Pensions are a subject that make most people want to switch off and since the change allowing people to access their funds from age 55, they have become a lot more complicated in the context of a marriage breakdown.
A number of lawyers, accountants and independent financial advisors came together in London in March this year to discover what they knew and did not know about how to value and deal with pensions on divorce, and what are the factors that clients need to be aware of, both when considering the divorce settlement and afterwards.
The message that came out loud and clear, and which is a consistent message from lawyers to their clients, is that financial advice must be taken. Lawyers cannot give financial advice and have to be careful of straying into it, even by, say, suggesting that a client draw down on pension funds to make a lump sum payment to the other spouse.
A major point of discussion was the unintended effect on pension attachment orders. Although rarely made these days, there was a time when pension sharing was not an available option, and pension attachment was the only way of a spouse securing an interest in the future pension itself. It was often provided that the person drawing the pension would commute the maximum lump sum possible, and the attachment order “bit” onto that lump sum so that a fixed percentage went to the non pension owing party. However the maximum lump sum possible was then limited to 25% of the fund value – it is a very different figure today.
It is likely that the number of pension attachment orders affected will be small but if you have not yet retired, divorced before 1 December 2000 and pensions were a feature of your settlement, you might want to dig out your paperwork and have a look at your order.
So are there some do’s and don’ts for those going through divorce today, with pension provision?
• Despite the contrary statements by senior Judges in a case of WS v WS  handed down in January this year, most Judges at County Court level will expect the assistance of an actuary where pensions are to be split on an income based approach in a needs case. This is an extra expense for the parties but a good report will be easy to follow and crucially easy to implement too.
• the new flat rate single tier state pension cannot be shared unless the person with the Additional state pension to be shared
a) started the divorce before 6.04.16
b) is already claiming the state pension
c) is are eligible to claim the state pension but has deferred
• be wary of offsetting ( how much cash/assets now should be paid against future pension not shared) as the calculations done by actuaries vary widely here. In the example used at the conference, 14 experts gave a band of offsetting values of between £290,000 and £798,000 when the fund in question was valued at £500,000
• assumptions about the ease of rebuilding a pension after sharing may be flawed. It was pointed out that in the case of both Uncrystallised Funds Pension Lump Sums and Flexi-Access Drawdowns, the annual allowance is thereafter reduced to £10,000 from £40,000
So have some sympathy for your lawyer making noncommittal sounds as to what is the best approach to your pension or your pension claims. The best answer is to gather all the relevant information as early as possible and to use every effort to formulate agreed question to a jointly instructed pensions expert, particularly if pensions are the largest asset or one or both parties are near to retirement – which today can mean simply approaching 55.