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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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« Pension Liberation (Scams) | Single-tier state pension & draft Pensions Bill - Part 1 (substitution rules) »

Single-tier state pension & draft Pensions Bill - Part 2 (Additional State Pension)

Currently, Additional State Pension can be shared and there are no implementation charges for doing so. Since single-tier pension (STP) has been a possibility we have been concerned about the implications for the beneficiary of sharing these benefits. The concern was whether entitlement to what has become the STP foundation amount might be influenced by the existence of shared benefits.

The transitional arrangements for converting shared Additional State Pension into protected payments as set out in the draft Bill are complex and we have not yet analysed the calculations in detail. It is possible that these will be changed before the legislation is passed by Parliament so a degree of uncertainty remains. In most cases Additional State Pensions are small in relation to other pension benefits and therefore, until the position is clearer our view is that it is preferable to avoid sharing ASP where other reasonable alternatives exist.

The change in SPa is relevant in terms of valuing currently accrued Additional State Pension entitlements and when sharing pensions to equalise pension incomes at a specific point in time. Increasing SPa reduces the value of the currently accrued benefits because they will start to be paid later and consequently they will on average be paid for a shorter period.  If pension incomes are equalised at a point in time before an individual reaches their SPa the benefits will not be included in the equalisation calculations.

This summarises our current broad views on the draft legislation and changes. None of the above represents advice as to a particular course of action or inaction. BDM, it directors and employees accept no liability for any action taken or decisions made arising in any way from these comments.

Posted on Friday, April 26, 2013 by Registered CommenterThe Ancillary Actuary | CommentsPost a Comment

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