Pensions and Divorce
It is a sad sign of modern society that in the past four years the Service Personnel & Veteran’s Agency (SPVA) has administered over 10,000 requests for a valuation of pension for divorce purposes.
The destruction of a marriage through divorce is often traumatic in itself. The division of the marital assets as a consequence of divorce usually compounds the misery, and if the issue has made an individual miserable, it often makes them angry, and sometimes bitter, at this point too. So much so, that there is often a desire not to co-operate and comply with legal requirements that need fulfilling in terms of considering the value of your pension as part of the marital assets. Such anger and belligerence needs to be controlled, because if it is not, as was witnessed in a recent divorce involving a Royal Marine Sergeant, you could find that you don’t lose 50% of your pension as he expected to lose but, after the judge had decided to trawl through the whole matter with a fine tooth-comb he lost 80%! So what should you do to ensure you comply with the law and try and get a fair settlement?
First, instruct a solicitor who has a good track record in dealing with divorces involving Armed Forces personnel. Don’t be frightened to ask them how many cases involving Service personnel they have taken on to a successful conclusion.
Next, you must obtain a Cash Equivalent Value (CEV) of your pension. The reason why you need one of these is because the Armed Forces Pension Scheme is a non-funded scheme, and so in order to obtain a realistic value of your pension you have to obtain an actuarial valuation of it in a format that is recognised as acceptable by the legal fraternity. You apply for a CEV by calling SPVA in Glasgow; they will send you a form to complete and return. A note of caution here: the form used by SPVA for CEVs is the same form on which you request a pension forecast. Pension forecasts are free (if you only ask for one in any 12 month period); full CEVs cost £180.00. Please do not think you can get away with just asking for a forecast, because you will not; and by trying to do so unnecessarily delays matters and you could be viewed as ‘obstructive’. So, send your cheque with your application form for your CEV as soon as you can. SPVA have recently improved their system to provide CEVs within 10 working days as opposed to taking 3 months under the old system. Please be aware that CEVs can take, on average, 3 months.
Upon receipt of your CEV you will, once you have a valuation of all other assets within your marriage, be able to negotiate for a fair division. At this point I should stress that there a couple of common misconceptions about ‘entitlement’ when it comes to pension sharing. To begin with, unless your divorce is being administered in Scotland, please don’t think that because you have been married for only (say) seven years of your (say) 18 year career, that you only need to share seven year’s worth of your pension. The full value of your pension is considered in England & Wales; just as the full value of any pension your (ex)spouse owns is considered too.
Second, you do not necessarily have to divide your pension. If there are other marital assets within your marriage that have a value that matches, or exceeds, the value of the portion of pension likely to be allocated to your (ex)spouse, then it often makes sense to ‘off-set’ one against the other. For example let us say that the value of your pension is £130,000 and you have agreed to share everything 50/50, then ordinarily your (ex)spouse would receive £65,000 of your pension share. However, if you jointly own a house which has a capital value of £130,000 after any outstanding mortgage etc has been deducted from its market value, it would probably make economic sense, in terms of reducing legal costs likely to be incurred, for you to keep your pension intact, and your (ex)spouse to have the house. Either way, your solicitor is best placed to advise you on this, given your particular circumstances – after all, it is what you pay their fees for.
If, as is the case in most divorce petitions, a Pension Sharing Order (PSO) is issued by the court, as soon as the PSO is administered by SPVA your ex-spouse becomes a member of the Armed Forces Pension Scheme in their own right; they are what is termed as a ‘Pension Credit Member’. ‘Pension Credit Members will have their pension value assessed in the form of an annual pension (and lump sum if the divorce occurred whilst you were still serving) on the basis that it will come into payment at age 65 (or if already over that age it will be put into payment straight away). The pension (and lump sum, where applicable) may be put into payment before age 65 (it can be put into payment from as early as age 55), and can be done so by writing to the SPVA requesting that this be done. Both elements (pension and lump sum) must be put into payment at the same time. It should be noted, however, that if the Share is paid earlier than age 65 the value will be actuarially reduced to reflect the fact that it has come into payment earlier than was originally accounted for.
Once a Pension Sharing Order is administered to divide you single pension into two separate pensions, those two pensions never come back together again, even if your ex-spouse dies before you do. The only time your original 100% pension figure would ever feature in a calculation again is if, on your date of death, you leave any children from that marriage who are deemed eligible for a child’s pension. Then regardless of whether they were resident with you or your ex-spouse, they will be entitled to child’s pension calculated as if the Pension Sharing Order had never been administered, so the innocents are not disadvantaged because their parents could not get on with one another.