Why should solicitors recommend a Pension Sharing Report for their clients?

If you are a family solicitor and are uncertain as to whether or not your client should have a Pension Sharing Report then that in itself is perhaps the most compelling reason to recommend that your client has a Pension Sharing Report.

If you are a family solicitor and are certain that your client should not have a Pension Sharing Report then you should ask yourself the following questions. You can assume that the wife has the main pension assets and so the husband will receive a Pension Share. If you confidently know the answers to these questions then you can test yourself by checking the answers at the bottom of each set of questions:

  1. Which will produce the greater Pension Share for the husband if he is aged 57 and wife is aged 53: one based upon equality of value or one based upon equality of income?
  2. Which will produce the greater Pension Share for the husband if he is aged 53 and wife is aged 57: one based upon equality of value or one based upon equality of income?

If you thought that you knew the answer to questions 1 and 2 and decided that your client did not need a Pension Sharing Report then unfortunately you have probably cost your client many thousands of pounds in lost pension benefits whether you were acting for husband or wife.

Why?

Well, a Pension Share based upon equality of income requires an assumed retirement age for each party so how can one know which Pension Share will be greater if we do not know the assumed retirement ages? Questions 1 and 2 did not give assumed retirement ages so we cannot say which is the greater Pension Share.

Rubbish questions? Fair enough. Try again with the following questions.

  1. Which will produce the greater Pension Share for the husband if he is aged 57 and wife is aged 53 if both are assumed to retire at age 60: one based upon equality of value or one based upon equality of income?
  2. Which will produce the greater Pension Share for the husband if he is aged 57 and wife is aged 53 if both are assumed to retire immediately: one based upon equality of value or one based upon equality of income?

If you thought that you knew the answer to questions 3 and 4 and decided that your client did not need a Pension Sharing Report then unfortunately you have probably cost your client many thousands of pounds in lost pension benefits whether you were acting for husband or wife.

Why?

Well, a Pension Share based upon equality of income requires knowledge of what options the pension scheme that is being Pension Shared offers in terms of pension credit benefits so how can one know which Pension Share will be greater if we do not know how the relevant pension scheme discharges its liability for a pension credit benefit. Questions 3 and 4 did not tell us what the pension scheme being shared was so we cannot say which Pension Share will be greater.

Rubbish questions? Fair enough. Try again with the following questions.

  1. Which will produce the greater Pension Share of the wife’s Police Pension Scheme 1987 pension for the husband if he is aged 57 and wife is aged 53 if both are assumed to retire at age 60: one based upon equality of value or one based upon equality of income?
  2. Which will produce the greater Pension Share of the wife’s Police Pension Scheme 1987 pension for the husband if he is aged 57 and wife is aged 53 if both are assumed to retire immediately: one based upon equality of value or one based upon equality of income?

If you thought that you knew the answer to questions 5 and 6 and decided that your client did not need a Pension Sharing Report then unfortunately you have probably cost your client many thousands of pounds in lost pension benefits whether you were acting for husband or wife.

Why?

Well, although we know the ages of husband and wife and we know the assumed retirement ages and we know the pension scheme that will be Pension Shared (the Police Pension Scheme 1987 so we know it is the internal transfer option) there are still other factors that can affect the outcome. For example, in questions 5 and 6 the outcome depends upon the wife’s Police Pension Scheme 1987 pension. If wife has more than 25 years of pensionable service then then the Cash Equivalent Value (CEV) of her benefits will assume immediate retirement. If wife has less than 25 years of pensionable service then then the Cash Equivalent Value of her benefits will assume retirement at age 60. Questions 5 and 6 did not tell us about the wife’s pensionable service so we cannot say which is the greater Pension Share.

The above should demonstrate why it is always advisable that family solicitors recommend that their clients have a Pension Sharing Report. One only needs to change one small aspect of a case for the conclusion to be very different to another apparently identical case.

To conclude this FAQ, please note that question 6 asks for a Pension Share based upon equality of income assuming each party retires immediately. However, if wife is aged 53 and she has less than 25 years of pensionable service then the earliest age that she could receive unreduced benefits in the Police Pension Scheme 1987 is age 55. Husband could not receive a pension credit benefit following a Pension Share in the Police Pension Scheme 1987 until age 60. Hence question 6 is in itself something that cannot be answered based upon the circumstances just described.

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