Average Career Earning Pensions

Hi All,

This is my first post so please bear with me!!

I am trying to find out more about my H's pension scheme. He has been in his company scheme for 17 years (from age 21) It was traditionally a final earning scheme and last year changed to an average career earning scheme. We do not yet have access to his CETV statement but I really need some idea of how much could be in the pot (tricky, I know!!). His earnings would have been between 15K at start gradually moving up to 45K currently. Would it be optimistic to expect a CETV of around 50k

I know this is a bit vague but over 50k and I may be able to stay in theFMH, less than it, probably not.

Any guidance greatfully received

Jezzie

Hi and welcome to wiki.

How were you planning to use the pension?? To offset against capital assets? YOu are quite right to recognise the value of the pension as an asset but this can be a tricky area. Have a look at some of the pension posts which will make it clearer .. or not! The bad news is that with such a long time to go before he takes his pension, it is likely to be downvalued for offsetting - possibly to 25% of CETV - if this ends up being decided by a judge.

If you want to tell us a bit more about yourself then there will be people here who can give you an idea of how the finances may be worked out.

Ages
length of marriage (and cohabitation)
Children - ages
Equity in FMH
Value of any other assets - savings, endowments, shares etc
Respective incomes


Hadenoughnow

Thanks for that .... I think!!

We were married for 18 years and counting ..... no divorce proceedings yet. We have 2 kids aged 14 and 12, about 180k in equity in FMH. Our savings are dealt with and were apportioned on day 2 of the split and I earn 14k and him 48K!

No other debts or assets

Ideally I want to keep FMH, whether by deferred equity or full transfer. He is ok(ish!) with that at the moment and is saying his priority is for the kids to have a safe, decent roof over their heads. If not, I need to come out with enough from any sale to allow for a smaller place with a small mortgage.

All advice, gratefully received - so far the legal advice has told me nothing.

Jezzie

Good to hear that you are thinking about pensions as part of the whole financial issue rather than just leaving them to the end.

I have guessed his age and plugged the numbers into our simple free calculator www.bradshawdixonmoore.com/calculator.html#calc assuming he is about 40 years old now, you might expect his pension to be worth something in excess of £100,000. The changes to the scheme basis – to career average earnings – complicate matters a little but these figures should be a reasonable starting point.

Peter.

As a starter for 10 I suggest you go to www.bradshawdixonmoore.com/calculator.html where we have put up a very simple free calculator (all you need is age, current earnings and years of pensionable employment).

If you want a more accurate answer you go up the scale through the BDM Express Pension Valuation (£25), through to full actuarial reports from ourselves or other actuaries (£425 or more).

I wouldn't recommend going for full reports until you are shaping the final settlement. Ideally get the judge to order one as a joint instruction: you can share the cost of it and you don't get into expensive haggling between experts.

Thank you gentlemen for your assistance. It's nice to know that hopefully I wasn't being too optimistic!!

Next question .... What % is a reasonable expectation if I am hoping to use it to offset equity in the FMH so that I can stay there with my children. Is it really as low as 25%?I have little or no pension in my own right and we paid into his from the year after we married until the present day.

Also, if we go through mediation, rather than solicitors, am I likely to get a better deal?

Its all rather make or break!!!

Jezzie

I wish that there was a straight answer to this simple question, but there isn’t.

My colleague, Nigel (an actuary, bless his socks), would tell you that it is inappropriate to “adjust” the pension valuations he calculates just because the pension is not the same as cash in the bank. I of course agree with him. Others, even some actuaries, will say that some adjustment is appropriate. Exotic beasts such as “utility theories” are quoted and comparisons are made between internal credits under pension sharing orders and an independently purchased “Purchase Life Annuity”, which each has different tax treatments when the pension is in payment. Some lawyers are carried away with the fact that under most pensions, it is possible to take a 25% tax-free-lump-sum at retirement and somehow this figure is used to justify only applying 25% of the pension value when offsetting against other assets, such as the house.

I am a simple soul; if an actuary toils for hours to calculate the current value of a pension and tells me that is an appropriate value and what it is worth in cash terms, it seems pointless for me to apply some arbitrary adjustment. The problem is that there is no perfect answer. We firmly believe that our approach is fair and reasonable for all parties, but not all lawyers will agree. Please do bear in mind that most values concerning pensions are not precise numbers. They are about probabilities, how long someone will live, what interest rate will be long into the future etc.

I shall leave it for others to give you the legal perspective on the subject.

Peter.