Pension split with my ex fell in value by £50k while scheme sorted it out

As part of my divorce settlement, I received a pension split from my ex-husband’s pension.

Because the pension management team works from home and doesn’t have a phone (I was told by customer service that the only way they could help was to take your details and email the relevant department), and the frustratingly long wait for a response to any query that i have emailed, my CETV transfer has been reduced from £121,000 to £71,000.

I asked if I could stay as a shadow member, which took months to be considered, and eventually got a “no” answer with no explanation as to why.

The delayed response (which they acknowledged and apologized for) I think has left me in a worse financial position.

What are the reasons for not letting me stay instead of transferring my share to an external provider? Why has it dropped so much?

Why can’t they transfer money without giving me an updated CETV transfer value even though I’ve repeatedly asked for it? My plans regarding where to move the money and investments might be different had I known.

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Steve Webb replies: Your ex-husband was a member of an occupational pension scheme that must pay him a fixed pension when he reaches retirement age.

As you probably know, there are two main ways in which the value of this pension can be taken into account in divorce.

– Your ex-husband can keep all his pension, but the value of his pension is included in the divorce agreement, so that you receive a larger part of the remaining marital property, for example a larger part of the value of the family home. This is a process known as ‘offsetting’.

– You could have a pension share. There are two ways in which a pension share is executed.

Internal share: You can become a participant in your spouse’s scheme and receive a pension from the scheme. This is the approach often taken by public service pension plans. However, the scheme is usually *not* required to provide this if it does not want it. It’s a matter for the scheme.

External share: You withdraw a pension balance. This is a capital that is transferred from your ex-husband’s occupational pension scheme to a pension scheme in your name.

When negotiating your divorce settlement, the pension plan will be asked for a “cash equivalent” of the value of your ex-husband’s pension.

This is counted in addition to other assets, such as the value of the family home.

The cash equivalent (also known as CETV or sometimes CE) does not always give an accurate value to an occupational defined benefit pension plan.

Therefore, in a divorce, it is very common to have a financial expert put an appropriate value on the defined benefit plan and provide calculations on how to divide the pension fairly so that you all get a similar pension amount. income.

If you are concerned that the cash equivalent may have changed significantly *before* the pension allocation order has been agreed, then you should get an updated valuation.

If an actuary is involved, they should be asked to rework their calculations. In this way, the final financial order is based on a reasonably current valuation.

However, there may still be a period of months between the date of the court order and its taking effect (usually the latest of 28 days after the court order, or final decision).

Once the order has ‘come into effect’, you are ‘participant in the pension discount’ and the pension entitlements of that day will be used later if the pension share is actually ‘executed’.

It’s an imperfect comparison, but the ‘come into effect’ command is a bit like when you’ve traded contracts on a house and the ‘execution’ is the completion.

So once the pension distribution order is complete, a new timeline begins.

The receivers must receive from the parties all information they need to execute the order, including payment of a fee.

Once this is done, the ‘implementation period’ will start. The scheme then has four months to complete the process.

During the implementation period, the value of the pension may fluctuate (possibly due to market conditions). This could work to your advantage (values ​​may go up), but more recently it is more likely to work against you (values ​​have fallen).

You ask why the cash equivalent fell.

Simply put, the transfer value is a measure of the cost to the scheme of providing the pension.

Because the return on the fund’s assets has likely increased sharply (for example, because interest rates have risen), the fund is now able to get a better return so it doesn’t have to hold as much to fund a certain amount of money. retirement.

As a result, transfer values ​​have fallen.

The only consolation is that if you intended to use the transferred amount to purchase an annuity or income for life, annuity rates have risen sharply in recent months and you may be pleasantly surprised at how much pension you can get for this reduced amount. sum.

Unfortunately for you, provided the scheme has met its four-month deadline, there is nothing you can do about fluctuations within that period.

However, if the scheme has lasted more than four months, meaning that the implementation fell outside the implementation period, and you have additional value decreases due to changes that took place later than four months, you may be able to file a complaint with ‘maladministration’.

This could ultimately be considered by the Pensions Ombudsman, who may find that you have been lost due to undue delay and recommend compensation.

Before you can turn to the Pensions Ombudsman, you should usually make use of all the grievance options provided by the pension scheme’s internal dispute resolution provisions.

In any case, you can also complain to the Ombudsman about the general poor administration of the scheme, but in most such cases you can only expect a token amount for ‘distress and inconvenience’.

The most important first step is to consider when the deployment period started and what happened in the timeline after that.

A more complicated question is whether the start of the implementation period has been delayed because the pension administrator has not corresponded with you in time about its refusal to allow an internal pension share.

But they can say that if their published guidance is that they don’t offer this option, there was no reasonable reason not to start the implementation period by specifying where you wanted your pension credit transferred externally.

Note: I am grateful to Rhys Taylor, an attorney specializing in retirement and divorce, for contributing to this column.