When a party to a divorce receives a Pension Sharing Annex signed off by the Court we are often asked how long it will take for the pension share to be transferred to their selected pension plan.
The question is a reasonable one but sometimes the answer isn’t. Particularly because the question is often accompanied with a further question such as “How much am I going to get?”
In a relatively simplistic case, such as the sharing of the value of a personal pension plan, the answer to the timing part of the question is “usually quite quickly”. Assuming that the ceding scheme has received all the information that they require together with the necessary discharge and transfer forms from the receiving plan, 2 to 3 weeks is about typical.
That said some providers of personal pension plans are less efficient than others and we often find that they need to be “reminded”.
Of course it can take a lot longer than that; we have seen examples where people who have received a pension sharing annex have then simply sat on it for 12 months, perhaps not understanding the importance of doing something with it.
The second part of the question though is where I want to focus my comments – how much am I going to get?
When the “split” is calculated it is based on a value at some point in the past and this can be many months before the Decree Absolute has been granted.
Where the personal pension that is being shared is invested in certain assets (primarily shares) the transferred value is very likely to be higher or lower than the figure used in the sharing calculations (the percentage of course will be absolutely the one shown in the Pension Sharing Annex) so the recepient of the share may get less in monetary terms than they thought they were going to get.
Is there anything that can be done to ensure fair treatment here? If we take the last week as an example, investment markets have been incredibaly volatile, a personal pension plan that was valued at £100,000 when the split was calculated which may have produced at a 50% share a credit value of £50,000 which had been invested entirely in UK equities might have fallen 4% in value.
So instead of £50,000 the recipient would have got £48,000. That sounds to me like a substantial reduction. Imagine then a delay in applying for the transfer of one year and where the “market” had gone down by 20%. How might someone feel about a value of £40,000 compared with £50,000? Not good I imagine.
Maybe when the Solicitors are examining the share of invested pension funds they might consider asking the original owner to switch selected investment funds to cash. Of course in a rising market both parties might miss out but perhaps that is a risk worth taking?
We still have some spaces left for our pensions and divorce workshop (for solicitors) in Guildford on 11th October 2011. More information and booking links are available at www.icl-ifa.co.uk/pensions-divorce-workshop.
Photo credit: Flickr/I .. C .. U
