Guest blog by Dr John Pollock, Pollock & Galbraith Consulting Actuaries
Little in the pensions and divorce landscape has changed in recent years but there remain pitfalls for the unwary. Two key issues which are problematic are the valuation and sharing of pensions in payment and the apportionment of Cash Equivalent Values to exclude that part of the value attributable to membership of the scheme prior to marriage.
The valuation of pensions is covered in Regulation 3 of the Divorce etc (Pensions) (Scotland) Regulations 2000. For active and deferred members of pension schemes and members of personal pension schemes there appears to be no ambiguity in the regulations. Once 12 months have elapsed since the relevant date the value required is the figure that applied at the relevant date (following 3(2)(a)(b)(c), 3(3), 3(4) 3(5) and 3 (11)). There is, however, ambiguity for pensions in payment as 3 (2) (d) directs one to 3(7) and 3(8), and the latter states that the date to which the cash equivalent is to be calculated is to be the date on which the request for the valuation was received, and 3(11), the '12 months rule', refers only to 3(3)(4) and (5) not 3(7) and 3(8). That said I understand that many solicitors are of the opinion that it is still a relevant date value that is required, given the underlying principles of valuation of matrimonial property as detailed in the Family Law (Scotland) Act 1985, section 10(2).
Turning to apportionment, Regulation 4 gives us the convenient A x B C formula to use but fails to define what the 'period of membership' of the scheme actually is! Is it active membership or is it all types of membership, active, deferred or pensioner? My preference is for active membership but who am I to say! Lord Tyre considered the case CB v- MB where the husband contributed unevenly to various pension policies before and after marriage which were then consolidated into a single new arrangement during the marriage. He accepted a calculation of the value of the pension which was in effect that part of the CETV at separation that was built up from the contributions made in marriage and the growth achieved on those contributions, no allowance was made for the funds in place at the time of marriage or for the growth on those funds over the period of marriage.
The message is that most pensions and divorce problems are easily solved, but just be careful!