Divorce - PSO or cash or mix

Marcon

Minky123lala said:

Marcon said:

Minky123lala said:

flaneurs_lobster said:

And your solicitors view?

anything better than 50/50 would be a win looking at the whole picture. He could not give specific advice on this pension offsetting vs PSO as he is not a pension expert

Just checking, although I'd sincerely hope your solicitor has already asked the question (he wouldn't need to be a pension expert to do so) - your DB pension is a funded scheme (public or private sector), rather than an unfunded public sector scheme? 

Hi Marcon,
I checked this, it's a funded private sector scheme. 
Many thanks

Good!

For anyone else reading who wonders why I asked the question, unfunded public sector schemes may not allow an ex to transfer out their part of a PSO (not to be confused with earmarking...)  - it stays in the scheme and the ex will at some point in the future be able to draw their own benefits from that scheme. 

Minky123lala

Hi All,
Thanks for the comments so far - really appreciate.

So I've spoken to my pension admin and tried to understand a bit more about DB pension growth and have adjusted my calculations as follows

PSO 187500 amount of pension husband wants

         622745 CETV

         30.11% % of CETV

         90978 Pension forecast - pa at 65

         63594 Revised pension forecast if PSO pension debit was 30.1%

         27384 'lost' pension pa 

         821531 'lost' pension over 30 years (65 to 95)

         24646 'lost' pension growth  (2 years 95-97 GMP @ 3.25%), (12 years 97-2009 CPI capped 5%), 2009 onwards                       CPI capped 2.5%, - say 3% avg across 30 years

         592324 'loss' to me of PSO (lost pension and pension growth over 30 years retirement reduced for tax I would                              have to pay (@30%, 40% of 75%)

Cash 187500 cash

           87097 interest borrowing 187500 over 13 years repayment c.1500 pm 4.22%

           274597 'loss' to me of giving cash 

does this comparison make sense?  appreciate any thoughts.  I'm obviously thinking cash offsetting is a better option, hopefully I'll live to 95 to see the income and give it to my children (minimising IHT along the way)!

sgx2000

The divorce laws in the uk are ridiculous......

In a business partnership if one partner puts in 80% and the other 20%
They dont split it 50/50 when the business disolves....

Pat38493

Minky123lala said:

Hi All,
Thanks for the comments so far - really appreciate.

So I've spoken to my pension admin and tried to understand a bit more about DB pension growth and have adjusted my calculations as follows

PSO 187500 amount of pension husband wants

         622745 CETV

         30.11% % of CETV

         90978 Pension forecast - pa at 65

         63594 Revised pension forecast if PSO pension debit was 30.1%

         27384 'lost' pension pa 

         821531 'lost' pension over 30 years (65 to 95)

         24646 'lost' pension growth  (2 years 95-97 GMP @ 3.25%), (12 years 97-2009 CPI capped 5%), 2009 onwards                       CPI capped 2.5%, - say 3% avg across 30 years

         592324 'loss' to me of PSO (lost pension and pension growth over 30 years retirement reduced for tax I would                              have to pay (@30%, 40% of 75%)

Cash 187500 cash

           87097 interest borrowing 187500 over 13 years repayment c.1500 pm 4.22%

           274597 'loss' to me of giving cash 

does this comparison make sense?  appreciate any thoughts.  I'm obviously thinking cash offsetting is a better option, hopefully I'll live to 95 to see the income and give it to my children (minimising IHT along the way)!

At first glance, it looks to me like your pension forecast at 65 has been adjusted forward for future estimated inflation, and you are then comparing that with a cash calculation in today's money - so it's not an apples to apples comparison?  Otherwise I'm not seeing how a pension with a CETV of 622K could be paying out £90K per year.

Also as previously mentioned, normally if you are giving cash instead of pension in a divorce the cash payment is adjusted downwards because that cash was already taxed on your side.

Cobbler_tone

sgx2000 said:

The divorce laws in the uk are ridiculous......

In a business partnership if one partner puts in 80% and the other 20%
They dont split it 50/50 when the business disolves....

You're talking my language!
I firmly believe that it will change at some point and future generations will look back in horror.

