Introduction
Where a case is complex and includes a final
salary pension, the pension
audit will start with the cash equivalent transfer value (CETV)
from the provider as the basis of the calculation. From the valuation procedure, it is possible to
determine a suitably adjusted
CETV that will reflect the fair value of the
pension arrangements based on the specific circumstances
and needs of the parties. The valuations can consider many aspects of the pension such as
past service reserve, death in service benefits
and future career prospects that are not considered
by the CETV
Method.
The individuals that will benefit most from a pension
audit will be those where their spouse is a member
of a final salary pension or a public service scheme
such as civil service, NHS, teachers, police, fire
services, armed forces but especially if they have
been in public service all their working life, and
in particular are now aged 45 or over. If if this
individual is also 4 or more years younger than
their spouse, they are likely to be a particular
beneficiary of a pension audit.
The following table summarises the findings from
recent cases of UK pensions on divorce. These cases
were rated A (significant) from the audit
rating table and the value added by the pension
audit report.
|
Case A |
Case B |
Case C |
|
A |
A |
A |
|
25 |
34 |
22 |
|
23 |
35 |
40 |
|
£18,100 |
£30,100 |
£33,300 |
|
£165,600 |
£292,600 |
£399,700 |
|
£219,000 |
£396,300 |
£557,000 |
|
£53,400 |
£103,700 |
£157,300 |
|
During ancillary
relief proceedings the adjusted CETV can
be used by the former spouse and their solicitor
as part of the negotiation process. As the step-by-step
guide shows, the solicitor
can make an open offer to the
other party and include the adjusted value.
The percentage agreed may not be a 50/50 share of
the pension arrangement but it will include the
value added by the audit, thereby resulting in a
significant gain for the former spouse and help
the solicitor achieve the best possible result for
the client.
The court will issue a pension sharing order that results in either an internal or external transfer. For a money purchase scheme, where the spouse is nearing retirement and requires an income the pension fund can be used to buy an annuity and has the option to use an open market option to search for the highest pension annuity, adding all the features necessary such as escalation, frequency of payment or a new survivors income. Once you have purchased an annuity it cannot be changed, so learn more about annuities, compare annuity rates and before making a decision at retirement, secure a personalised pension annuities quote offering guaranteed rates.
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