We were approached by the solicitors representing Mrs
P. Both parties were in their mid 50s, with Mr P continuing
to work even though his retirement
benefits from a previous employer were in payment.
Mrs P was entitled to her state basic pension that she
could expect when she is 60 as well as a pension income
from a retirement
annuity policy (RAPs) but she did not have a state
earnings related pension scheme (SERPS) entitlement.
Mrs P's solicitor was minded to seek a pension
sharing percentage representing 1/3rd of Mr P's retirement
benefits but was concerned whether this would be perceived
as being reasonable from the other party's perspective.
Mr P was receiving a pension income from a private sector scheme
and at the point of retirement the benefits to Mr P were as
follows (rounded to the nearest £100):
of £74,600 per annum;
||Tax free lump sum of £230,000.
The scheme administrators had calculated
and ascertained the cash
equivalent transfer value (CETV) as follows (rounded to
the nearest £1,000):
||Total CETV of £1.585 million;
||Protected rights proportion of £49,000.
In order to facilitate a settlement of 1/3rd
of Mr P's retirement pension, the question was whether this
would result in Mr P's pension income also being reduced by
1/3rd as it would be reasonable to assume. If only it were
that simple! Whatever the reduction in the scheme members pension
income, you need to know because whatever a solicitor
seeks for their client must be perceived as being reasonable
by the other party and their solicitor.
We provide a number of 'what if' scenarios to put you in a
position of strength in order to optimise the settlement for
your client. The court wishes to see an outcome that is reasonable
from both parties point of view.
By obtaining 1/3rd of the CETV for the reduction in pension
income for Mr P would be only 24.0%. The reason for this is
due to the age of Mrs P being younger than Mr P and the fact
that the life expectancy of women is greater than for men.
Therefore one pound of income purchased for Mr P will cost
less than one pound of income purchased for Mrs K. Statistically
it has been shown that on average the wives of male scheme
members are three years younger but on average the husbands
of female members are only two years older!
The other point of this
case is that the private sector scheme does not allow dual
membership. This means that Mrs P could not make an
internal transfer and had no choice but to make an external
transfer to a private pension arrangement. This could
have been to a compulsory purchase annuity, however at
her young age a pension
drawdown has allowed her take an income and defer
the purchase of an annuity until a later date. This will
allow for an improvement in annuity rates due to her age,
possible improvement in the future rates due to economic
factors and potential growth in the size of the fund to
match the effect of inflation up until the point she decides
to take an annuity.