When looking at pension benefits on Divorce we must consider not only how they are valued, but also how they can then be treated in the division of assets using one of three options :

Offsetting is where the value of the pension is "traded" for another capital asset. For example, you have joint ownership of your home worth £300,000 after repayment of the mortgage, and your spouse has a personal pension fund of £300,000. If offsetting is agreed, you might agree to keep the home and your spouse keeps their pension.

Earmarking is where an agreed percentage of the pension is identified as yours, and ring-fenced for your benefit on your spouse's retirement. This should not be the option of choice in most circumstances because it does not allow for a clean break. In addition, the pension dies with your spouse, or your spouse could elect to defer taking this particular pension until the age of 75, an action that is beyond your control.

Pension sharing was introduced on 1st December 2000 for all types of pension except the basic state pension,  Pension sharing provides for the immediate division of the pension into two separate pots, each individually owned, thereby removing the dependency and association applicable to the earmarking arrangement.

Valuing Pension Benefits

CETV (Cash Equivalent Transfer Value) is a value produced by the Scheme Administrator/Pension Provider and represents the value of the member's benefits assuming they are leaving pensionable service at that time. Whilst this may be appropriate for a money purchase scheme, for more complex arrangements it does not take into account such additional benefits as death in service payments, spouses rights and discretionary benefits provided by the Trustees. In other words the result is not a fully valued CETV.

Other Options are therefore appropriate when one party disputes the CETV value and feels that other benefits should also be considered, a pensions audit can therefore substantially increase this value. In other words, an adjusted CETV may either be permitted by the Court or agreed between the two parties.

As you would expect, earmarking or sharing will require a detailed understanding of the schemes and how best the assets may be utilised under each available method. Possible future discretionary increases, the solvency of schemes, tax considerations relating to income versus Capital sums are all factors that should be considered when looking at the valuation of future benefits.

Given the complexity of Pensions and Divorce advice from a suitably qualified professional should always be taken.

An Independent Financial Adviser (IFA) such as Neil Staley is considered to be an appropriate professional as he holds the CII G60 pensions qualification required by the The Financial Services Authority Rules and Guidance .