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 minimizing costs both for ourselves and for solicitors and their clients).

1. 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.

2.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.

3. 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
• current pension statements:

DC Pensions (money-purchase schemes)

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).

DC Pensions (money-purchase schemes) – typical requirements

• CETV – less than 12 months old
• the total monthly contribution (employer and employee) in £’s to each of these pensions, if applicable
• date of starting and leaving the pension in case of the calculations of relationship period

Defined Benefits Pension (final-salary schemes)

Pension information for final-salary schemes is more complex. It starts from the CETV which has normally been obtained quite recently (for Form E). However, CETV statements 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.

Defined Benefits Pension (final-salary schemes)– typical requirements

• CETV – less than 12 months old
• Pension increase rate before and after retirement (including whether inflationary increases are by reference to RPI or CPI)
• Late retirement factors, including whether these are applied to the pension at Normal Retirement Age or whether pension increases since NRA are also added.
• Please note that different parts of the pension may have different retirement ages, pension increases and early/late retirement provisions – in which case we need it for each part.
• If sharing is internal or external.  If it is internal, please can the administrators provide an illustration for the pension credit to their partner if she/he is granted a hypothetical 50% share, based on her/his date of birth.

State pension information (if we are to be asked for calculations including these) -the forecast can be obtained online at https://www.gov.uk/check-state-pension or by completing form BR19

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.

4. 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

–equality of CETVs or current fair actuarial capital value (FAV).

We can be asked for calculations

– exclusion of 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.

5. 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)