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Pension Sharing Paralysis in the Public Sector

Public sector pension schemes have stopped producing pension cash valuations and implementing pension sharing orders. At present is it not known exactly when normality will return, but it is likely to be weeks or more likely months before the situation is resolved.

Why is this happening?

Following the March 2011 HM Treasury confirmed that they were considering a review of the calculation basis for cash values of public sector pensions. These are known as Cash Equivalent Values (CEVs) or previously referred to as Cash Equivalent Transfer Values (CETVs.

On 26 October, The Treasury released a guidance note [http://www.hm-treasury.gov.uk/d/public_service_pensions_discount_rates_261011.PDF] for managers of public sector pension schemes. The guidance sets out a revised basis for calculating pension values and it requires immediate implementation. Unfortunately, schemes do not have the calculation factors they need to calculate the values on the new basis, hence the paralysis.

Most schemes have stopped producing CEVs, although surprisingly at least one scheme is continuing to produce valuations on the old basis with a warning that they may need to be recalculated. Pension sharing legislation requires Pension Sharing Orders (PSOs) to use the current CEV calculated by the scheme when implementing the PSO. So, if they cannot calculate the current value schemes cannot implement PSOs; hence the current paralysis.

BDM is committed to help its clients over this difficult period. If you would like to receive more information on this topic and our periodic updates as the situation evolves please email us with your contact details at cev@bdm-mail.com.

Posted on Friday, November 4, 2011 by Registered CommenterThe Ancillary Actuary | CommentsPost a Comment

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