Annuity query

jamesd

Well, you can always ask here for second to tenth opinions, depending on how many people reply. dunstonh is an IFA and there are a fair number of others here who either are or aren't (me) but do understand how to build portfolios to manage up and down movement levels (commonly called risk but volatility is a better word for it).

These days anyone who calls themselves an independent financial adviser, all three words, is required to give advice that's best for you, without favouring any one supplier unless that one is best for you. If they don't they are liable to pay you redress for any money you lost as a result of bad advice. Not for investment performance if they recommended the right mixture of investments, though, just if the advice to use them was wrong. unbiased.co.uk is the place where most can be found.

Anyone using the full IFA term is also required to have an option to charge a fee instead of taking commission and that fee is not supposed to be just the same as commission. In your case a fee will be the best - cheapest - way to go but it can be taken out of initial charges for investments to save some VAT. Fees vary between IFAs, you can ask for opinions here on whether a fee seems reasonable. Can also shop around, just as you would with a builder.

One of the better options for you, if you can stand it, is to use income drawdown and gradually buy an annuity a year with part of the money, say £20,000 a year. That way you'll gradually benefit from annuity rates that tend to increase as you get older and gradually reduce uncertainty about the money. Perhaps start with an initial annuity with £100,000 or so to give some certain top up of the salary.

gibblywich

OK you wonderful helpful people - do any of you know about pension earmarking??
My solicitor threw this out as an option as he said it would cease upon the pension holder's (my ex) death or my (god forbid) re-marriage.
However I have read the paragraph that explains about it in the Company pension scheme rules and the words read as though that is the norm UNLESS THE COURT ORDER DICTATES OTHERWISE. I have asked my solicitor to fully pursue this but I may as well talk to my flat eric at home.
It reads to me as though a Court can stipulate that the normal execution of the earmarking rule may be replaced by one that is decided at Court, not by the Company pension trustees.

rabbitmumu

hi. I have dealt with several pension sharing on divorce cases for final salary schemes but have never come across this option. While i am doing some research, it would be helpful to my understanding if you can let me know the following:

(if you are uncomfortable putting all these in public, please feel free to PM me)

1. Your ex- has a company final salary scheme and he has already been receiving his pension?

2. Are you officially divorced already? i.e. has the court issued a decree absolute with a divorce date in there?

3. Have you actually received a Pension Sharing on Divorce confirmation - i.e. a sheet(s) that state the % of pensions you will get from your ex-'s scheme?

4. Reasons for asking all these is because you already knew you would receive around 1/2m pensions, which you were told initially you had to transfer it out of the scheme (i.e. in the form of an annuity or income drawdown - or the option of wait and see in a sep fund is also possible but as you said you need the cash now, so you were only advised of the first 2 options).

With the idea of 1/2m, they have clearly calculated the transfer value (i.e. what your ex- fund is worth, and you get something like 52% as decided by court), so to my understanding everything is settled. So how come you are now given this option? If you were given this option, then you would stay as a member of the scheme (i.,e. they need to add you in) which is totally opposite to the original point you made where they told you you need to transfer your share of the benefits out of your ex-s scheme?

Just one bit of advice, (based on my personal experience only, no offence to anyone), divorce lawyers are not experts in pensions and so whatever happens you need to ask questions. Don't just take the answers given by them - because they can always go and ask the scheme's actuaries and/or trustees if they are not 100% sure. I have personally dealt with divorce lawyers who sent us wrong info etc and we had to identify their mistakes. They ended up blaming other people for any delays or their own mistakes...

rabbitmumu

without knowing the full details, this is what i can come up with.

It appears the earmarking orders is almost opposite to the pensions sharing orders, with the former one having no clean-break from your ex. There hasn't been many applications/ approval with this earmarking order (probably that's why i have never heard of it).

It sounds very odd that your lawyers didn't inform you of this "option" right at the start, and hasn't advised you this is not really a good option. Given your ex- is already taking his pensions, the so-called only advantage could be to take some of his pension lump sum which he has already received - but this is not really necessary because if you go for the SHaring Order, the judge would have allowed for all your other assets and split them accordingly anyway.

For Pension Sharing Orders (i,e, the annuity or income drawdown option you had), that is the usual preference of company pension scheme trustees as this reduces the admin cost of adding you into the scheme. Nice easy and simple for them. However, I am wondering if something weird is going on as to why the lawyers now suggest this Earmarking Order? (probably not true but at the back of my mind without knowing the full details - has it got something to do with this big transfer out of 1/2m? And the scheme is not very big etc?)

If the lawyers can't really explain the benefits of this Earmarking Order, why would they suddenly simply throw you with this option?

Anyway, hope the above info help you a bit. And for more details http://www.sharingpensions.co.uk/earmarking.htm

jamesd

I'm no expert in earmarking but normally I'd expect a pension splitting order to make your pension completely independent of his life or a possible marriage for you. A "clean break" so you don't even have to think about him any more. Rabbitmumu seems to know more about this than I do but you definitely need to find out more about anything that depends on his life or your not having a future marriage and seek some resolution that avoids those links. You don't want someone you no longer have a relationship with getting hit by a bus ending most of your income!

If you do for some reason end up with such an agreement that ends on his death, you have an insurable interest in his life and should take out life assurance on his life to replace your income on his death.

gibblywich

I hadn't thought about insuring against his death. Actually I probably didn't make myself clear earlier.I spotted the earmarking option when I asked for a copy of the rules. As we both work for the same company I expected my "share" could be transferred to my own pension. It can't. As I would be far more secure from an inflation standpoint having a share of his pension earmarked it sounded a good option. But not if it ceases on his death or my stupidity in marrying again.The wording in the rules implies the court may be able to overuse this condition. I just wondered if anyone had experience of it

rabbitmumu

gibblywich wrote: »

The wording in the rules implies the court may be able to overuse this condition. I just wondered if anyone had experience of it

I haven't seen a case of Earmarking Order in the last few years. All that I have seen are the Pensions Sharing Order which I believe is far more practical and clean in most circumstances.