It may be appropriate to use in the following circumstances:
When is a Pension Audit Report suitable
It can be used for the following types of schemes:
1) Pension schemes for public service employees
This will also include uniformed service pensions for the police, fire & rescue, armed forces and prison service pensions require specific valuation criteria provided by a Pension Audit report.
2) Private sector defined benefit schemes
For defined benefit (final salary) schemes in the private sector there may be some money purchase schemes with a defined benefit underpin that would require a Pension Audit report.
3) To value "average salary" defined benefit pensions
Some defined benefit schemes have benefits formulae unsuited to simple valuation. The main example is where the pension is set as a proportion of the average salary of the member throughout their scheme membership. In this case an Pension Audit is required.
4) Where the pensionholder is in ill-health
If the pensionholder is in ill-health then a longevity assessment and Pension Audit is required.
5) When the pensions(s) are ring-fenced and shared equally
A Pension Audit should be obtained to ensure true equivalence of value to both parties. However, ring-fencing pensions will rarely be an optimal solution and full or partial offsetting alternatives should be considered.
When Form E's are exchanged
It is important to check the information from the other party is complete and accurate. The CETV undervalues defined benefit (final salary) pensions and an appropriate valuation should be obtained to understand the true financial position.
When determining settlement options
In ancillary relief cases when determining which option of offsetting, attachment or pension sharing should be used, it is better to work with appropriate valuations rather than inappropriate CETVs.
When dealing with pensions of significant value a Pension Audit Report is recommended.
When it may not be suitable
It may not be appropriate to use in the following circumstances:
1) To value a defined contribution (money purchase) pension
A fund valuation is sufficient. The CETV
normally gives this though sometimes early surrender penalties, market value adjustments or the existence of valuable guaranteed annuity rates mean that the CETV is less than the fund value.
2) To value a Small Self Administered Scheme pensions
These SSAS schemes are for small groups of employees who usually have greater control over their pension benefits. A share of fund basis may be more appropriate in these schemes.
3) To value the State Second Pension
The State Second
Pension is defined by historic contributions and the equivalence of a CETV obtained from the DSS using Form BR20.
4) For cases outside of the UK
The Pension Audit Report is designed specifically to value UK pension schemes in UK divorces and dissolutions. It is not suitable if the pension is outside the UK.