Pension report advise

Gsea

Hello.

Hoping someone can advise,

The wife’s solicitor has sent a letter to my solicitor recommending some companies to carry out a pension report. The letter has asked that I choose which company to carry out the report. My solicitor, through her assistant has advised against using such companies and said that in her experience the final cost will far exceed the figures quoted. 

Are these reports a legal requirement, and if not, what is the alternative?

Pension info:

Wife had little in pension provision

I have a AFP pension (in payment) with a CEV of ~70k & DC pensions valued at ~750k

We have both agreed to split everything 50/50

TIA

tacpot12

I can't see why such reports should be necessary if you are able to split your pensions 50/50. The pension companies can value the pensions on the day they effect the split, to give you and your wife 50/50. The value of the pension today is not much use as it could change, especially the DC pension. 

The only time I can see that such reports might be necessary is if the AFP pension can't be split, and you need to give your wife more of the DC pension to make up for this. Then you would need an actuarial report. There is no reason why the price should ever be more than you have been quoted. (I also can't see why you should have to pay more than 50% of the cost of obtaining any reports that are needed).  

Gsea

Hi tacpot12,

Thanks for the reply.
I understand the AFP pension can be split, but knowing the forces it may not be straight forward.
I don't see the value in paying for a report when we have agreed a 50/50 split. Can the wife insist on the report, if so, I suspect she is going to try and get more than we have agreed.


TIA

Silvertabby

The AFP can certainly be split, even if it's already in payment.

However, the figures will have to be requested from Paymaster, stressing that they are required for divorce purposes.  

Also note that AFP won't split a pension without a Court Order detailing the %age to be applied.

How old are you both?  Regardless of when you started to draw your pension, your wife won't be able to access her part before SPA  unless she takes a reduction for early payment.  Complicated?  You bet !  Far simpler to get the CETV valuation and use that as an offset against the DC.

Gsea

Thanks Silvertabby,

I'm 60 and she is 59. That's interesting that she wont be able to access her half of that pension until SPA. I have obtained a CEV for divorce purposes (at a cost of £180). Offsetting would work for me, not sure if it works for her.

Many thanks
Gsea

TBagpuss

tacpot12 said:

I can't see why such reports should be necessary if you are able to split your pensions 50/50. The pension companies can value the pensions on the day they effect the split, to give you and your wife 50/50. The value of the pension today is not much use as it could change, especially the DC pension. 

The only time I can see that such reports might be necessary is if the AFP pension can't be split, and you need to give your wife more of the DC pension to make up for this. Then you would need an actuarial report. There is no reason why the price should ever be more than you have been quoted. (I also can't see why you should have to pay more than 50% of the cost of obtaining any reports that are needed).  

It's because pensions don't have the same value for evyeone. You could split a pension 50/50 and end up with a situation where one party then has pension income of £10,000 a year and the other £15,000 - it's complex, as it depnds not only on things like age, gender nad health, but also on the terms of each individual pension cheme.

Particuarly true with DB schemes where the benefits that can be trnasferred to the other spouse are often much less generous than those provided to members of the scheme.

It;s not a legal requirement - you and your wife can instruct your respective solicitors to simply provde for a 50% PSO.
BUT the solicitors are likely to be very uncomfortable with this, because it's not in her best interests and there is a signficant risk that it would leave her worse off than if the pensions are proerly assessed and dividied. 

It isn't normal for the cost of the repot to exceed the quote proided that adquate information is given to the actuary to allow them to quote - if the solicitors tell them who the pensions are held with and the approxiomate values then they should be able to provide an accurate quote.

Costs do go up when people start adding extra questions, and most actuaries will have a standard fee and then add ons depending on what is asked. So for instance if you want them to look at splittingthe pensions to provide equal income in retirement then that might be the standard fee, if tyen then say you also want to have figures based on only looking at the propertion of the pension built up while you were married, or figures looking at different retuitrement ages, or adding questions about offsetting pensions against other assets, those kinds of questions mean more work so the fees change. 

