Value of pensions in Divorce

LobsterSoup

First post on the forum.  Does anyone have any experience of getting final salary pension valued for divorce?  I have heard that actuaries are likely to value them higher than the CETV, I'm wondering how much higher?

Me and ex are trying to decide whether we need an 'expert' valuation of pensions for divorce or whether to just get on with it and use CETV's we have.  One side has local authority pensions, the other various defined contribution pension pots.   There's about a 20% gap between them at the moment, would it be possible an actuary's valuation could close that gap?  

Thanks in advance!

ewaste

The CETV value for a Defined Benefit scheme is essentially the cost or sum of money that the actuaries of the scheme deem necessary to provide the defined benefit. If anything some transfer values are higher to offload risk from the scheme. Although if I remember correctly because the LGPS is a relatively stable and well funded scheme the transfer values may well be lower than others.

Marcon

LobsterSoup said:

First post on the forum.  Does anyone have any experience of getting final salary pension valued for divorce?  I have heard that actuaries are likely to value them higher than the CETV, I'm wondering how much higher?

Me and ex are trying to decide whether we need an 'expert' valuation of pensions for divorce or whether to just get on with it and use CETV's we have.  One side has local authority pensions, the other various defined contribution pension pots.   There's about a 20% gap between them at the moment, would it be possible an actuary's valuation could close that gap?  

Thanks in advance!

How long's a piece of string? It really is that sort of unhelpful response, I'm afraid. The only way to find out is to get both a CETV and an 'expert' valuation. 

But if the gap is only 20%, does it really need closing - could you reach an amicable agreement by sharing other assets in different proportions and saving yourself a hefty professional fee for getting 'expert' valuation as well as a CETV?

What does your solicitor say? You'll need a court order if you want to go the pension sharing route.

Silvertabby

Certainly in the case of the LGPS, you will need to request a revised CETV specifically for divorce purposes, as the calculation is different (much more complex!) and more information supplied (Form E).

LobsterSoup

@Macron Thanks for your response.  We could of course share other assets and that's almost certainly what we would do.   But what is in question here is whether one side should be be giving up part of a stake in equity to offset a 'gap' which might not really be there.  

LobsterSoup

Silvertabby said:

Certainly in the case of the LGPS, you will need to request a revised CETV specifically for divorce purposes, as the calculation is different (much more complex!) and more information supplied (Form E).

Thank @Silvertabby.  As far as I understand, the CETV was requested for divorce purposes.  We are not doing Form E, but going via a mediator route to get a consent order.  We just don't know whether we should be also getting an actuarial valuation - the mediator said it was something we 'could do'.

Silvertabby

LobsterSoup said:

Silvertabby said:

Certainly in the case of the LGPS, you will need to request a revised CETV specifically for divorce purposes, as the calculation is different (much more complex!) and more information supplied (Form E).

Thank @Silvertabby.  As far as I understand, the CETV was requested for divorce purposes.  We are not doing Form E, but going via a mediator route to get a consent order.  We just don't know whether we should be also getting an actuarial valuation - the mediator said it was something we 'could do'.

A divorce CETV isn't just the transfer figure, it also includes current and forecast pension figures.  

Don't know if this helps, but out of all the initial divorce calculations I produced, over 20 years, less than 10% proceeded to actual pension sharing order (PSO) stage.

I assume that the value of the pension has just been offset against another marital asset, probably the house.

Thrugelmir

Silvertabby said:

LobsterSoup said:

Silvertabby said:

Certainly in the case of the LGPS, you will need to request a revised CETV specifically for divorce purposes, as the calculation is different (much more complex!) and more information supplied (Form E).

Thank @Silvertabby.  As far as I understand, the CETV was requested for divorce purposes.  We are not doing Form E, but going via a mediator route to get a consent order.  We just don't know whether we should be also getting an actuarial valuation - the mediator said it was something we 'could do'.

I assume that the value of the pension has just been offset against another marital asset, probably the house.

Easier and quicker to divide cash . 

LobsterSoup

We have no intention of trying to go down the route of a pension sharing order.. we will definitely offset any inequality against split of other assets.  And yes, @Silvertabby the divorce CETV shows all of those figures.  For what its worth, one of us holds all LGPS pensions (various LAs) and the other all private pension pots.

What I'm struggling with is:  do we take the LGPS CETVs on face value?  Or would an actuary look at the LGPS ones and say (for example) that a LGPS pension valued at £200k is really worth £250k to the person who keeps it.

I've tried to look at the other way as well. Obviously we know what the LGPS ones will pay, but trying to come up with what the private pension pots will pay is impossible. Every calculator I've tried spits out a wildly different figure for drawdown (some more than the LGPS payout, some less) . And the annuity figures are crazy, as low as half as what the LGPS will pay out.  So even if we went to an actuary, I'm guessing its all a bit arbitrary.  

Thrugelmir

LobsterSoup said:

What I'm struggling with is:  do we take the LGPS CETVs on face value?  Or would an actuary look at the LGPS ones and say (for example) that a LGPS pension valued at £200k is really worth £250k to the person who keeps it.

There's no cash CETV . The value is in the future guaranteed benefit. The notional CETV will fluctuate as the cost of buying a  similar index linked annuity on the open markets does. Comparisons are valid only at the date of the split. 

LobsterSoup

Thanks, @Thrugelmir