Published by Excalibur

These notes are intended to help parties and their representatives put together instruction letters – particularly identifying issues which in our experience can cause delays, added costs, and other problems. They are comments based on our experience of acting as Single Joint Experts on divorce cases over many years.

There is helpful guidance including a specimen letter of instruction in Appendix E of the publication “A Guide to the Treatment of Pensions on Divorce – 2nd Edition” (which we refer to as “PAG2”).

We have also included a copy of the specimen letter of instruction here.

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, PAG2.

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.

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:

Defined Contribution Pensions (also known as DC or 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 – typical requirements

• Cash Equivalent Transfer Value (CETV) – less than 6 months old (ideally less than 3 months old)
• the total monthly contribution (employer and employee plus any tax relief being claimed by the pension provider) in £’s to each of these pensions, if applicable
• If there are relationship period calculations
  • date of starting and stopping contributions to the pension
  • (For larger plans) full contribution history
  • details of any transferred in benefits including dates of starting and stopping original contributions
• details of any guaranteed annuity rates or other guarantees

Defined Benefits Pension (also known as DB or final-salary schemes)

Pension information for DB pensions is more complex than for DC pensions. 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 we may ask the parties specifically to request additional information which might include detailed benefit statements (including “remediable service statements” for public sector pensions affected by the McCloud Remedy) as well as updated CETVs. 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.

DB Pensions – 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)
• Early and / or Late retirement factors, including how these are applied to the pension.
• 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.
• Whether sharing is internal or external.  If it is internal, please ask the administrators to 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 and the same date as the CETV.

If LGPS pension provided-

• Please ask the administrator to provide the full CETV calculation sheet (example here), with full pension details i.e. member’s pre-2008 pension, post-2008 pension, post-2014 pension, lump sum, spouse’s pension etc.
• (if the Pension Fund has an online member portal, the split might be available online)

State Pensions

State pension information (if we are asked for calculations including these) – the forecast can be obtained online at https://www.gov.uk/check-state-pension or by completing form BR19.
The accrued state pension figure that will be used in the pension sharing calculations is highlighted in the example state pension statement highlighting the needed figure. Please note that if a full state pension has already been accrued, the wording on the statement will detail that “You cannot improve your forecast anymore”. If there are relationship period calculations, it can be helpful to provide the parties’ NI records – these can be obtained online at https://www.gov.uk/check-national-insurance-record.

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 – typically state pension age for each party or the normal retirement age of the largest DB pension. 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.

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).

Once we have received all necessary pension information, we will provide an expected delivery date for your report. We will send out our invoices shortly after that. We ask for our invoices to be settled in full before the report is issued.

6. Compliance

This normally specifies that the report should follow FPR Part 25 requirements for expert reports – and that we have the competencies as set out in Appendix D of PAG2. Our report will include the appropriate declarations.