My favourite quip is "what did they bring to the party?"

BTW if you come away with 50/50 you are doing well! Pre and post nups are becoming more common.

In terms of this case, if the cash can be bumped up I'd retain more of the pension for future security but that is based on lived experience and appreciate every circumstance is different.

Bostonerimus1

sgx2000 said:

The divorce laws in the uk are ridiculous......

In a business partnership if one partner puts in 80% and the other 20%
They dont split it 50/50 when the business disolves....

Yes, but a marriage isn't a business.

Minky123lala

Pat38493 said:

Minky123lala said:

Hi All,
Thanks for the comments so far - really appreciate.

So I've spoken to my pension admin and tried to understand a bit more about DB pension growth and have adjusted my calculations as follows

PSO 187500 amount of pension husband wants

         622745 CETV

         30.11% % of CETV

         90978 Pension forecast - pa at 65

         63594 Revised pension forecast if PSO pension debit was 30.1%

         27384 'lost' pension pa 

         821531 'lost' pension over 30 years (65 to 95)

         24646 'lost' pension growth  (2 years 95-97 GMP @ 3.25%), (12 years 97-2009 CPI capped 5%), 2009 onwards                       CPI capped 2.5%, - say 3% avg across 30 years

         592324 'loss' to me of PSO (lost pension and pension growth over 30 years retirement reduced for tax I would                              have to pay (@30%, 40% of 75%)

Cash 187500 cash

           87097 interest borrowing 187500 over 13 years repayment c.1500 pm 4.22%

           274597 'loss' to me of giving cash 

does this comparison make sense?  appreciate any thoughts.  I'm obviously thinking cash offsetting is a better option, hopefully I'll live to 95 to see the income and give it to my children (minimising IHT along the way)!

At first glance, it looks to me like your pension forecast at 65 has been adjusted forward for future estimated inflation, and you are then comparing that with a cash calculation in today's money - so it's not an apples to apples comparison?  Otherwise I'm not seeing how a pension with a CETV of 622K could be paying out £90K per year.

Also as previously mentioned, normally if you are giving cash instead of pension in a divorce the cash payment is adjusted downwards because that cash was already taxed on your side.

Pat,
Thanks.  Yes I think teh £91k forecast at 65 probably does include estimated inflation, so perhaps a double count on th e £24.6k 'lost growth', but doesn't make a massive difference to the final figure for PSO.   Yes the CETV value is as of now, and the accrued pension is £56k pa.

Re. adjusting cash value downwards, my STBXH won’t accept a reduction for tax or utility – as he would take 25% tax free at 55 next year and want to invest the rest in a pension anyway.  

Would you do the cash option if in my shoes?
Thanks

Minky123lala

sgx2000 said:

The divorce laws in the uk are ridiculous......

In a business partnership if one partner puts in 80% and the other 20%
They dont split it 50/50 when the business disolves....

sgx2000 - totally agree!  or split on future 'needs'!   
I totally get that stay at home partners who contribute work in other ways should have that work taken into account and an appropriate financial value applied - apparently they have a calculation for this in Germany, was talking to a colleague about this

Minky123lala

Cobbler_tone said:

sgx2000 said:

The divorce laws in the uk are ridiculous......

In a business partnership if one partner puts in 80% and the other 20%
They dont split it 50/50 when the business disolves....

You're talking my language!
I firmly believe that it will change at some point and future generations will look back in horror.

My favourite quip is "what did they bring to the party?"

BTW if you come away with 50/50 you are doing well! Pre and post nups are becoming more common.

In terms of this case, if the cash can be bumped up I'd retain more of the pension for future security but that is based on lived experience and appreciate every circumstance is different.

Thanks Cobbler_tone

Fully agree. 

Thanks for the 'lived experience' pov, adds weight to the calculation. Did you do a similar calculation?
Do you think my calculations are logical or have some kind of flaw?

Thanks

Hoenir

Cobbler_tone said:

My CETV was £625k during mediation, £675k in the consent order, £550k by the time of the divorce, £450k the following year and £430k this year. 

The amount of "pension" the sum of money that this could have bought remains relatively unchanged though. The inherent danger with not understanding the far bigger picture.