CETV value

wounded_panic

Marcon said:

wounded_panic said:

I am currently taking pension from a major UK employer. The scheme is DB and pays £48K pa. As I am in the early stages of divorce, I have asked for a transfer value on divorce and the scheme administrators have come back with a value of £760K. I know transfer values have come  down since their peak a few years ago but this value seems very low. I have queried it with the admin but got a response that the value is correct. Does this value seem right to people?

It is what it is - and as you don't give your age (always a key factor in CETVs) it's impossible to comment more helpfully than the answer above.

More to the point - if it's your pension and you are in the process of divorce, surely the lower the value the better?

If I am to transfer out some of the pension capital to the wife's pension scheme (say 50% = 380K) as part of the settlement, then I want as high a CETV as possible. This is because the part that remains in the DB scheme for me will generally be valued in a different way (ie it's not the other 380K). If we split the DB 50/50 I will end up giving a much higher proportion of the rest of our assets to wife. Either that or split pension 40/60 or even worse.

wounded_panic

Marcon said:

GunJack said:

Rather than cetv, would it not be better for your scheme to split your membership with your (soon) ex-spouse? Surely less messy going forward

Not (usually) how it works on divorce. You're looking at the capital value of all assets, and simply doing as you suggest gives no idea of the underlying value of a DB pension.

Yes, I've asked the scheme if they will do pension earmarking (eg give both me and wife 24K). They seem reluctant to do this and anyway the payment to her stops on my death. Plus it doesnt give a 'clean break'.

wounded_panic

Asimovs_nightfall said:

It all depends on how you negotiate your divorce.

The CETV provides a figure to put into the overall pot for divorce, but the reality could well be a % of the annual DB pension as part of a clean financial break. For example, if your DB pension was worth £48k p.a. then what would be a negotiated settlement that you and your ex would accept based on the pension?  Would it 60/40, or 50/50 or something else of this £48k p.a.  What would impact on this would be the split of other assets, the equity in the house, other savings etc.

It's a negotiation. 

You are right, it is a negotiation. As you have said, there are various ways of cutting the cake with the various assets we have. We are seeking to use financial mediation to come to something 'fair' . My main problem is even the mediators cant always agree on what 'fair' is!

Albermarle

wounded_panic said:

Asimovs_nightfall said:

It all depends on how you negotiate your divorce.

The CETV provides a figure to put into the overall pot for divorce, but the reality could well be a % of the annual DB pension as part of a clean financial break. For example, if your DB pension was worth £48k p.a. then what would be a negotiated settlement that you and your ex would accept based on the pension?  Would it 60/40, or 50/50 or something else of this £48k p.a.  What would impact on this would be the split of other assets, the equity in the house, other savings etc.

It's a negotiation. 

You are right, it is a negotiation. As you have said, there are various ways of cutting the cake with the various assets we have. We are seeking to use financial mediation to come to something 'fair' . My main problem is even the mediators cant always agree on what 'fair' is!

Each side will normally always feel they did not get the best deal. 

shortseller09

wounded_panic said:

If I am to transfer out some of the pension capital to the wife's pension scheme (say 50% = 380K) as part of the settlement, then I want as high a CETV as possible. This is because the part that remains in the DB scheme for me will generally be valued in a different way (ie it's not the other 380K). If we split the DB 50/50 I will end up giving a much higher proportion of the rest of our assets to wife. Either that or split pension 40/60 or even worse.

Sorry, can't follow that, can you clarify?

leosayer

Marcon said:

leosayer said:

Is the calculation for a CETV the same as a valuation for a divorce pension sharing order?

Not quite sure what the question is - so my answer may not be a response to what you've actually asked. If so, apologies!

The CETV calculation is done twice: once at the time the order is made (and a %age split awarded) and then again at the time the order is implemented and actual payment of the transfer value is made.

My question, which could have been worded better, is whether the pension value provided by the administrator is different depending on whether the value is required for a transfer (ie. to give up the DB rights) or for a sharing order (where the DB rights may not be given up). 

Silvertabby

leosayer said:

Marcon said:

leosayer said:

Is the calculation for a CETV the same as a valuation for a divorce pension sharing order?

Not quite sure what the question is - so my answer may not be a response to what you've actually asked. If so, apologies!

