Monday, April 28, 2008

Pension Valuations

Pension rights fall into three main categories:

State scheme pension rights
State scheme benefits can be acquired in the basic state pension, the state earnings related pension (now the state second pension), and the graduated pension scheme. Valuations can be obtained from the Department of Work and Pensions.

Personal pensions (including stakeholder pension schemes)
Personal pensions can be effected by both the employed and the self employed.

Occupational schemes
Pension rights can only be acquired in occupational pension or employer-sponsored schemes, which include final salary schemes, when in employment.

Cash equivalent transfer values
The basis on which pension rights are valued for divorce purposes is the cash equivalent transfer value (CETV) that would have been payable on the relevant date. The CETV is a value that can usually be obtained easily from pension scheme administrators. However, CETVs will often not take into account matters such as discretionary benefits, even where there is a very high likelihood of payment, or death in service benefits. Thus CETV’s often undervalue the pension by as much as a third, particularly if the pension is final salary or related to salary. Although Courts are directed to the CETV other matters maybe taken into account when supported by expert evidence.

Importance of date of separation
It is worth bearing in mind that the CETV can change very quickly over short periods of time, and indeed in the uniformed services (e.g. armed forces, police, firemen) on specified single days.


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