As an interim measure, legislation will be written into the Finance Bill 2010 to increase the purchase age to 77. This increase in the age to 77 by which time the member must secure an income has effect on or after 22 June 2010. The change applies equally for Inheritance Tax purposes to members who die on or after that date.

Since April 2006, it has not been compulsory to purchase an annuity at age 75 (although some individual schemes insist on it) when an alternatively secured pension (asp) became an option. ASP has not been universally popular due to the poor income rates and punitive tax charges (up to 82% on death!).

The Government intends to consult shortly on the finer detail of what is planned. Watch this space on developments which in my opinion, will have far reaching implications for divorce, annuities, annuity rates and retirement planning.

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

To enable the NHS Pension Agency to calculate the CETV they require pay and membership details from you and your employer. NHS Pensions rely on NHS employers to provide details of pensionable pay and membership of the NHS Scheme.

The forms required depend upon whether you are a contributing member or not.

Contributing member (or leaver within the last 12 months)

Form PD2 needs completing by your employer – a separate one is required for each NHS employment. Form PD1 needs completing by you.

Once both are completed, you need to send it to NHS Pensions, Hesketh House, 200-220 Broadway, Fleetwood, Lancashire, FY7 8LG.

Non contributing member

Form PD1 only needs to be completed and returned to the above address.

Timescales

They aim to provide the CETV within 6 weeks. Note that occupational schemes have 3 months to provide the CETV. You can pay extra to receive the CETV more quickly.

To avoid delays it is important that the forms are completed accurately. I am happy to provide further information on how the NHS deals with pensions on divorce.

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

HOW THE IFA WILL WORK WITH YOU AND YOUR SOLICITOR:

IFAs will be accredited by Resolution to work in the collaborative area, having undertaken training on the technical and cultural aspects involved, and passed an examination on the subject.

The IFA acts as a ‘financial neutral’ – rather than representing one party, their role is to assist all parties in highlighting issues and providing information that enables the collaborative process to move quickly and smoothly.

In addition to their specialist technical knowledge, IFAs can outline options to parties and comment on risk factors (eg in terms of pension options) which solicitors are unable to do as they are not authorised to give financial advice.

IFA’s can attend a first meeting with the Solicitors present, so as to display to the parties how they may add value to the process. At your discretion, IFAs can subsequently meet you without your solicitor being present, so as to control total costs.

EXAMPLES OF WHERE THE IFA IS ABLE TO HELP:

• Tax efficiency and mitigation if assets or investments are being sold as part of the agreement (eg ISAs, Capital Gains Tax issues).

• Pension-sharing issues under occupational final salary schemes, for both the scheme member and the ex-spouse.

• Issues surrounding individual pensions, including retirement options.

• The cost of replacing items under an employee benefits package for the ex-spouse (eg life cover, critical illness cover, private medical insurance).

• Mortgage availability and costings in relation to the marital home.

• Assessment of endowment policies and the options going forward.

• General financial education

• Budgeting exercises and lifetime cashflow projections to determine whether the agreed settlement will be sufficient to support the financial requirements of each party over time.

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

1. Does the CETV itself represent fair value

It is important to understand that the CETV may seriously undervalue the total pension benefits due to a variety of reasons (for example, it may not cover all the pension benefits or it may have been discounted due to the state of the scheme’s funding). It is therefore, possible to argue that another (higher) figure should be used which represents a fairer valuation.

The CETV itself cannot be changed and so a higher proportion of pension benefits may be shared or other marital assets may be distributed more favourably.

To prove undervaluation it would be necessary to present expert actuarial opinion and to negotiate strongly on this point. This should not to be confused with..

2. Does the split of the CETV represent fair value

Where equality of outcome is desirable (i.e. both parties want the same income at an agreed retirement age) a 50:50 split of the pension assets may not represent fair value.

Here a split in favour of the wife may be greater than 50% to take account of a number of factors, but mainly that women have a greater life expectancy than men.

Of course, it should be noted that it is likely that the final benefits received will not represent the same values quoted due to the time lag between the valuation date and the valuation day.

If you would like to know whether your CETV represents fair value, please call or email me for a confidential chat.

In England, Wales and Northern Ireland, the date on which the transfer value request, Cash Equivalent Transfer Value (CETV) or Cash Equivalent of Benefit (CEB), is received by the trustees or scheme provider becomes the Valuation Date.

This becomes the value which all of the negotiations for your settlement will be based on. For example, if you are advised by your solicitors, having received an actuary’s report, that the pension needs to be split 60:40 this will be done on the basis of the value on the Valuation Date.

However, this is NOT the value which will be used when the final benefits are calculated. The actual value will be calculated at some point within the four month implementation period and this date becomes the Valuation Day. The implementation period starts on the Transfer Day, which is the day the pension sharing order takes effect, or, if later, on the day the pension scheme has the prescribed information needed to implement the pension sharing order.

The period of time between the Valuation Date and the Valuation Day can be considerable and a lot can change in a pension during this time, which can have knock on effect on the valuation and subsequently the benefits derived from it.

If you would like to understand more about how the Valuation Date and Valuation Day might affect you and your benefits, call or email me for a confidential chat.

phil@thedivorceifa.co.uk or 0800 092 1229

The CETV is the capital value of the pension rights as calculated by the scheme actuary or the pension provider. This valuation method is used where the pension is being accrued or is not yet in payment.

