Valuing pensions

How do I value my pensions on divorce?

Pension sharing upon divorce or dissolution is an area that often causes the most animosity in any case given that pension capital can sometimes be the largest asset.

How Pensions are valued

The value of pension capital can sometimes be difficult to calculate, given the many different types of pensions and the different formula used. The most common method of calculation in matrimonial proceedings is the Cash Equivalent Transfer Value (CETV). The CETV provides a notional value of the capital accrued under the pension scheme. That ‘notional value’ and is not necessarily indicative of the true value of the pension fund, especially in the case of Final Salary or Public Service schemes. 

Pensions Division on Divorce or Dissolution

Whether you are entitled to a percentage of your spouse’s pension (or they of yours) is dependent upon a number of factors set out in section 25 of the Matrimonial Causes Act. People often wrongly assume that as they have made no contribution to their spouse’s pension(s), they have no entitlement to the value of this asset. The reality of the situation is that upon marriage, the majority of the assets held in joint or sole names, become ‘matrimonial assets’ and are therefore subject to division in the event of divorce. Do not assume however, that all the ‘matrimonial assets’ will be divided equally upon divorce. The Court has wide powers of discretion and every case will differ based on the individual circumstances.

How Do I Calculate my Entitlement?

Unfortunately, this is the most difficult question for solicitors to answer. The fact that using CETV gives only a notional value that doesn’t necessarily reflect the true value of the pension provision, it is nearly impossible for solicitors to advise on how to divide pension capital. The instruction of a pension actuary may be appropriate. Pension actuaries can provide projections and calculations which can be used to assist the parties or the Court when looking at how to divide the pension policies. Not every case will require this as the costs of instructing an actuary can often be disproportionate. If you are ever in doubt as to whether an actuarial report is necessary, seek legal advice.

If you require advice on whether you are entitled to a pension sharing order or how to obtain a pension sharing order please contact one of our family law experts on 01295 270999 (Banbury Office) 01869 252 161 (Bicester Office) 01788 579 579 (Rugby Office).