Embargo lifted on the production of CETV for public sector pensions

In March 2023, the Government Actuary’s Department (GAD) temporarily suspended the production of Cash Equivalent Transfer Value (CETV) for public sector pensions following recent changes to certain factors used in these calculations.

This embargo has now been lifted, however the bodies who provide CETVs for public sector pensions are now working through a backlog of requests and it may still take some time for you to receive your CETV.

However, there is the possibility of a future suspension, so here’s what you need to know.

What does this mean?

If you are going through a divorce and want to end your legal financial relationship with your ex-partner, you need a consent order. A consent order is the document that makes your financial arrangements legally binding once approved by a judge and ends the possibility of future claims through a ‘clean break’.

In order for a legal professional, such as amicable, to draft your consent order, couples need to complete a full financial disclosure which includes any pensions. Even if you don’t plan on sharing your pensions as part of your financial settlement, you need to provide this information in the accompanying consent order documents.

For public sector pensions, the only way of getting a value for these is through a CETV. The embargo on the production of CETV for public sector pensions means that cases which include this pension type, may face delays around their financial settlement, even if pensions aren’t being shared.

When will an embargo be lifted?

There is normally no fixed date when an embargo will be lifted, which can be frustrating for many divorcing couples who face delays as a result. If the production of CETVs is suspended again in the future and you’re an amicable customer, we will keep you up to date with news of when we expect this to be lifted.

Pensions and divorce (the basics):

There are three types of pension:

• State pensions
• Workplace pensions
• Personal pensions (inc. SIPPs)

A pension can either be a defined benefit pension (DB) or a defined contribution pension (DC). A DB pension is typically based on salary and the number of years worked. A DC pension is where both the employer and employee contribute to a pension pot, which is invested. The amount contributed is typically a percentage of the employee's salary. The value of the pension pot at retirement depends on the contributions made and the investment performance.

The calculation of a CETV considers various factors such as the individual's age, expected retirement age, the value of their pension benefits, the scheme's funding level, and other relevant factors. It aims to provide a fair estimate of the cash value of the pension benefits that can be transferred. A defined benefit pension (DB) is much harder to value in this way so can be misleading. If you have DB pensions you may need to invest in an actuarial report to calculate how to split your pensions fairly or offset them fairly against other assets.

Read more information about pensions and divorce in our guide or more about sharing pensions here.

Pension-sharing reports:

A pension-sharing report explores which pensions could be shared on divorce/ dissolution and in what percentages. It is a more accurate way of understanding the value of a pension in the context of a separation, however, it doesn’t replace a CETV.

Here are some things to consider:

1. CETV’s aren’t always reliable:

In private-sector defined benefit schemes, the CETV may not always represent what is behind the figures and within the valuations and therefore could be unreliable.

2. Offsetting is always a risk

Offsetting is always a risk and it’s worth considering looking at Galbraith tables in conjunction, rather than simply using a pound-for-pound calculation.

3. Pension-sharing reports are optional

A pension-sharing report isn’t legally required, however, without one, the amount of pension that would be transferable isn’t clear, and therefore may be queried by the court or unfair.

In short, a pension pound isn’t the same as a house or cash pound so comparing the two might be unfair. The more clarity and accuracy around pensions in the context of separation, the more fair the settlement is likely to be.

If you’re unsure about any of the above please book a free 15-minute consultation with one of our Divorce Specialists to understand the options available to you.