From 29th October 2018, there was a suspension of calculations relating to pensions on divorce. We want to start by giving an important disclaimer: this is a time when you should get financial and legal advice to know how this will impact on you as an individual. What follows is a general understanding of what this suspension means but circumstances may change the significance of this.
On the 29th of October, in the Budget, the Chancellor announced a change to the discount rate used for public service pensions, which includes your teacher pension. This impacts the factors that used to calculate transfer values for a pension on divorce, and these should be changed with effect from that date.
This had a direct impact on the work of the Teachers’ Pensions’ work. It now means that they cannot provide the values of benefits held in the scheme, which are known as cash equivalent transfer values (CETVs) for pensions on divorce cases. If the effective date on the pension share was on or before October 29th then Teachers Pensions should be able to help. This also means that they will be unable to implement pension on divorce orders with pension share after this date.
What does CETV mean to me?
If this all sounds a bit garbled for you, then we will unpick why divorce might impact on your pension. If your spouse decides to end your relationship you are likely to be asked for information about the value of the teacher pension. This will allow a court to determine if you should share your pension with your partner, and how much you should share. This means Teachers’ Pensions would previously calculate this value, which is the cash value of the benefits accrued in the scheme. This includes your pension, your lump sum and any dependant’s pension.
This is an important calculation, as the court may award a percentage of this to your ex-partner. This means they will receive this amount of your pension benefits, reducing the amount you are due. Your ex-partner will become a pension credit member, which gives them limited membership to the Scheme.
When is this suspension of calculations likely to change?
The ability of Teachers’ Pensions to offer CETVs for pensions on divorce cases will not be reinstated until new factors are received. It is these factors that were deemed to need change with immediate effect in the budget. Interim requests will be suspended until it is possible to apply these new factors. As of December 2018, there is no further update on the topic of pensions and divorce.
With such uncertainty, waiting for the new factors to arrive, it is essential and necessary that you seek appropriate advice. Going through a divorce is difficult as it is, without the need to worry about your pension in the future. Therefore, a legal and a financial advisor will be able to give you the appropriate advice to help you through this challenging issue.
Please note that Teachers Financial Planning Limited does not provide legal advice and you should seek independent guidance from a suitable organisation.
The content in this article was correct on 10th December 2018. You should not rely on this article to make important financial decisions. Teachers Financial Planning does not offer legal advice on divorce. Please use the contact form below to arrange an informal chat with an adviser and see how we can help you.