Earlier this year the Government announced changes to public sector pension schemes, which means that the Superannuation Contributions Adjusted for Past Experience (SCAPE) discount rate has been varied.
The impact of this is that it will change how ‘cash equivalent transfer value’ (CETVs) – which are required in divorce financial remedy proceedings - are calculated by the public sector pension schemes.
Following the announcement, many public sector schemes have already suspended providing CETVs whilst they await additional information from the government’s actuary department.
While the government has said that the changes will be positive for the financial wellbeing of many key workers, a delay in the implementation of the new schemes is having a significant impact on teachers and NHS staff who are going through a divorce.
This is because it is not currently possible to provide a CETV, which is needed to calculate the value of a pension for the purposes of achieving a divorce settlement.
Banner Jones’ Head of family law, Kelly Parks, explains: “When a couple divorces both parties must provide details of any pensions they own. The only way to determine the pensions value is to request a CETV.
“When HM Treasury announced the changes to the public sector pension scheme it also announced that the calculation of CETVs was to be temporarily suspended to allow time for guidance to be updated to reflect the change.
While we had expected that suspension to have now been lifted, unfortunately HM Treasury has not yet published its new guidance.
This means couples may face a delay in finalising their financial arrangements as they cannot negotiate or be advised as to what would be a fair settlement without knowing the CETV of their pension fund.
As a result, court proceedings have been adjourned in some cases as pension experts cannot prepare their reports without knowing this information.”
While Kelly says it’s important that the calculations are correct to ensure that both parties get the money they are entitled to, it is also likely to cause added stress and upset to anyone going through a divorce and separation who is affected by the changes.
“In most cases a marital breakdown is a very difficult thing to experience,” Kelly adds. “People are dealing with the emotional fallout of a relationship, while also trying to minimise the impact on children and extended family.
To know that proceedings might drag on far longer than you had anticipated because of these changes will no doubt cause additional stress and upset.
It’s absolutely imperative that the Government’s Actuary’s Department provide the revised factors to the public sectors schemes so that the suspension on providing CETVs can be lifted, and so that thousands of couples across the country can progress with their divorce proceedings and look to move forward with their lives.
For most couples, pensions are amongst their biggest assets, so it’s really important that the calculations that are used are accurate. In many cases Pensions on Divorce Experts will be used to calculate the pension sharing order needed for equality of income. We can advise if an expert needs to be instructed and prepare the necessary applications and letter of instruction.”
The BBC reports that there are about 120,000 divorces a year; about 17% of employees work in the public sector. While only teachers and NHS workers are currently affected, police officers, firefighters and armed forces personnel are also expected to be affected at some point.
Divorce Financial Settlement negotiations take into account several factors including:
- The financial and other needs of any children
- The current earnings of both parties
- The potential future earning capacity of both parties
- Length of the marriage
- Standard of living enjoyed during the marriage and income needs
- Contributions that both parties have made to the marriage, both financial and otherwise – including looking after the house or caring for children
- Assets of each party, including accrued pension values.
The Banner Jones family law team is on hand to offer expert advice and guidance on divorce financial settlements.
- Director
- Solicitor
- Head of Family Law