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Why do I need my pension to be valued for my divorce and financial settlement?

on Wednesday, 15 January 2025.

When looking at financial settlements on divorce, family lawyers will ask you to obtain your pension CETV (Cash Equivalent Transfer Value) from your pension provider(s).

Pension CETV's have recently been in the news due to the extremely long wait teachers are experiencing in obtaining their CETV figures from the Teacher's Pensions scheme. The delays mean that many teachers are not able to obtain a Final Order in their divorce or reach a final financial settlement. The delays are frustrating and are causing divorcing couples additional emotional and financial strain.

This will understandably lead many to question, why should I bother getting a CETV if it means my divorce will be so delayed?

We will look at the reasons why pensions are an essential asset not to be overlooked, even if you may have to wait longer than expected.

Why are pensions taken into account?

Pensions can be shared on divorce, just like any other asset. Pensions are often one of the most significant assets in a marriage and they are sometimes more valuable than the family home.

When looking at how the assets should be divided, the most important thing a court would consider is how the parties' financial needs can be met, both now and in the future. This includes someone's financial needs on retirement.

It can be quite common for one person to have a larger pension than the other, particularly if one person has been out of work for a period of time, for example if they have had a career break or worked part time when caring for children. Some pension funds are also more valuable than others, for example teachers, NHS workers and civil servants  often have more generous schemes compared to the private sector.

Most pension funds would be considered a matrimonial asset, regardless of when or how much  each person has contributed. If a pension is required to meet both parties' needs on retirement, it is unlikely to make a difference  if a significant amount of that pension was accrued before the relationship began.

Why do I need a CETV? Can't I use an annual statement?

Your family lawyer will ask you for a CETV and you will need to disclose this to your spouse.

An annual statement is not sufficient for the purposes of dealing with pensions on divorce. An annual statement shows the current value of a pension pot at the date of the statement. A CETV is different as it will show the amount the pension provider is offering you to transfer the pot outside of your scheme.

A family lawyer or a pension valuation expert cannot give you advice on dealing with your pensions on divorce without a CETV.

What will happen once I have a valuation?

Once all pensions are valued, it is likely that your family lawyer will advise you and your spouse to obtain a joint pension valuation report from a pension expert.

Expert advice is often required at this stage to provide the most accurate calculations as the underlying benefits of a pension scheme can be much more valuable than the CETV given (particularly in public sector schemes).

A pension report will look at several options for dealing with your pensions, including:

  • Pension sharing – this is where one spouse receives a percentage share of their ex-partners pension/s. This is either transferred into a separate pension scheme in their name (known as an external transfer) or into a separate pot within their former partner's existing scheme (known as an internal transfer). Some schemes will only offer an internal transfer e.g. NHS scheme. Pension offsetting – this is where the value of a pension is offset against other assets. For example, one spouse may receive a greater share of the family home or savings to compensate for the lack of pension provision. This is generally advised against as pensions are a very different type of asset to savings/interest in property.

What can I do if there is a delay?

Much is in the hands of the pension provider.

However, some things you can do are:

  • Applying for your CETV as early as possible
  • Whilst waiting for your CETV to come through ensure that all other assets have been identified, disclosed and values agreed
  • Ensure that you have started the application for your divorce (although you should not apply for a Final Order until a final financial settlement has been reached, including pensions)

For more information about pensions and divorce please contact our New Enquiries team on 020 7405 1234, or complete the form below.

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