A pension CETV is a cash equivalent transfer value which reflects on the capital value of the pension benefits which have been accrued within a pension scheme to date. It assumes that the member is leaving pensionable service and transferring their pension fund to another financial arrangement.
A pension CETV is the value of the funds transferred and accrued to date. It is sometimes suitable for achieving a fair valuation of any retirement benefits, particularly for straightforward money purchase schemes where a defined contribution is made and set up by your employer to provide their employees with a certain level of income when they reach retirement.
The CETV option isn’t so simple if you have more complex arrangements however, such as discretionary benefits provided by Trustees, spouses’ rights or death in service payments which can result in a CETV which isn’t fully valued.
For members who leave pension schemes early, a CETV is also used to calculate their benefits as it’s an easy method to use because it can be obtained by the pension providers, i.e. an employer pension or a private pension.
When calculating a final salary pension however, a CETV is calculated on the basis that the member immediately leaves or terminates their pension scheme by leaving service . This can distort the value of any benefits which are taken into consideration.
Assessing your valuation options
When dealing with complex pension schemes or Final Salary schemes in a divorce, it is often necessary to obtain specialist advice from a pension actuary. A pension actuary will be able to give a fair valuation of the pension, taking into account all of the benefits and will also be able to advise on how the pension can be divided to achieve, for example, equality of income in retirement, and further advise on suitable valuation of the pension for offsetting purposes.
Pensions and divorce – make sure you appoint a specialist solicitor
Dealing with pensions is one of the most tricky areas when it comes to divorce – and any mistake can prove incredibly expensive. Sadly, some divorce solicitors don’t seem as fully clued up about the importance of pensions, and particularly how they should be valued, as others. We suspect that, as a direct result, there will be a significant increase in the number of professional negligence claims made against divorce law solicitors who haven’t properly dealt with their clients pensions.
Rest assured that all of our divorce lawyers really understand the importance of pensions in divorce – and how those pensions work. If you’re worried about what could happen to your pension upon divorce – call our specialists today.
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