriate approach to look at pension sharing and perhaps consider a greater proportion of the pension be shared with the spouse who is in good health. This may enable the spouse in poor health to retain more non pension asset (which could die with them) and pass this wealth down through their family. For completeness, a review of the death benefits available should also be undertaken.

For more information on this and how life expectancy affects pension valuations and other aspects of your finances on divorce, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk

This has wide reaching implications, not only for those public sector workers currently going through divorce who are unable to get cash equivalent transfer values (CETVs) or implement their pension sharing orders, but potentially, all final salary pension schemes.

The implementation of the change has been set at 3 months but this is by no means guaranteed and there is likely to be a backlog of cases. This affects all of the public sector schemes including the NHS, Fire, Police, Armed Forces, Teachers and the Local Government Pension Scheme.

It is possible to still get divorced legally but the financial settlement will not be completed without agreeing the pension settlement.

The long term implications of the move are greater. The CPI is a lower measure than RPI and so the knock on effect will be that inevitably CETVs will be lower leading to lower pension settlements.

In addition, the private sector is likely to follow suit although this will take longer as they will need to consult with their pension members.

See my comments on this in The Guardian.

For more information on this issue, please contact us on 0800 092 1229 or email advice@thedivorceifa.co.uk