Also, it's quite common for the true value of a DB pension to be higher in real terms than the CETV might suggest, and it is usual for the same amount for pension to be worth more for men than women, due to differences in average life expectancy. For those reasons, your wife's solicitors are likely to advice her very strogly to get the report becasue she is the one who would be likely to lose out if you just split the funds equally without getting proper advice. 

Sometimes, where pensions are very small, it can make sense to do it without a report becuase the costs outweigh the benefits, but you have very siginifcant pensions so that doesn't apply here. 

Silvertabby

Gsea said:

Thanks Silvertabby,

I'm 60 and she is 59. That's interesting that she wont be able to access her half of that pension until SPA. I have obtained a CEV for divorce purposes (at a cost of £180). Offsetting would work for me, not sure if it works for her.

Many thanks
Gsea

As she's over 55 she could take her (hypothetical) 50% now, but it would be reduced for early payment.

In very rough terms, assuming 50% each, your pension would be reduced by half but your wife would only get 25% or less.

Gsea

TBagpuss said:

Also, it's quite common for the true value of a DB pension to be higher in real terms than the CETV might suggest, and it is usual for the same amount for pension to be worth more for men than women, due to differences in average life expectancy. For those reasons, your wife's solicitors are likely to advice her very strogly to get the report becasue she is the one who would be likely to lose out if you just split the funds equally without getting proper advice. 

Hi TBagpuss,

Thanks for taking the time to explain, and I thought retirement planning was complicated. Up until this time last year I was planning my retirement with a target date of 2023, then this bombshell was dropped, now I'm survival planning. How quickly life can change.

Ok, so splitting the AFP pension 50/50 is not equal because she may live longer, and because she is expected to live longer her pension will be lower. So does this mean the pension will be split so that I will get less pension so that she can have an equal amount? So if I live longer I would be disadvantaged? 

I take it if one party insists on a pension report it must be provided?

Prices quoted for the report is £2400 - £2700 +Vat, Would you know how this compares.


TIA

Gsea

TBagpuss

Gsea said:

TBagpuss said:

Also, it's quite common for the true value of a DB pension to be higher in real terms than the CETV might suggest, and it is usual for the same amount for pension to be worth more for men than women, due to differences in average life expectancy. For those reasons, your wife's solicitors are likely to advice her very strogly to get the report becasue she is the one who would be likely to lose out if you just split the funds equally without getting proper advice. 

Hi TBagpuss,

Thanks for taking the time to explain, and I thought retirement planning was complicated. Up until this time last year I was planning my retirement with a target date of 2023, then this bombshell was dropped, now I'm survival planning. How quickly life can change.

Ok, so splitting the AFP pension 50/50 is not equal because she may live longer, and because she is expected to live longer her pension will be lower. So does this mean the pension will be split so that I will get less pension so that she can have an equal amount? So if I live longer I would be disadvantaged? 

I take it if one party insists on a pension report it must be provided?

Prices quoted for the report is £2400 - £2700 +Vat, Would you know how this compares.


TIA

Gsea

The normal way that reports are done is that the actuary is asked to recommend a split that would leave you both with equal income in reiirement. - where a pemnsion fund is used to buy an annuity, then the pension omapny will look at statistical evidence to see what your life expectancy is and the amount of income you get per £10,000 of fund is based on that. However, if  youdo buy an annuity then once you'e got it, theypay even if you live longer than expected  - they are looking at broad trends and, as with insurance, some individuals willdo better than others! 

Obvsioult if you don't get an anuity and chose instead todecide for yourself when and how much you draw down then you have to guess for yourslef how long it has to last you. 

That quote for a report sounds fairly normal 

Gsea

Hi TBagpuss,

Thanks for taking the time to respond. I'm still awaiting feedback from my solicitor as to my options regarding agreeing to the report. However by the sound of it, if she does insist I don't have a choice, does she need my agreement to go ahead with the report or can she go ahead and initiate one.

TIA

Retireinten

If the report is insisted upon can you not request this is paid for fully by the person requesting the report, ie your wife? Or at the very least the report costs are split 50/50. This is primarily in her interest afterall.