how to count pension in 20+ years time?

Ummm maggie, I am afraid that is exactly what happens - and that is why it would be good to have some rules!

I had four barristers and three solicitors look at my case ... and an actuary's report - which only seems to have muddied the waters - and not one of them predicted what the judge would do with the pension.

The pension was close to payment so the judge ignored all the valuations and looked only at the lump sum - which was treated as cash and put into the pot. My pension (CETV less than half his - but worth a lot less as it is not gold plated final salary like his ...)was ignored altogether as was the residue of his (2.5x the projected income from my pension). What was divided then was simply the cash pot - house, savings, his lump sum.

Clear guidance at FDR about how the pension would be treated would have been very helpful. As it was, a lot of time and energy (and expense) went on trying to sort out valuations and to guess how a judge would look at the pension ...

aaaaargh!!!!!!!
Hadenoughnow

Those with an interest in this subject might like to read an article by Alexander Chandler in the December issue of Family Law Week http://www.familylawweek.co.uk/site.aspx?i=dl28476. Mr Chandler is a barrister at 1 Garden Court Chambers in London. Though the article is not specifically about pensions, he makes interesting points about different classes of assets and how they might be treated.

By the way, I don’t believe that the actuary’s report that hadenoughnow referred to which muddied the waters in her case was one of ours!

Peter.

Whoops, I'm sorry; on checking that the link to Family Law Week works, I realised that a sub­script­ion is necessary to access it.

I’ll see if we can get it made available for public access on our blog site.

Peter.

No, actuary's report was not BDM's but peter did kindly help me to interpret it.

The thing is, I knew from the outset that the pension was worth roughly the same as the house and wd release a significant lump sum - enough to buy a suitable property. It was also able to be taken at any time. I wanted to keep the house for the kids and was prepared to forego pension to do it.

However it was a final salary scheme undervalued by CETV - we know that because the lump sum - which shd be 25% of the fund, was in fact HALF of the CETV. So in real life the fund was worth TWICE the CETV - although there wd be tax implications reducing the ball park figure. So in fact I did not need an actuary's report. What I needed was clear guidance about how a pension soon to be in payment would be viewed by the court.

A lot of time and money was wasted in debate about ex having no cash - when we KNEW he had a large wad on its way ...and about the true value of the pension when in fact the judge only took the lump sum into the pot and counted the rest as income. I guess it worked to my advantage as 25% of CETV would have been nearly 50k less and that would have meant I could not keep our home. The trouble is that the actuary's various values meant there were lots of different ways to work out the percentage split - but in fact what really mattered was what we each needed.

What grieves me is that two years ago I told my then sol I wd be happy to trade off pension against house. The only thing I had forgotten was the endowment policy - which after 50k of legal bills between us was given to him (5 months after he was offered and rejected it).
If I had known then what I know now, I would have insisted we make an open offer at the outset - he keep pension, I keep house and we then just sort out what should happen to the policy - which was then worth just over half then what it is now.

I just don't understand how we got from that start point to where we ended up. I guess a large part of it was the solicitors - his insisted he shd have ALL the pension AND half the house. All I ever wanted was to keep the house ... whic, in the end I did.

Hadenoughnow

I think Maggie's suggestion of using Martin's and Mesher's as alternatives to arbitrary pension reductions could be a way forward in some circumstances.

However let me look at the house / pension argument a different way round.

Say the only assets are a house with a net of mortgage of £100,000, and a pension for H with a CETV of £400,000 and an actual value of £600,000. W wants to stay in the house.

Currently a sol would go OK, let's value the pension at £400,000 x 25% = £100,000 and hey presto W keeps the house and H the pension.

Fine, except W has an asset of £100,000 and H an asset worth £600,000. So W loses £500,000 because she wants to keep house. Does not seem fair to me.

Go back to the beginning. Let's start with the two assets with market values of £100,000 for the house and £600,000 for the pension.

W wants the house, how much is she willing to "pay" H for it? £150,000, £200,000, more? Let's say she will go up to £200,000: £100,000 over its market value.

Now W gets the house and H gets £200,000 of the pension in payment. There is £400,000 of the pension left so this is shared between the two parties, so each get £200,000 worth.

W now has the house plus a pension credit worth £200,000, and H keeps £400,000 (or 2/3rds) of his pension. W's total assets are worth £300,000 in market value, and H's £400,000. W still gets less as she had priorty pick of the assets, but the differential now seems a more reasonable £100,000, rather than the previous £500,000.

I would claim that this approach is more transparent and leads to better decision making. It directly addresses the question of how keen is W to stay in the house, rather than let H have it, or to let it be sold for cash that they can then share.

Yes it is harder to implement than the current common approach, but what do we want: "harder, but fair", or "simple, but unfair"?

Last 2 posts very interesting.

Hadenoughnow, so really what you would advovate is that we dispense with solicitors and formulate our division of assets. Can we write an open letter direct to ex's detailing same or do we have to go through respective solicitors - incurring more costs.

In my case (am now on second solicitor who is not much better than first) find i am getting no advic/help, return of telephone calls whatsoever.

Am learning from your expensive experience - am currently trying to discover what would be fair division of assetts from advice given on here. I have not got £50,000 to throw away - seems like we are lining solicitors pockets and it is only them who benefit - not us or the kids.

BDMs calculation was helpful but when there is only £100,000 cetv and £250,000 mortgage free home - how would this compare.

InLimbo,

I firmly believe that having a good idea of how the assets may be divided - taking the needs of both parties into account - is a very good start point from which to instruct your solicitor. That way you can focus simply on what you have - and what you need - rather than getting dragged into expensive and protracted debate about stuff that simply does not count.

That is not to say that they are not times when an actuarial report may be very useful - for example with a gold plated final salary or forces pension which we know will be undervalued by a CETV. They can also help to work out what a fair pension share should be. I would also suggest that a forecast of pension benefits - assuming pension is frozen at date of request - should be obtained at an early stage. That will give an idea of what the lump sum entitlement is - and therefore a better picture of the true value of the pension (4x lump sum with an adjustment for tax).

It should be mandatory - and enforceable - that full financial disclosure is made at an early stage - although sadly we know that many stbx partners have to have this information dragged from them.

I would always now suggest that a barrister's opinion on a fair division is sought very early in the process and then the boundaries can be set taking into account the possible cost of court proceedings - so 10-20k apart at the outset should be solve-able without recourse to a judge.

If you have a good idea of a fair division - and that is where wiki can help - then yes, I think an offer letter very early on would be a sensible plan - with solicitor help to draw up a binding consent order.

If there is a disparity between CETV and house equity - then the first step should be to ensure the needs of children and PWC - parent with care - are sorted via a Mesher Order if needs be .... The other party should, if possible be provided with liquid cash for at least a deposit with the remainder made up of mortgage raised on their salary. Any mortgage on the FMH or new purchase would depend on the mortgage raising ability of the PWC with or without SM. It seems that the way courts are tending to look at offsetting would make a pension share a more sensible approach - however this, especially combined with a Mesher Order - may not be an emotionally attractive proposition as it does not allow for a clean break. I know in my case I really did not want to feel I had a sword of damocles hanging over us ready to fall when the youngest reached 18 ...

In the case you outline, I would want to know the mortgage raising capability of each party and then look at the possibility of a Mesher and pension share and compare it with an offset and no pension depending on the needs of both.

Interestingly I understand that divorce settlement used to be handled by arbitrators ... maybe that should be revived?

Hadenoughnow