When considering the finances that arise out of a divorce, you may be required to obtain a pension report. But what is a pension report, and why are you being asked to obtain one?
Why do I need a pension report?
Pensions are unique among the matrimonial assets. Most pensions have a cash equivalent transfer value, or a CETV, and this will need to be obtained from your pension provider when divorce is being considered. However, pensions cannot be treated as a cash asset in the same way that a house or savings can be as it is not money that can be freely drawn down given the serious tax implications involved in do so.
For parties that perhaps in their late forties onwards, a court is likely to aim to achieve equality of income on retirement of the parties. This involves quite complex calculations which considers age, gender and health amongst other considerations. Solicitors cannot carry out these calculations because they are so complex, and they will need to obtain a report from an expert in those calculations.
For younger parties, the Court may look to achieve equality of capital, but that, again has specific calculation issues based on how the CETV itself is calculated. Not all CETVs are calculated in the same way, and this can affect any capital split. An actuary is still, therefore, required for this.
What is a pension report?
The person instructed by your solicitor to prepare the report will be a Pension on Divorce Expert, or a PODE for short. The PODE will produce a report in respect of the pensions based on the instructions that are given to them by the solicitor. This is known as a pension report. In most situations, the PODE will be asked to calculate what percentage of one person’s pension provision is needed to be given to the other party to achieve equality of income, as that is usually the aim of the Court.
However, PODEs can be asked many different questions. For example, the parties can decide whether all or part of the pension pot is taken into account by the PODE. A PODE could also be asked to calculate what lump sum would need to be given to offset a party’s claim to the other’s pension
Do I need a pension report?
Legal practitioners are advised that if the total pension provision across both the husband and wife exceeds £100,000, or if one of the pensions is a public sector pension (e.g. an NHS or civil service pension), then a pension report should be obtained. That is not to say that pension reports should not be obtained for amounts less than £100,000, but the cost of obtaining a pension report in such circumstances may be disproportionate. Our expert solicitors at Johnson Astills, would be able to assist you in determining where a pension report is required in your matter.
Please call us at our office in Leicester on 0116 255 4855 or our office in Loughborough on 01509 610 312 and ask to speak to a member of the Family Team. Alternatively, you may prefer to email us at legal@johnsonastills.com or complete our enquiry form.
