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We were approached by the solicitors representing Mrs S and Mr S and were appointed with joint instructions as the clients had agreed settlement during ancillary relief proceedings. The outcome they wanted required a pensions expert to calculate the appropriate percentage for the pension sharing order.

Both parties were in their late 60s, retired with retirement benefits in payment. The objective was to have equal incomes for both Mrs S and Mr S including all sources of income.

Pension audit
Whilst we sympathised with the parties intended outcome we felt that some modification of our instructions was necessary to reflect the fact that some of the pension entitlements would increase during payment and some would remain level. Furthermore the life expectancy of the parties was also different. Both parties and their solicitors happily embraced this observation.

The respective gross annual pension income for both parties were as follows (rounded to the nearest £100):

Mr S    
  State pension
First personal pension
Second personal pension
Public service scheme

Mrs S    
  State pension
Public service scheme

The original approach to achieving the parties requirements was to have pensions of equal aggregate amount of gross pension income and this was considered equality for both parties. We proposed a basis that would give each party pensions of equal actuarial value allowing for age, gender and escalation. In order to achieve this balance taking all the pension income into consideration we recommended that Mr S's pension rights within the unfunded public service scheme should be shared in the following proportions (rounded to the nearest percentage):
Mr 37%
Mrs 63%


Our proposed basis was accepted by the parties and their solicitors and ratified by the court as a pension sharing order. This process took just over 9 weeks to complete from the time of our appointment.

During the audit procedure and data collection stage the public service scheme administrator acknowledged that Mr S was divorcing and confirmed in writing that in the event of Mr S's death, his wife would be entitled to a widows pension of 1/3rd of Mr S's pension rights. If this information was not interrogated for accuracy but instead taken as fact, used as part of the valuation calculation and implemented in the pension sharing order, it would have created a material error, however with pension sharing there is no opportunity for a variation of orders at a later date.

For an unfunded public service scheme a widows pension is payable only to the legal wife. Therefore in this case after Mr S and Mrs S divorce was final, Mrs S would have no entitlement to a widows pension if Mr S died. Only if Mr S were to re-marry would his new wife Mrs S(2) be entitled to a widows pension of 1/3rd of Mr S's pension rights.

Under an unfunded public service scheme there can be no pension fund provision made for the scheme members as the retirement benefits are guaranteed by statute. This means that the only option for Mrs S was an internal transfer of pension rights, in other words she was made a member of the scheme with the same benefit entitlement enjoyed by Mr S in terms of income escalation.
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