Public Sector Pensions And Divorce
It is not just about dividing up the CD collection and the crockery when it comes to divorce, pension pots have to also be taken into account.
Unlike most private sector pensions, public sector pensions are excluded from the government’s new rules, the so called ‘Pension Freedom’, and in particular the opportunity of cashing in a pension early.
All too often in divorce cases pensions can be pushed aside when resolving financial matters. It is easy to assume that because it may be several years until pension income will be accessible it is best to prioritise retaining assets that are available straightaway, such as property or investments.
However, a pension may be the most valuable asset in the ‘pot’, particularly a ‘final salary’ scheme. This can apply where the pension is a defined benefit scheme and includes public service schemes such as the NHS, Police, Fire & Rescue, Armed Forces and Teachers.
Whilst there is no presumption that pensions should be divided equally on divorce, where an equal division is appropriate it does not follow that the share should represent 50% of the scheme value.
Usually where equality is appropriate it will be based on equalising the former spouses’ incomes on retirement at their anticipated retirement age. This can result in a different percentage of a pension being shared.
For example, in the NHS scheme, some of the value of the original scheme member’s remaining provision will relate to widow/widower’s and dependants’ benefits, whereas no such benefits will exist within the receiving spouse’s new scheme. The original member would therefore receive lower pension income from the same pension pot if a simplistic 50% pension sharing order is made which would not be a fair outcome. A pension sharing order for less than 50% of the scheme value would therefore equalise retirement incomes.
Whether you are the pension member or the potential recipient of a pension sharing order, expert advice is needed to ensure issues such as this are highlighted and dealt with appropriately.
Tracy Crompton specialises in divorces involving complex pension schemes and works with actuaries and independent financial advisers to ensure clients do not lose out on valuable pension rights. Over the years she has represented many public sector workers and advised on their pension rights during divorce and Tracy firmly believes it is her professional advice and experience that is crucial in such cases.
“People need to realise the importance of looking beyond the valuation given by the pension provider, known as the cash equivalent transfer value, and to seek an accurate valuation of the pension from an actuary,” said Tracy.
“I would urge anyone considering divorce to also consider managing their pensions accordingly and take advice from a qualified solicitor and independent financial adviser,” she added.
For advice on managing your pension through divorce call Pearson Solicitors on 0161 785 3500 or email email@example.comSubscribe to our newsletter
Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
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