The current health crisis caused by Coronavirus is having an impact on almost every element of our lives, and those couples in the midst of financial settlement negotiations regarding divorce or dissolution are no exception.

It is common practice for couples who are going through the process of separating and dividing their assets to obtain advice, in addition to that provided by us as their lawyers, to assist in reaching a fair outcome. When it comes to dividing pension assets, we will often enlist the services of an actuary – a pensions expert.

The actuary will calculate the percentage pension share required to give the outcome or outcomes that the lawyers set out in formal letter of instruction.

For many clients, whilst they may have already been through the process of obtaining an actuarial report, they may not have finalised the settlement or implemented a pension sharing order.

What happens in that situation?

  1. The impact of current financial conditions upon a report or pension assets will depend on whether the parties are sharing defined contribution (money purchase/personal) pension schemes, or defined benefit (occupational/final salary) schemes;
  2. If the dominant pension is a public sector defined benefit scheme, they are unlikely to be affected as those schemes are generally resistant/unaffected by market conditions because they are unfunded. They are built up by employee contributions and pay out a proportion of a final salary. These schemes would include NHS, military, police, teacher and local government schemes;
  3. If the pension share makes provision for a pension to be divided more or less equally, then again, you should take advice on whether you can proceed as planned. This is because you and your spouse will equally share any dip or rise in pension value, as a result of the financial conditions we are experiencing due to the Coronavirus outbreak;
  4. Private sector occupational schemes may experience a change in value because those schemes are based upon the price and value of gilt yields. If you hold a private sector occupation scheme then it may well be worth reviewing an actuarial report and pension sharing percentage previously considered. The proportionality of doing so will need to be considered given the possible additional costs and delay they may arise as a result of any review;
  5. If parties hold mixture of defined contribution and defined benefit schemes, but the defined contribution (private pension) scheme is not the main or dominant pension i.e. it has a nominal value compared to the main defined benefit scheme being shared, then the change in value/percentage is unlikely to be significant when compared proportionate to all schemes held in the total pension pot;
  6. Parties should bear in mind that scheme trustees are going to be much slower in providing information for both new actuarial reports and also the review of existing reports, so that should be taken into account when looking at timescales for letters of instruction, implementation of pension shares already agreed and the implications of reviewing/revising existing reports.

Please get in touch with the team if you would like advice on any element of pension sharing within the context of your divorce and financial settlement negotiations.