CETV, How much is it really worth?

DivorcedDad

Hi, This is my first post and I'm going to keep it simple as I'd like a simple answer, if possible. I'm going through a divorce, we've been to mediation and the mediator has told us that when negotiating how to split the equity of all our finances, the pension would not be valued as its full CETV value. The pension would realistically be valued in court as a third of the CETV. I understand that cash in hand is more valuable than cash in a pension, but where is this written? Is this true? 
I'd appreciate any help.
Thanks

Marcon

DivorcedDad said:

Hi, This is my first post and I'm going to keep it simple as I'd like a simple answer, if possible. I'm going through a divorce, we've been to mediation and the mediator has told us that when negotiating how to split the equity of all our finances, the pension would not be valued as its full CETV value. The pension would realistically be valued in court as a third of the CETV. I understand that cash in hand is more valuable than cash in a pension, but where is this written? Is this true? 
I'd appreciate any help.
Thanks

It could just be the way you've interpreted what they have said, but I think you need the mediator to explain what they meant. It's hard to understand - if a CETV is (say) £300K, are they saying that will be seen as generating a pension of £100K? Or the pension overall is only worth £100K - if so, why, when the CETV has confirmed something 3 times that amount?

In divorce proceedings, the CETV (which must be requested by the scheme member specifically in relation to a divorce, as a particular presentation is required) is normally taken into account at the value given, and a %age awarded during proceedings (if appropriate) to the 'other party'.

The CETV will be recalculated before any payment is actually made (or a 'pension credit' awarded to the receiving spouse, if benefits are staying in the same scheme), since the CETV's guarantee period will have expired by the time the court order has been made and implemented, so the amount could change - up or down - if the financial markets move significantly.

That's in England and Wales. It's different in Scotland, where a lump sum amount of cash is awarded rather than a percentage. 

Albermarle

DivorcedDad said:

Hi, This is my first post and I'm going to keep it simple as I'd like a simple answer, if possible. I'm going through a divorce, we've been to mediation and the mediator has told us that when negotiating how to split the equity of all our finances, the pension would not be valued as its full CETV value. The pension would realistically be valued in court as a third of the CETV. I understand that cash in hand is more valuable than cash in a pension, but where is this written? Is this true? 
I'd appreciate any help.
Thanks

As said above, that does not sound right.
You need some more clarification from the mediator as to why they said that.

Cobbler_tone

My mediator didn’t get into valuation of CETVs. We did it and it didn’t revolve around pound notes. It cost me financially but I kept my entire pension which was my end goal.

DivorcedDad

Thank you for those replies. the mediator told us that as we were trading off other assets. Using your example of CETV £300k, this would not equate to £300k equity in the family home. This was because the pension would take 20 years to give returns of £300k, yet the equity could be accessed relatively quickly.

Marcon

DivorcedDad said:

Thank you for those replies. the mediator told us that as we were trading off other assets. Using your example of CETV £300k, this would not equate to £300k equity in the family home. This was because the pension would take 20 years to give returns of £300k, yet the equity could be accessed relatively quickly.

That doesn't come near to translating as 'The pension would realistically be valued in court as a third of the CETV'. Why would a pension take 20 years to give a return equal to the CETV - a figure which fluctuates the whole time with a defined benefit scheme. CETVs have pretty much halved in value in recent years (with the pension they represent being wholly unaffected by such fluctuations), which rather destroys the logic.

I can see what they could be driving at - different types of asset have different types of 'value' in both time and tax terms - but I suggest you and your spouse go back for clarification if you are still at odds on financial matters.

DivorcedDad

Marcon said:

DivorcedDad said:

Thank you for those replies. the mediator told us that as we were trading off other assets. Using your example of CETV £300k, this would not equate to £300k equity in the family home. This was because the pension would take 20 years to give returns of £300k, yet the equity could be accessed relatively quickly.

That doesn't come near to translating as 'The pension would realistically be valued in court as a third of the CETV'. Why would a pension take 20 years to give a return equal to the CETV - a figure which fluctuates the whole time with a defined benefit scheme. CETVs have pretty much halved in value in recent years (with the pension they represent being wholly unaffected by such fluctuations), which rather destroys the logic.

I can see what they could be driving at - different types of asset have different types of 'value' in both time and tax terms - but I suggest you and your spouse go back for clarification if you are still at odds on financial matters.

Unfortunately we are still at odds. Does arbitration work in a similar way to mediation, but with legally binding outcomes? Would there be room for a certain amount of negotiating in the session?

Albermarle

DivorcedDad said:

Thank you for those replies. the mediator told us that as we were trading off other assets. Using your example of CETV £300k, this would not equate to £300k equity in the family home. This was because the pension would take 20 years to give returns of £300k, yet the equity could be accessed relatively quickly.

I can sort of follow the logic, but it is not as simple as that. As said the CETV is a moving target ( it depends on certain conditions in financial markets) although the pension it represents is set in stone.
In the long term current CETV's for DB pensions are probably undervaluing their real value, so there is no way the value is only a third of equity in a house, despite the quicker availability of the latter.
I suppose it all becomes part of a negotiation and maybe you need your own solicitor.

Marcon

DivorcedDad said:

Marcon said:

DivorcedDad said:

Thank you for those replies. the mediator told us that as we were trading off other assets. Using your example of CETV £300k, this would not equate to £300k equity in the family home. This was because the pension would take 20 years to give returns of £300k, yet the equity could be accessed relatively quickly.

That doesn't come near to translating as 'The pension would realistically be valued in court as a third of the CETV'. Why would a pension take 20 years to give a return equal to the CETV - a figure which fluctuates the whole time with a defined benefit scheme. CETVs have pretty much halved in value in recent years (with the pension they represent being wholly unaffected by such fluctuations), which rather destroys the logic.

I can see what they could be driving at - different types of asset have different types of 'value' in both time and tax terms - but I suggest you and your spouse go back for clarification if you are still at odds on financial matters.

Unfortunately we are still at odds. Does arbitration work in a similar way to mediation, but with legally binding outcomes? Would there be room for a certain amount of negotiating in the session?

I've just had a look online for a decent, brief explanation (which happily seems to have less of a sales pitch than some I came across!) - try https://www.slatergordon.co.uk/family-law/divorce/mediation-arbitration/

DivorcedDad

Thanks for the answers. What would happen if one party accessed their pension? as in, retired from their current role ( a genuine possibility), how would this effect the CETV? Obviously trying to cover all eventualities here.

Marcon

DivorcedDad said:

Thanks for the answers. What would happen if one party accessed their pension? as in, retired from their current role ( a genuine possibility), how would this effect the CETV? Obviously trying to cover all eventualities here.

Depends how much tax free cash/pension they'd taken before the CETV was calculated.

You really do sound in need of proper, informed advice - not just responses to a few questions on a website. Once you have a better grasp of things (and they are highly complex and happen at a time when emotions are running high), you may find reaching a financial settlement isn't the insuperable issue it probably feels right now.