My question is about my wife's pension valuation in a divorce situation.
She is on a final salary scheme working for a national charity organisation. I feel the CETV value is too low and certainly does not take into account the inbuilt benefits such as guranteed final salary, life insurance.
What are my options? Particularly, as I gave up my career, as her salary was higher than my earnings as a self-employed person, and took the responsibility to look after the growing children.
We have two useful pages on our site that would be a good start; Divorce common misconceptions and Distressed Divorcer. I recommend reading those if you haven’t already.
The CETV is the fair market value of a member’s benefits in the scheme and is calculated by the scheme actuary. The CETV can often be the only thing used when agreeing a financial settlement in a divorce. But, there’s far more to it than that. You’re right in that your wife is likely to have additional benefits such as life cover and there is most likely a spouse’s pension payable if she dies. You will lose both these on divorce. The scheme will give her a secure income for life whereas you may not have such security. If she’s an active member, she’s also going to enjoy the benefits she builds up after divorce which you won’t be able to enjoy. At the same time, £1 in a pension is not worth the same as £1 cash once you allow for tax and access restrictions.
It’s essential that the full value of all pension benefits are taken into account with a divorce. In may cases it can be the most valuable asset in a marriage. Her scheme may allow you to become a member and receive part of her pension. It may not. I strongly recommend that you obtain an independent actuarial valuation of the pension benefits involved in your divorce. This should be the starting point for any financial recommendations. Your solicitor should have good contacts in this field and be aware of all the implications a pension brings to a divorce. If not, you may want to find one that does.