Where the pension is actually in payment, a different valuation basis needs to be used. This is the cash equivalent of benefit (CEB) calculation and it does give a capital value which can be shared, offset or earmarked. If you google the Martin-Dye v. Martin-Dye judgement you can find more information out on this valuation basis.

Neither calculation (CETV or CEB) is subject to standard actuarial methods and each defined benefit scheme will use a different valuation basis.

I cannot emphasis how important understanding this aspect of pensions and divorce is to maximising your settlement. Scrutinise the value to decide whether it represents fair value.

If you need further assistance with your CETV or CEB feel free to contact me for a confidential chat.
phil@thedivorceifa.co.uk or 0800 092 1229

In addition, where the pension is in payment, there will be an immediate reduction of benefit for the member but the ex spouse’s pension will not kick in until age 60 (which could be many years away).

This issue has been neatly termed as “income gap syndrome” and it has been found not to go  against the anti discrimination provisions of European Law.

Of course, this assumes that the ex spouse decides upon an internal transfer as the means to facilitate the pension share.  There may be many reasons why the other option (an external transfer) is appropriate, but there will many situations where the only choice available is an internal transfer.

Regulations which came into force in April 2009 made provision for a partial solution to this issue which some of the statutory schemes are now starting to implement.  The NHS scheme will now permit pension credit members to draw benefits after age 50 (or 55 from 6 April 2010) whilst an Armed Forces (2005) pension credit member can draw benefits at age 55.  It should be noted that actuarial reductions will apply for early payment.

From a financial planning point of view it is wise to review the drawing of a pension credit benefit in line with your overall goals and objectives to ensure that any reduction is understood and budgeted for.

For more information on this please contact me on 0800 092 1229 or contact me by email, phil@thedivorceifa.co.uk

During separation and pre divorce – Will written

Decree absolute is the final decree and marks the conclusion of the marriage. Until the parties are divorced (or their civil partnership is dissolved), property will still pass on their deaths under the terms of any will and, commonly, one spouse will have bequeathed a substantial part of his or her estate to the other.

Separation – No Will

Where no will has been made, the rules on intestacy will apply and a large part of the intestate’s estate will pass to the surviving spouse including all personal belongings.  A separated spouse may therefore inherit most of the deceased’s assets unless action is taken at the time of separation to reverse the position by executing a new will or a codicil to the existing one.

Post Divorce – Will written

Under the current law, a divorced spouse will be treated as if he or she predeceased the deceased person on the date of the divorce for all purposes.  A gift in a Will to a former spouse will therefore lapse on divorce.  This may possibly disinherit the children of a former marriage.  Similarly, the appointment of a former spouse as executor and trustee will be void unless the will provides otherwise.

If there is a wish to leave property to a former spouse, it should be borne in mind that the spouse exemption does not apply to divorced spouses and such a gift may therefore be liable to inheritance tax.

Following the divorce, either or both former spouses may marry a new partner. Marriage revokes a will unless the will was made in contemplation of the new marriage. Similarly, the children of a new partner will have no rights under intestacy. However, if the children of a new partner are adopted, they will then rank equally with the children of the former marriage. This may well be in accordance with the wishes of those immediately concerned, but if other people, such as grandparents, have left property to `the children of X’ this will equally also include the adopted children.

Post Divorce – No Will

Where no Will has been made and there are children of minority age involved it is not uncommon for a situation to develop where the assets of the deceased pass into trust for their benefit wholly but are within the control of the former spouse (as the legal guardian of the children).  They are then in control of the trust and can appoint trustees (their new partner?) should they wish and will have to make the arrangements for the funeral.

So don’t delay seriously think about getting a Will written today.  For more information, contact us on 0800 092 1229 or by email advice@thedivorceifa.co.uk

The Financial Services Authority does not regulate Will Writing.

Having recently added it to the range of contact options I offer to clients I have been amazed by the diversity of the responses and indeed the geography!

In the past few weeks I have had discussions with UK divorcees living in Poland, Jersey and on holiday in Texas wanting to understand where they stand with their pensions and finances on divorce.   All these conversations were FREE.

For those starting out on divorce I offer a free initial consultation on the financial aspects of divorce and you can find my contact details here www.thedivorceifa.co.uk/contact-us

This can be done in a highly confidential manner using Skype www.skype.com or via email.   Of course,  if you prefer a more personal approach,  face to face meetings can be organised or even a webcam session can be arranged.  I am here to help, so please get in touch by whichever means you prefer.

What is most surprising is by how much these valuations can undervalue these benefits and therefore, how the unwary could find that they are losing out on potentially thousands of pounds.

I have highlighted below some examples taken from a survey done by the actuaries, Bradshaw Dixon Moore based on a sample of their own reports.  The findings are startling and what is most surprising is the variations between the same schemes, particularly the Public Sector and Uniformed Services schemes.

You can get the full details of their findings here.  Pension-CETV-value-comparisons

I have been asked to comment recently on whether actuarial valuation reports are worthwhile and what value they add to financial negotiations.  Many clients are naturally trying to reduce costs during divorce and see this as a potential cost saving.

My advice is that where defined benefits are involved, regardless of the scheme, an actuarial valuation is a necessity.   By finding out the true value of the pension assets you will be in a much better position to negotiate a fairer settlement.

For information on any of the information provided here, please contact me at advice@thedivorceifa.co.uk