Case Study 8 - How to reduce pension sharing by £68,000!

Background

  • Our client, Mr A approached us to assist with the division of pensions in his divorce.
  • His pensions were significantly more valuable than Mrs A’s pensions on a cash equivalent transfer value (CETV) basis (£600,000 v £140,000).

Concerns

  • Mrs A’s existing IFA had put forward an approach whereby the division of the pensions would be done on a capital value
    basis. i.e. £600,000 – £140,000 / 2 = £230,000.
  • Therefore, Mrs A would receive a pension share of c.£230,000 or 38%.
  • Mr A was concerned that this was too simplistic and unfair to him because his benefits were in personal pensions whilst Mrs A’s pension was final salary.

What We Did

  • We reviewed the CETVs and ascertained that Mrs A’s pension was an NHS Pension.
  • Their CETV calculations are on a single life basis.
  • This undervalues the true pension benefits which are joint life benefits.
  • In addition, providing like for like benefits for Mr A is expensive using his personal pension (He needs much more capital to
    produce a similar income to Mrs A).
  • We put forward equalising the pensions on an income basis as being a more fair approach to both.

The Results

  • Mrs A’s IFA accepted the approach.
  • He was able to negotiate a 27% pension share to be taken from his benefits or £162,000.
  • Ultimately, he was able to retain a further £68,000 of his pension capital.

What Our Clients Say...

He delivered a thought provoking and eye opening session...
I asked Phil to present at the Family Mediators Association Conference on Pension Freedoms within the context of divorce and financial settlements. He delivered a thought provoking and eye opening session full of ideas and case studies. The feedback I received from our delegates was extremely positive. If you are struggling with the challenges that pension freedoms throw up then Phil’s your man.
Beverley Sayers - Chair - Family Mediators Association

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