This blog is intended to encourage an exchange of ideas and promote debate about the financial issues that arise in a relationship breakdown. The concept is to create a platform for discussion that is not available elsewhere. Aimed mainly at professionals working in this area; lawyers, accountants, financial advisors and actuaries, it is also a potential source of information for the general public.
In our experience there is a significant variance in how professionals handle pension assets in divorce, with little consensus on which methods give the best outcome. We feel this is due in part to a lack of centralised knowledge and debate on what can be a complex issue. We intend to address this by posting our original articles on key subjects, as well as those contributed by others. Our intention is to post quality, discussion-worthy topics at least once a month, or more often if the need arises.
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A ten page document was recently published by the Government Actuary's Department (GAD). The detail of of the publication need not immediately conceren you but the signs are interesting.
You may recall that the current difficulties with public sector pension schemes arose when the Treasury released a document on 26 October 2011 announcing a change to the discount factors used for calculating Cash Equivalent Values (CEVs). After reviewing the guidance, our actuaries took the view that schemes may take the opportunity to revise other factors at the same time; with the result that the impact of the changes could not be estimated with any certainty. The recent GAD document confirms that mortality and contingent partner assumptions are indeed being revised in certain specific circumstances. Whether this will translate into similarly revised mortality assumptions for all public sector schemes remains to be seen.
What does this mean
Our view remains unchanged. We do not believe that we can estimate the impact of the combined discount and mortality rate changes with an appropriate degree of certainty. Consequently, although we are willing to produce interim reports that may assist in moving cases forward, until the new scheme factors are published we are not prepared to produce reports that will be relied upon for final settlements.
Publication of the GAD document does suggest progress is being made with the production of new factors, but there is as yet no evidence that any public sector schemes have received the revised factors. Hopefully, that will change before too long.