Pension challenge

BACKGROUND: Currently in early stage of divorce i.e about to receive petition. I have an incurable nurological condition and expect to retire on ill health grounds in (say) 5 years. STBX is Chartered Accountant in well paid job. Two children from marriage who will live mostly with her.

We had agreed 50/50 (and both been advised as such by our respective sols) property split because of my medical condition but there is sufficient in the pot for two OK properties each mortgage free.

ISSUE: STBX is now proposing to adjust the property split because I have circa 20% more in my pension fund than she does. However she is 2 years younger and has 20 years of career ahead as compared to my expected 5 years.

QUESTION: What is the likeihood of her being sucessful? Will the courts recognise my somewhat precarious future financial position? Should I fight all the way to the courts or might a mediator encourage a reasonable line?

Any assistance appreciated!

Hi DK

I am sorry to be morbid but have you considered the possibility that your pension could actually be worth less to you because of your unfortunate condition?

Please see the two articles by one of our actuaries on our blog site www.ancillaryactuary.co.uk/home/2008/1/1...l-health-2-of-2.html

Peter.

Peter

Many thanks for that - which is a perspective that had not occured to me!

My life expectancy is broadly normal but presuming I will have to retire in 5 years, my income will fall to at least half and possibly a quarter of its current level, dependant on the terms of the ill health retirement I'm given, which is at the discretion of the fund.

Given that, might there be a case to argue that my probable pension benefit is significantly smaller than my STBX's (with her 20 years ahead of her) and she should be offseting in my favour instead?

Or would the courts not favour that given she's the primary carer of the children?

DK

I am afraid that pensions are only valued at the time of divorce or separation. Future accruals are not taken into account. However, I cannot answer for the perspective of maintenance settlements.

Peter.

Hi Peter

I now have a CETV, and given my wife has a similar final salary pension fund but with less years and a smaller salary (CETV not arrived yet), I reckon the gap between our pension CETV's is going to be about £60k or so.

Question 1 - Would the Maskell vs Maskell 25% precedent be reasonable to apply given both parties are in their 40's?

That would I think give an offset value of £60k x 50% x 25% = £7,500 payable - do you agree?

Question 2 - Would the Courts deem such a sum as negligable and say that the pensions not be off-set in the light of us splitting about £700k of property and savings, and also given my health issues?

Cheers DK_60

Hi DK

The questions you raise are very reasonable but to answer requires a legal expertise that I do not have.

DL has recently posted on adjusted CETVs on another thread - www.wikivorce.com/divorce/Divorce-Forum/...etting-Pensions.html - although I have to say that technically, there is no justification for adjusting CETVs because they are not the same as cash. I also happen to believe that Maskell v Maskell is widely misinterpreted on this issue, by both the legal profession and the lay public.

Illiquidity can be argued for many different types of asset, including houses. If the house will not or cannot be turned into cash because it is where the young family will live until they leave home, shouldn’t that mean that the value of the house should be reduced (as with a commercial property with sitting tenants)?

Ultimately, what I think is irrelevant; it is the courts that make the decisions having listened to the arguments from lawyers and expert witnesses. Therefore, I defer to the experience of lawyers who see first hand what the courts do in practice – although that still does not make it fair and right.


Peter.

Peter

Thamnks for your prompt reply and maybe a lawyer will be able to comment further.

My understanding of the discount factor applied to the pension value recognises that £1 today is not worth £1 in 20 years, but rather more.

For example - if you want to have £1 in 20 years you only need invest about 25p and leave it attracting 6.5% interest for the term. Thus £1 in 20 years is discounted to a Net Present Value (NPV) of 25p now.

This is because the pension value can't be released for another 20 years, unlike a home that can be sold at any time.

I guess my question is, to anybody with experience of the Courts in this area, is will the Courts normally understand the concept of NPV, as they seem to have done with Maskell vs Maskell - or is it lucky dip?

Cheers DK