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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« That'll Teach You! | Public sector pensions - CEV problems - progress at last? »

Sour Note for Military (ex)Wives

Public sector pensions have been in the news a lot recently. Strangely we have not seen any coverage of a problem faced by some military ex-wives (and civil partners?).

Historically, the Armed Forces Pension Schemes presented something of a challenge on divorce or dissolution. Serving members of the armed forces can leave and take an immediate pension from 55 if they meet the service criteria. If a member leaves service before they are 55 they become a deferred member of the scheme and the pension benefits built up before 2006 are paid from age 60; those built up after 2006 are paid at age 65 but can be taken at 60 on actuarially reduced basis.

If a pension sharing order is made against a member of the AFPS 75, the ex-spouse or civil partner (pension credit member) will receive their benefits at age 60 or when the order is implemented if later. For pension-credit members of the AFPS 05, benefits begin when they reach 65 or when the order is implemented if later.

This has led to situations where the member may be able to retire at 55 on a pension but the ex-spouse or civil partner could not. A successful challenge resulted in legislative changes that enabled pension-credit members to take their pensions from age 55.

In short it would seem that the changes were not handled correctly. Some pension credit-members received documentation from the Service Personnel and Veterans agency – who administer the schemes – showing that the pension payable at 55 is the full rather than an actuarially reduced rate. At least one pension-credit member is said to have been receiving their pension since 2009 and has recently been informed that the SPVA has discovered the error and the pension will consequently be reduced by 50%.

Unofficial reports are that about 120 people are known to be affected by this problem and SPVA have apparently set up a special section to handle the complaints. We understand that SPVA are contacting people they know are affected.

The issue was raised in the House on 26 April –www.theyworkforyou.com/debates/?id=2012-04-26a.1099.0&s=speaker%3A24839#g1116.1 so hopefully there will eventually be an equitable outcome. More publicity may help, which is the reason for writing this article. We are aware that another firm has contacted three MPs and the scheme actuary about the problem. 

It seems completely wrong to reduce someone’s pension in this way, purely because of a SPVA mistake. Hopefully with appropriate publicity and political intervention sense and equity will prevail.

Posted on Saturday, May 12, 2012 by Registered CommenterThe Ancillary Actuary | Comments5 Comments

Reader Comments (5)

As one of those whose Pension Sharing Order was incorrectly implemented by SPVA I cannot over-emphasise the impact of this error. To compound it, the handling of the matter has been exeptionally poor - there has been an unforgiveable delay (of over a year!) between SPVA discovering their mistake and the Pension Credit Members being notified. During this interval I have made significant and contractual financial commitments - I have taken out a mortgage to provide a family home for my three children. To be told therefore that the sum quoted as due to me at 55 won't be due until I'm 65 has been devastating. I have since discovered that their intended 'correction' is in fact a further error, but as I am still awaiting a revised forecast from SPVA (two months since they first wrote to me) I can only wait to see what figures they come up with. As a deferred pension credit member, my circumstances are different to others I've spoken to who are already in receipt of pension benefits. That they are facing significant reductions to their incomes with effect from 1 June is outrageous. We have found very generous and practical support from concerned actuaries, and political support from our MPs, including the Leader of the House. However, for sense and equity to prevail while the Minister (Veterans Personnel Welfare) is taking no responsibility, still less showing any concern, would seem to necessitate another round of stress, distress and struggle for a group of women who believed they had already been legally awarded this pension provision through the courts.
May 26, 2012 | Unregistered CommenterPension 'victim'
I am an ex-spouse whose pension is in payment. SPVA’s letter of 5 March informed me they were proposing to reduce my pension by 40% wef 1 June. That figure has now been revised which means I’m now facing a pension reduction of approx 10%. Whilst this percentage is not as shocking as the original figure quoted, it nevertheless represents a substantial loss of income for me and is not what was agreed as part of my financial settlement on divorce.

I agree with pension ’victim’ in respect of the very generous and practical support offered by concerned actuaries. Their efforts have been invaluable. I’ve been disappointed and feel let down by my MP who has accepted the Minister’s responses at face value.

[Email address supplied but redacted by moderator to maintain anonimity]
May 29, 2012 | Unregistered CommenterPension 101
A growing group of us have formed a network and can be contacted, courtesy of bdm, via SPVAerror@ancillaryactuary.com
We are anxious to ensure that satisfactory outcomes are secured for each Pension Credit Member affected by these errors, and would encourage others to get in touch with us as a matter of urgency.
May 29, 2012 | Unregistered CommenterPension 'victim'
As a member of the network group formed as a result of the MOD pension issue, I strongly urge anyone affected by this to contact SPVAerror@ancillaryactuary.com. Firstly, it is great having contact with others in the same boat. Secondly, we are sharing information. Thirdly, there is strength in numbers.
June 4, 2012 | Unregistered CommenterPension Victim
I echo the comments made in previous posts. I have spent the last 18 months planning to retire in July and become self employed. I will be 55 in September. I need to give my employer 2 months notice but I am completely stuck as I still have not had a pension forecast following my letter in March about the SPVPA error.Dare I let go with both hands when I have a son at University to support?

e mail address available
June 8, 2012 | Unregistered CommenterRetiring Teacher

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