Teacher pensions CETV

I'm just posting this for information. When I started this process I had no idea of how much an actuary would consider the CETV of my teacher pension to be undervalued, and I saw other people asking the same question with respect to public sector final salary pensions. The CETV was £400,000, the actuary increased this to an open marked value of £700,000. I am 57 and retire in three years. Fortunately I didn't have to offset much of the pension against the equity, but it made the offset value a very poor deal from my perspective.

I've seen discussion on underaluation of public sector final salary pensions but that's pretty shocking!
My ex and I both have accrued many years service in our CS pensions though mine is reduced due to part-time working.
I've been wondering about the pro's and con's of engaging an actuary to ensure any offset against equity is fair. As we've got the same type of pension for about the same length of time, I really don't know if it's worth the expense and time if it will only keep the values relative to each other...but maths isn't my strong point!
How did you go about finding an actuary and do you have any other insight that might help to determine if a report is worthwhile?
Thanks

Hi,
Our solicitors agreed on using Mathieson Consulting to do the report. There were five pensions in all to consider and it cost just over £2000. It took six months. Pension were equalised based on income (not CETV) on retirement, which is the standard way to treat defined benefits pensions, so the inflated value did not affect the pension share and was fair. It was worth the money. You would need help in writing the letter of instruction - Wikivorce might be able to do this if you are not using solicitors. The problem is that it is very expensive to buy something like a teacher pension, with all it's extras, on the open market, so 4.3% of my pension was valued at £25,000 of equity. But 4.3% gives only £50 a month in retirement. It would take 40 years to get the money back! If I was buying a pension on the open market I wouldn't spend all that money, just as if I was buying a car I wouldn't buy a Rolls Royce. I think it also needs to be considered that, although the pension might be 'worth' £700,000 I didn't pay anything like that to buy it, nor could I have ever afforded to. You can't compare it to equity. If someone gave you £50,000, would you blow it all on a really expensive pension you don't need? Or would you spend it on a house? Fortunately I was able reach an agreement with my wife which works well for both of us, but my heart goes out to people with public sector pensions who are forced to offset £ for £ in court.

A couple of other things to consider is that part of the open market value of the teacher pension is the fact that, upon death, the spouse continues to receive the pension - this is of little value to someone who is getting divorced. The other is that you receive your state pension on top of the teacher pension. When I a 67, having a small amount of extra teacher pension becomes irrelevant. The pension sacrifice my wife makes to receive extra equity is also irrelevant to her when she receives her state pension.

Thank you for this MarcusFox. I am at the very beginning of this process and can’t claim to understand the finer details of pensions at the best of times but this advice gives me a starting point at least.

My husband has had the teacher’s pension for 15 years. We’ve been married 9 and both aged 39. Seems like it would be worth my while getting it valued properly ie not the CETV?

Hi Wealdenlady. Thankfully I am at the end of the process now and the Consent Order has been agreed. What a relief! I am glad we came to an agreement, with the help of solicitors, because we have an arrangement we are both happy with. Have you spoken to a solicitor? Mine cost me £3500 for a year of negotiations, and for me, it was money well spent. I have 26 years of teacher pension so I would imagine 15 years of teacher pension will be worth a lot. Then again, I only have my own experience to refer to. I know that we could not have reached an agreement without an actuary report. If your pension is a defined contribution pension it cannot be compared to a defined benefit pension using the CETV. It might be worth Googling 'A guide to the treatment of pensions on divorce, pensions advisory group July 2019'. It is a hefty document, but useful to dip into. According to my solicitor it has had a significant impact on recent court cases. 9 years is an interesting length of marriage; it is not a short marriage, nor is it a long marriage. Did you both bring the same amount of capital to the marriage? Any children? This affects things a lot.

Good luck!

Marcus.

Another thing to consider is that, if your husband has 6 years of pension accrued before marriage, he may want to ringfence this and not include it in the marital pot. This is called apportionment. I tried to do this but, because of the guidance in the pensions advisory group report, I had to include all my pension as it was a needs based case. on the other hand, mine was a longer marriage (16 years).