The CETV calculation is done twice: once at the time the order is made (and a %age split awarded) and then again at the time the order is implemented and actual payment of the transfer value is made.

My question, which could have been worded better, is whether the pension value provided by the administrator is different depending on whether the value is required for a transfer (ie. to give up the DB rights) or for a sharing order (where the DB rights may not be given up). 

A divorce CETV is just about the most complicated calculation in the world of DB pensions.  Even more so when the pension is already in payment, as seems to be the case here. 

In the case of a transfer CETV, the answer will be a one-liner in a letter, just giving the amount and the guarantee period.

In the case of a divorce CETV, the pension provider has to supply a Form E  (or equivalent) - an A4 sheet of so much more information than just a valuation figure.

Silvertabby

wounded_panic said:

Marcon said:

GunJack said:

Rather than cetv, would it not be better for your scheme to split your membership with your (soon) ex-spouse? Surely less messy going forward

Not (usually) how it works on divorce. You're looking at the capital value of all assets, and simply doing as you suggest gives no idea of the underlying value of a DB pension.

Yes, I've asked the scheme if they will do pension earmarking (eg give both me and wife 24K). They seem reluctant to do this and anyway the payment to her stops on my death. Plus it doesnt give a 'clean break'.

That's not the way a pension earmarking order works.  Your pension provider can't just pay half of your pension to your wife - they would just continue to pay the full amount to you (as your taxable income).  You would then personally transfer the specified amount to your wife.

An earmarking order would make life much easier for your pension provider, as they wouldn't actually have to do anything - but they are right in warning you of the downsides.  ie, no clean break order and payments would cease on your death.

Earmarking orders were largely wiped out by the introduction of Pension Sharing Orders (PSOs) in which a %age of the benefits valuation are placed into a scheme under the recipients name, and are theirs for life.  
.

wounded_panic

Silvertabby said:

leosayer said:

Marcon said:

leosayer said:

Is the calculation for a CETV the same as a valuation for a divorce pension sharing order?

Not quite sure what the question is - so my answer may not be a response to what you've actually asked. If so, apologies!

The CETV calculation is done twice: once at the time the order is made (and a %age split awarded) and then again at the time the order is implemented and actual payment of the transfer value is made.

My question, which could have been worded better, is whether the pension value provided by the administrator is different depending on whether the value is required for a transfer (ie. to give up the DB rights) or for a sharing order (where the DB rights may not be given up). 

A divorce CETV is just about the most complicated calculation in the world of DB pensions.  Even more so when the pension is already in payment, as seems to be the case here. 

In the case of a transfer CETV, the answer will be a one-liner in a letter, just giving the amount and the guarantee period.

In the case of a divorce CETV, the pension provider has to supply a Form E  (or equivalent) - an A4 sheet of so much more information than just a valuation figure.

Because of these extra complications, does that mean that the transfer CETV and divorce CETV will have different values?

Albermarle

Silvertabby said:

wounded_panic said:

Marcon said:

GunJack said:

Rather than cetv, would it not be better for your scheme to split your membership with your (soon) ex-spouse? Surely less messy going forward

Not (usually) how it works on divorce. You're looking at the capital value of all assets, and simply doing as you suggest gives no idea of the underlying value of a DB pension.

Yes, I've asked the scheme if they will do pension earmarking (eg give both me and wife 24K). They seem reluctant to do this and anyway the payment to her stops on my death. Plus it doesnt give a 'clean break'.

That's not the way a pension earmarking order works.  Your pension provider can't just pay half of your pension to your wife - they would just continue to pay the full amount to you (as your taxable income).  You would then personally transfer the specified amount to your wife.

An earmarking order would make life much easier for your pension provider, as they wouldn't actually have to do anything - but they are right in warning you of the downsides.  ie, no clean break order and payments would cease on your death.

Earmarking orders were largely wiped out by the introduction of Pension Sharing Orders (PSOs) in which a %age of the benefits valuation are placed into a scheme under the recipients name, and are theirs for life.  
.

Some time ago I was looking at the Teachers Pension Scheme rules in this area on behalf of a friend, who potentially may have to get involved with a Pension sharing order.
If I remember correctly it was possible for the TPS to pay a regular pension directly to the divorced spouse of the pension holder, as part of a legal financial settlement between divorcing parties. I do not remember any mention of it going into a separate scheme. Although I could have read it wrongly.