Final Salary Pensions

Hello Jessie

Tiggy’s case is slightly unusual because they have already “agreed” what to do about the differences in the pension values (he will get 37.5% of the difference in their pension values). The arguments about comparing pension values to house values are long and very boring. Our view is that they are directly comparable (that is a pound of pension value is worth the same as a pound of property), but this is not a view shared by everyone (including some highly respected solicitors, barristers and judges).

Our view is that the figures in your case should look like this (assuming that both the pension and the property equity are shared 50:50.

Pensions
Hers £25,000
His £180,000
Total pension value £205,000

50:50 pension split £102,500
Her "shortfall" £77,500
His "excess" £77,500

Property (equity of £180,000)
Share of equity £90,000
Her offsetting balance £77,500
Her net share of equity £167,500

Share of equity £90,000
His offsetting balance -£77,500
His net share of equity £12,500


The “challenges” are a) agreeing fair and appropriate valuations of the pensions, and b) agreeing that pound for pound, pensions are worth the same as any other asset.

In our view, the figures can be adjusted to take into account other aspects of the financial settlement but we see no technical justification for artificially adjusting the value of the pensions by some arbitrary amount. You have to remember that it is the lawyers and the courts that make the actual decisions on these matters, not the actuaries and their colleagues!

I hope that this helps ..... a little.

Peter

Sorry Peter .... can't type either his pension should have read 100k ..... thought it was too good to be true!!!

Thanks for your advice though!!!

Ooops, sorry! But you get the idea anyway (do you think that it shows that I'm not an actuary?).

Peter.

Hi Peter.

Interesting information in the thread above. I noticed on the first page, you said that the fair value of a final salary pension scheme would be 20 - 30% above the CETV, provided there is continuing employment.

My wife and I have several small pensions between us. Most of these are money purchase schemes, the largest of which (is mine and) has a cetv of around £50k. She has worked in a local school for the past 5 years, up to 2 years ago. She has now moved on and is currwently on a 2 year fixed term contract with the DWP. This is due to end in May 2011, and in the current climate renewal is not a foregone conclusion.

I have suggested that we use 25% above CETV as a fair uplift in the case of her final salary pensions. So if one had a CETV of £10000 we would value it at £12500. Do you believe this is fair, given (1) the changing government pension environment and (2) that she has no certainty of ongoing employment at DWP, and has already left the previous scheme?