Pension Sharing order

Shepp66

I am in the process of getting divorced, my ex has two deferred pensions (one is a local government pension scheme, the other is a civil service scheme) for which she has obtained cash equivalent transfer values. On both schemes she currently has a normal retirement age of 60 ( she is currently 57, I am 62). We agreed that one of the deferred schemes would be transferred to me in it's entirety and she would retain the other. I have just discovered that when the lgps  is  transferred to me the normal retirement age that applies is changed from 60 to 65. Neither scheme will give me any information on what pension I am likely to receive and will only provide figures once the pension sharing agreement has been implemented. Surely as I result of the increased normal retirement age I will get less pension as a result? We have been told that should the civil service pension be transferred to me my normal retirement age will remain at 60 but I have no way of knowing if this is true - I was previously told that my normal retirement age in the lgps would remain 60 but now I find out this is not the case. I assumed that cetv's were basically standard but the fact that the lgps is going to change my normal retirement age to 65 surely makes their cetv effectively worth less than the civil service cetv?

The lgps say that I have the option to transfer the cetv to a different pension provider if I wish to but everything I read seems to suggest that transferring out of defined benefits scheme is, to all intents and purposes, impossible so I really don't know what to do.

The lgps has an online calculator that states that if she was to take her pension now (3 years before her normal retirement age) she would receive a pension of 13k per annum and a tax free lump sum of 42k. Would I be better off if she takes the pension early and then I get a pension sharing order against that?

Thanks for reading, any comments will be gratefully received

Brie

I wouldn't transfer out of a DB scheme as they are generally good value.  As for the raised age I would assume you will get an enhance pension for taking it later.  And also it's likely that you could take it "early" (aka now) in any case as you're already over 55.  But get someone to double check the NRD change as pension admins can make mistakes.  (they tried to tell me my NRD was 65 but that was a new portion of the scheme not the bit I was in)

I don't think you can make her take her pension now just to suit you.  But your solicitor would know better than me.

Marcon

Shepp66 said:

I am in the process of getting divorced, my ex has two deferred pensions (one is a local government pension scheme, the other is a civil service scheme) for which she has obtained cash equivalent transfer values. On both schemes she currently has a normal retirement age of 60 ( she is currently 57, I am 62). We agreed that one of the deferred schemes would be transferred to me in it's entirety and she would retain the other. I have just discovered that when the lgps  is  transferred to me the normal retirement age that applies is changed from 60 to 65. Neither scheme will give me any information on what pension I am likely to receive and will only provide figures once the pension sharing agreement has been implemented. Surely as I result of the increased normal retirement age I will get less pension as a result? We have been told that should the civil service pension be transferred to me my normal retirement age will remain at 60 but I have no way of knowing if this is true - I was previously told that my normal retirement age in the lgps would remain 60 but now I find out this is not the case. I assumed that cetv's were basically standard but the fact that the lgps is going to change my normal retirement age to 65 surely makes their cetv effectively worth less than the civil service cetv?

The lgps say that I have the option to transfer the cetv to a different pension provider if I wish to but everything I read seems to suggest that transferring out of defined benefits scheme is, to all intents and purposes, impossible so I really don't know what to do.

The lgps has an online calculator that states that if she was to take her pension now (3 years before her normal retirement age) she would receive a pension of 13k per annum and a tax free lump sum of 42k. Would I be better off if she takes the pension early and then I get a pension sharing order against that?

Thanks for reading, any comments will be gratefully received

I think you're misunderstanding how pension sharing orders work - and from the sound of things confusing them with an alternative known as 'earmarking'. 

Have a chat with your solicitor - and if you aren't confident that they are fully understand the mechanics (many don't - it's a horribly complex area), ask for a referral to someone who does. Alternatively, there are some fairly good explanations online, albeit they aren't an easy read because it isn't an easy topic. This seemed a pretty accessible one: https://www.sharingpensions.co.uk/yourques6.htm and so too is https://techzone.abrdn.com/public/pensions/Tech-guide-pension-sharing-div

Transferring out is far from impossible, but it's also often far from wise!

mark5

I would guess that although she is passing you the full pension its normal retirement age for the pension is 60 for her which works out at 65 for you being 5 years older. 

Basically the pension will pay out when shes 60 not when your 60, she’s passing you the benefit but you seem to expect the pension scheme to pay out 5 years earlier?

hyubh

Shepp66 said:

I am in the process of getting divorced, my ex has two deferred pensions (one is a local government pension scheme, the other is a civil service scheme) for which she has obtained cash equivalent transfer values. On both schemes she currently has a normal retirement age of 60 ( she is currently 57, I am 62).

Strictly speaking for the LGPS one, I would be 95% confident the NPA is 65, and 60 is when she meets the 'rule of 85', so can retire at that point without an actuarial reduction. Materially comes to the same thing, but isn't formally so. (There are exceptions, in particular a group of bulk transferees from the civil service pension scheme many years ago maintained an NRA of 60. But in most cases it's the 85 year rule that does it.)

We agreed that one of the deferred schemes would be transferred to me in it's entirety and she would retain the other. I have just discovered that when the lgps  is  transferred to me the normal retirement age that applies is changed from 60 to 65.

