One of the greatest impediments to an
‘amicable’ divorce is the sheer complexity of the
issues surrounding pensions. As the title suggests, many are
wholly incomparable. Consequently clients need clear sighted
advice and the lawyers need to co-operate in order that both
parties can get to a position where they can at least make an
informed decision.
The most obvious trap that is waiting for both parties is
the cash equivalent value of say the husband’s and the
wife’s pensions. They may have definite figures
attributed to them and therefore the temptation is to offset one
against the other. That could be a very serious
mistake.
In the first instance public sector pensions do not have a
‘cash fund’. It is therefore wholly impossible to
compare these to private sector pensions. Although a figure
is attributed to them it is an entirely ‘notional’
figure based upon certain assumptions. They are underwritten
by the Treasury (ie paid from taxation) and do not vary with the
fluctuations in the markets and are consequently guaranteed.
Such pensions are not available in the private sector or we would
all purchase one.
How do you divide these?
Quite simply by employing a pension actuary to calculate how to
equalise pension incomes on retirement. This will frequently
lead to equality of incomes being achieved by a wholly unequal
transfer of cash equivalent values.
What if you do not have a Public Sector Pension?
Defined Benefit or Defined Contribution?
You may alternatively have one of two completely different types of
pension. These maybe either a defined benefit or defined
contribution plan. They may have identical values “on
paper” but be completely different in reality because one is
guaranteed by the employer and the other fluctuates with the stock
market.
Complicated?
It certainly is.
However, if parties contemplating a divorce at least recognise the
difficulty and do not argue a point they are doomed to lose, we can
as with all attempts to reach a settlement – enhance our
chances and agree on how to get around it at the outset.
Clearly a Court should be the last forum in which to resolve such a
dispute. How the values are calculated has nothing to do with
“right or wrong”, “fair or unfair”.
The lawyers need to “collaborate” to put the parties in
a position where they can make informed decisions. For many,
the Collaborative legal process is tailor made to achieve that
end.
First published on 23 May 2013 in 'Business News Weekly'
within the West Sussex County Times.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.