Notes on Instruction Letters

I have written these notes to help family solicitors put together instruction letters - particularly identifying issues which in our experience can cause delays, added costs, and other problems. They are comments from my viewpoint as an actuary experienced in divorce cases over many years, building on having worked closely with experienced pensions and divorce solicitors.

Instruction letters are normally in six sections: (1) introductory details of the solicitors, clients, and court involved, the general nature of the instructions (joint, etc), and contact details; (2) the current stage of the process, court orders, timetable; (3) Information about the clients and their pensions; (4) the questions which the expert report is to address; (5) fees and terms of business matters; and (6) compliance, FPR Part 25, best practice guidance matters. Please note that we are happy to discuss cases, and draft instructions, in advance of the instruction letter - since that can often help to make the whole report process more effective (including minimising costs both for ourselves and for solicitors and their clients).

Introductory Details: This is normally straightforward, but we need email contacts as well as postal addresses and telephone numbers, and also the court and case number if available. Our most usual instructions are on a single joint expert basis, but we can if appropriate report as a sole expert.

Current Stage: It is always helpful to have as much information as is possible on the timescales involved, and particularly on the terms of any court orders involved. If initial advice is needed, it could be that a formal FPR Part 25 report is not needed at this stage - although we are normally able to write up such advice into a formal report quite quickly (at low extra cost) if needed.

Information about the pensions: This can be very complicated, and involve substantial delays if further information needs to be obtained. We always need the dates of birth of the parties - and also dates of marriage, separation, etc if relevant to the questions being asked - if we are not provided with information on the parties' health, we would normally assume both have normal life expectancy.

Pension information for money-purchase schemes, including personal pensions and SIPPs, is normally a recent fund value, and if possible a recent investment statement showing the specific funds in which the money is invested, and current contribution rates (if any). Some money-purchase schemes have valuable benefits such as annuity rate guarantees (typically provided in "retirement annuity policies" started in the 1980s or earlier).

Pension information for final-salary schemes, either for current employment of for preserved benefits from earlier employments, is more complex. It starts from the CETV which has normally been obtained quite recently (for Form E), which will normally be provided in a letter setting out how it has been calculated (mentioning, for example, if it has been reduced on account of a fund deficit). We need information on divorce and pension sharing options which are typically provided in standard form by the scheme administrators if the parties told them at the time they requested the CETV that it was needed for the purpose of a potential divorce. However, CETV statements (too) often do not give enough information on the preserved benefits themselves (annual pension, retirement age, pensions increase provisions, etc), so the parties may need specifically to request detailed benefit statements as well as CETVs . Particularly where we are asked for calculations of pension sharing for equality at retirement ages different from the pension scheme's normal retirement age, we will also need information on the early and late retirement terms of the scheme.

State pension information (if we are to be asked for calculations including these) includes normally the state pension statement (BR19)  which is most easily obtained by the parties' directly from DWP. If the instructions are to include questions about pension accrual in different (marriage-related) periods, sufficient information about the service periods and contribution dates of the various pensions will be needed.

We are happy to be sent the information currently available on the various pensions with the instruction letter (or draft instruction letter), which we will review and identify whether or not further information is needed, and if so, how best to obtain this.

The Questions for the Expert: This is the key section of the instruction letter, and needs to be as clear as possible in order to avoid later problems. Our usual instruction is for pension sharing calculations to achieve equality of income in retirement for the two parties, taking account of pensions accrued at the report date. It is important to be clear on the definition of retirement age - for example, by specifying a calendar date (perhaps when the husband reaches age 65) or by specifying the ages of retirement (perhaps age 65 for the husband, and age 60 for the wife, which might for example be the normal retirement ages in their current employments). We will normally carry out our calculations in inflation-adjusted terms where retirement is at different calendar dates, and by adjusting pensions with different provisions for increases in payment to actuarial equivalent amounts.

We can be asked for calculations of the parties' retirement incomes from specific pension sharing, for example from sharing to equalise CETVs or current fair actuarial capital value. We can be asked for calculations excluding pensions accrued in particular periods (such as pre-marriage, or post-separation), or for calculations including future accrual, and this needs to be specified clearly in our instructions.

We can be asked to comment on the merits and disadvantages of sharing the various pensions, and to advise on the sharing likely to be most effective - this can be important since some pensions have very unfavourable sharing terms (for example retirement annuities with valuable annuity rate guarantees, or final salary preserved pensions where the CETV is substantially below fair value), and others can have very favourable terms.

We can be asked to advise on "Offset" asset values if pensions are not shared, where there is no single "right" value, but we can provide a range of values and a commentary to enable the parties to discuss the many issues involved in this.

Fees and Terms of business: We are happy to provide firm fee estimates in advance if you tell us about the pensions and the questions (or if we are sent instructions in draft). Our terms of business follow the Academy of Experts model (on their website), together with our current partner hourly charge rate. If instructing solicitors wish their clients to be fully responsible for the fees, we ask for fees to be settled at the time of the instruction, otherwise we normally send out our fee invoices when the report is issued.

Compliance: This normally specifies that the report should follow FPR Part 25 requirements for expert reports - where our report will include the appropriate declarations.

Notes by:         Geoffrey Wilson, Partner, Excalibur Actuaries (September 2016)

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