In October 2018, the Government announced plans to change the basis for the calculation of public service pension valuations.
What is changing?
In 2015, the HM Treasury agreed a number of reforms to pensions, and part of that agreement was to ensure public sector pensions retained their value. This has been ongoing for the past three years, but the 2018 budget indicated that changes will need to be made from 2019-2020 to ensure that pension benefits remain generous for public sector employees despite it becoming more expensive for employers to provide public sector pension benefits. This covers public servants, NHS staff, police, teachers and armed forces members.
What does this mean?
The impact of the review means that the factors used to calculate pension valuations are set to be revised by the government and as a result, valuations are going to be significantly delayed. For divorce lawyers, when we are looking at the total “asset pot” available for division, solicitors will consider the capital assets owned – property, savings, cash and personal belongings but, they also have to consider pension assets.
As pensions are not “ready cash” we will ask clients for a Cash Equivalent Valuation or CEV. This is a notional cash value provided by the scheme administrator and attributed to pension assets. We can then use this figure to assess whether there is a disparity in a husband and wife’s pension provision and subsequently, whether that pension should be shared.
What does this mean if you are already involved in a divorce?
If you have already embarked upon divorce proceedings and have already requested your CEV, the central changes being made in order to calculate the value may mean that receiving your valuation is delayed. We frequently experience long delays in obtaining CEVs already so this development is likely to add to that timeframe.
If you are already involved in financial court proceedings, this is something that should be raised at the earliest opportunity because it may delay the implementation of a court order or the instruction of an actuary (pension expert) in looking at how pensions should be divided and shared.
What does this mean if you are about to divorce?
Our advice would be that you apply for your pension Cash Equivalent Valuation as soon as possible given this potential time delay. Otherwise you may increase the risk that your financial settlement and divorce cannot be concluded as swiftly as possible or, that your financial circumstances alter significantly during the time during which we are waiting for your valuation to arrive.
You should always seek advice on pension valuations and pension sharing in the context of a divorce and financial settlement and it is something that should be raised in an initial meeting with us.