Newspaper article The Journal (Newcastle, England)

YOUR MONEY Your Money Queries [...]

Newspaper article The Journal (Newcastle, England)

YOUR MONEY Your Money Queries [...]

Article excerpt

YOUR MONEY Your money queries are answered by Trevor Clark, Director of Rutherford Wilkinson Ltd, Chartered Financial Planners

Q. I am a substantial way through the divorce process - my wife having left me and instigated divorce proceedings - and, thankfully, it has remained relatively amicable to date. However, my wife has commissioned an actuary to prepare a "pension sharing report" that suggests that, were my wife to receive a cash lump sum in lieu of seeking a share of my pension, this lump sum is less valuable and, therefore, ought to be in the order of three to four times the value of my pension savings. This strikes me as being unfair and would result in my wife gaining almost all of the matrimonial assets, which may well be her motivation in putting forward the report. Is it common for cash settlements to be considered less attractive than a share of retirement savings? A. First, I would agree with you that to suggest that a cash settlement needs to be significantly greater than retained pension benefits seems somewhat unfair.

As a rule, when valuing matrimonial assets for the purpose of financial remedy proceedings, it is usual to take account of the parties' pension savings when negotiating a settlement. There are a number of methods for dealing with those pensions savings, including pension sharing, which involves one party transferring an agreed percentage of their retirement savings to the other party, and attachment, under which one party is given a right to a certain proportion of the other party's retirement income.

However, the most common method is offsetting. This involves increasing one party's share of the matrimonial assets, excluding pensions, to take account of the fact that the other party is retaining all of their retirement savings.

There is no set formula for offsetting pension benefits and the factors used to reach a recommendation depend upon the circumstances unique to the divorce in issue. It strikes me that - based upon the information you have provided - the pension sharing report commissioned by your wife may present a somewhat distorted view. …

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