Excalibur’s Richard Nobbs, Owner and Fellow of the Institute and Faculty of Actuaries, has called for the Government to address what he describes as an inherent unfairness in the way some pension assets are shared on divorce.
Writing in The Guardian, Richard responded to a recent article about the financial pressures facing separating couples and highlighted a problem he regularly encounters in his work as a pensions on divorce expert.
When equal value doesn’t mean an equal outcome
Where one party has built up valuable benefits in a defined benefit pension scheme, a pension sharing order can result in the other party receiving an equivalent cash value which is transferred out of the scheme, known as ‘external sharing’.
The problem is that the cash value transferred does not necessarily provide pension benefits equivalent to those retained within the defined benefit scheme.
Richard believes this can result in pension assets being undervalued, often to the detriment of women, and in some cases by many thousands of pounds.
As Richard wrote in The Guardian:
“Divorce is a traumatic enough experience. This fundamental flaw in the legal process compounds unfairness and is both unnecessary and easily rectified.”
He is calling on the Government to address the issue urgently, warning that without action there is a risk of “sleepwalking into another pensions scandal”.