Were you to proceed, her pension wouldn't directly transfer to you. Instead, a dedicated 'pension credit' membership will be created in your name, purchased with the divorce CETV - and pension credit memberships come with their own terms. There are various technical reasons for this, one of which is if your ex were to have a GMP in scheme: while her GMP would be reduced, the GMP would not pass onto you (instead, your entire pension credit would be treated as 'excess'). Basically acquiring a GMP on divorce would imply the ex-spouse (i.e. you in this scenario) losing SERPS pension rights, which the old state pension system did not have the concept of.

If you're familiar with public sector pensions in general, you could think of it roughly equivalent to a Club transfer between public sector schemes - i.e. terms that are not like-for-like, but of similar value overall. So, for example, were an individual with a civil service pension have joined the LGPS in 2009 and transferred, they would have got a service credit in the LGPS with an NPA of 65 not 60 (since 65 was the LGPS NPA at that point).

Neither scheme will give me any information on what pension I am likely to receive and will only provide figures once the pension sharing agreement has been implemented.

I agree that's rubbish, but unfortunately not uncommon in DB land.

Shepp66

Thanks to everyone who has taken the time to reply. The whole process has been hugely frustrating and continues to be so. Basically I had a choice between 2 deferred pension pots of similar value - my ex contacted both schemes to clarify what npa I would be given as a new member in the scheme and both confirmed that I would get the same npa as the existing member. This has subsequently proven to be incorrect with regard to lgps which is the pot that I chose. I've had to make my choice based on an absolute minimum of information ( basically just the cetv's). I am assuming that the higher npa that I will be given as a new member in the lgps will negatively affect the pension that I receive but this is only an assumption because they won't give me any information until the pension sharing agreement has been implemented so effectively I've had to make a choice with no guidance as to what the outcome will be - it seems crazily unfair. Looking at other pension schemes, the NHS scheme clearly states that new members acquiring pension rights as a result of a divorce get the same npa as the existing member. The civil service does the same ( assuming they are actually giving us the correct information). I find it baffling that a scheme is able to offer different terms to a divorcee and that they suffer a financial penalty as a result - I'm  staggered this is even legal.( I am of course guessing I will be worse off because the pension scheme won't provide any information!!!).

As I mentioned in my original post, if my ex took the deferred pension now she would receive 13k per annum plus a lump sum of 42k - in the absence of any other information I assumed I would get a similar amount with a slight increase to reflect the fact that I am 4 years older but who knows - I certainly don't…

Crazy system

Silvertabby

Shepp66 said:

Thanks to everyone who has taken the time to reply. The whole process has been hugely frustrating and continues to be so. Basically I had a choice between 2 deferred pension pots of similar value - my ex contacted both schemes to clarify what npa I would be given as a new member in the scheme and both confirmed that I would get the same npa as the existing member. This has subsequently proven to be incorrect with regard to lgps which is the pot that I chose. I've had to make my choice based on an absolute minimum of information ( basically just the cetv's). I am assuming that the higher npa that I will be given as a new member in the lgps will negatively affect the pension that I receive but this is only an assumption because they won't give me any information until the pension sharing agreement has been implemented so effectively I've had to make a choice with no guidance as to what the outcome will be - it seems crazily unfair. Looking at other pension schemes, the NHS scheme clearly states that new members acquiring pension rights as a result of a divorce get the same npa as the existing member. The civil service does the same ( assuming they are actually giving us the correct information). I find it baffling that a scheme is able to offer different terms to a divorcee and that they suffer a financial penalty as a result - I'm  staggered this is even legal.( I am of course guessing I will be worse off because the pension scheme won't provide any information!!!).

As I mentioned in my original post, if my ex took the deferred pension now she would receive 13k per annum plus a lump sum of 42k - in the absence of any other information I assumed I would get a similar amount with a slight increase to reflect the fact that I am 4 years older but who knows - I certainly don't…

Crazy system

Unlike earlier versions of NHS and civil service pensions, which may/do have pre 65 npas, the LGPS npa was always 65 (for both men and women).  In your ex's case, her dates of membership qualify her for full Rule of 85 protections (ie, pension payable in full from age 60).  R85 is not transferable in the case of a PSO.

Your eventual pension will be based on the value of the divorce CETV, not your ex's pension.  ie, the pension would be converted to £XXK and then the PSO %age awarded further converted to a pension credit record for yourself.  You may access this benefit before 65 but, as you are aware, the amount payable would be actuarily reduced for early payment.

A divorce CETV etc is one of the most complicated pensions in DB world, especially when it comes to working out a fair split (the job of your divorce lawyer, not the LGPS!)  In my time, I did umpteen CETV calculations, but would say that less than 10% actually made it to PSO stage.  Largely because it was so much easier to view the CETV value alone as a marital asset, ie take the full value of the house instead of 50% house and 50% pension.

ADD.  No, your pension credit amount won't be increased because you are older.  That only applies to DC age related annuities(?), not DB schemes.

Pat38493

Shepp66 said:

As I mentioned in my original post, if my ex took the deferred pension now she would receive 13k per annum plus a lump sum of 42k - in the absence of any other information I assumed I would get a similar amount with a slight increase to reflect the fact that I am 4 years older but who knows - I certainly don't…

Crazy system

In the end it's the CETV value that's being transferred, so theoretically, if you take the pension on the same date as when your ex would have taken it, you should get the same amount.  However this depends on the interplay between early retirement factors, late retirement factors and so on in the scheme, so it might be different (might even be more!).  I think that setting those factors is not an exact science so you are not going to get the same result to the penny.

If the other scheme that you didn't choose has a more clear picture, I assume it's too late to change to the other one?  Otherwise hopefully any differences that you encounter would be small.