Half of the 1.5m divorce settlements in the last year years may have been undervalued.
Divorcees who separated in the past 12 years could have to hand over more of their pension income to their former spouse
Divorcees who separated in the past 12 years could have to hand over more of their pension income to their former spouse.
Pension funds are often the main asset of a marriage and are frequently more valuable than the home, but according to a report from Divorce LifeLine in as many as half of the 1.5 million divorce settlements in the UK since December 2000, the divorce pensions may have been undervalued.
The specialist financial advice firm said that hundreds of thousands of divorcees could benefit from a boost in retirement income following miscalculations of the valuation of their ex-spouses pension pot. Solicitors have advised that divorcees could stake a claim up to 12 years after the legal separation has been settled.
In 2000, the law was changed to allow pension sharing between couples, meaning a pension provider can be instructed to pay a percentage of retirement income to someone other than the pension scheme member.
Sali Jackson-Thomas, head of family law at JCP Solicitors, said: “People need to realise the importance of looking beyond the valuation given by the pension provider, the cash equivalent transfer value, and to seek an accurate valuation of a pension from an actuary.”
Jeremy Wolff, from Divorce LifeLine, said that problems occurred when divorcing couples engaged in miscalculated “offsetting”, where a husband or wife without a pension receives a greater share of a property or other asset instead of a share of their spouse’s pension.
“There is no fixed calculation for offsetting, as it involves comparing a future income with a current value of assets and a lawyer is not qualified to do this. It is therefore essential that an actuary is instructed to calculate the correct figure for offsetting, if this is the case,” he said.
Deborah Jeff, partner of the family department at Seddons solicitors, said that a pension fund should be relied upon to provide the correct value of a retirement pot at the time of a divorce.
“Solicitors would typically rely on the cash equivalent value issued unless there was good reason not to, in which case a pensions actuary or financial adviser would be asked to value it instead,” she said.
“But this can be expensive, at a time when a spouse also has to meet legal fees so there is a balancing exercise to carry out to decide whether the valuation appears inaccurate and therefore to incur the expense of an independent valuation.”
SOURCE: The Telegraph