WARNING: Still in service after a divorce? You may lose all of your pension!

[Fintastic]

I'm currently fighting this with AFPS and have a dispute lodged with the pensions ombudsman as well as having the Forces Pension Society involved. I divorced amicably in 2013, and had a court order apportioning just over 40% of my AFPS 75 pension to my ex, via a Pension Sharing Order. This was because I wanted a 'clean break', which is what this process promises to deliver.

However, as I have remained in service after this, her share of my remaining pension has increased by 20%, meaning that the longer that I remain in service, the less of my original AFPS 75 pension I'll get at retirement. If I served for 8 years beyond my divorce date then ALL of my original AFPS 75 pension would go to her, not just the 40% set in the court order. As it is I'm still going to lose thousands of pounds, which I'm obviously not very happy about.

Whilst I understood and accepted that the amount of her pension would increase gradually with inflation etc, I assumed that this would be in proportion to increases in my own pension. Unfortunately this is not the case and her share is currently increasing at 5% per annum. No-one indicated the excessive rate at which these 'actuarial adjustments' would be applied! AFPS say that they are just following the government guidelines, but in no way, shape or form does this represent a clean break, as the government/forces websites claim for a PSO.

If anyone is in a similar situation please pm me as I am going to fight this. A few of us together would make for a stronger case to get these procedures changed and potentially some of your own pension back. I'm sure that this isn't widely publicised otherwise many divorcing personnel would not stay on, just to fill another's pension pot! What a manning headache that would be!

So, my fellow ppruners, have any of you had any experience with this too?

[Just This Once...]

I think that is the way it works. Played the other way around the projecting forward at 5% per annum calculation is why the 'cash equivalent transfer values' can get to some pretty high numbers at the point of divorce even if the current pension earned is quite small:

For example, if a person has an accrued pension today of £10,000 per annum. If this was then revalued to a normal retirement date in 20 years at 5% per annum it would be a pension worth £26,533.

The cost to provide this pension at an annuity rate of say 6.5% would be £408,200.

With a projected investment return of say 7%, to achieve the target cash sum required of £408,200 at retirement date - you would need to invest today £105,487.

£105,487 is, therefore, the cash equivalent transfer value in this very simple example. It is very easy to see how pension benefits can become a huge part of negotiation and a huge thing to lose in any divorce settlement.

As I understand it a pension sharing order helps you to dodge the bullet above (and many just don't have that kind of cash kicking around with 20 years or more to retirement) but the effect of kicking the can down the road can mean an even bigger problem later on.

In a way the Armed Forces Scheme is stuck in the middle of all this. On one hand it could be seen as unfair to limit the actuarial pension growth of the other party just because the Armed Forces Scheme did not/could not grow to the same level. On the other hand it would be unfair to burden the Scheme by protecting your part of the pot whilst using actuarial protection to increase the pension pot of the ex-partner. In effect your pension would be worth (ie cost more) after divorce than other members of the pension scheme.

The apparent unfairness of all this is catalysed by the hamfisted efforts to make the AFPS fit with regular pension legislation. The AFCS is not a regular pension scheme and it is deliberately designed for the unique aspects of the Service. This is just another example where arbitrary values and percentages have been used to make the legislation 'fit' with AFCS. Another example of this is the values used for the lifetime allowance - a system introduced to stop the rich placing massive amounts into a pensions to avoid tax - but actually penalises senior officers, doctors, senior nurses etc when they are promoted.

I wish you well in your challenge as this is far from 'sharing' when you get nothing; but I fear it will take new legislation to be inacted to allow an Armed Forces pension 'share' to be a set percentage of an intangible benefit in the future, subject to your own career choices or path. The status quo is clearly unfair on you, is cost-neutral for the Scheme, but provides security to your ex-partner at a level that would match that of a civilian scheme.

If you have been poorly or incorrectly advised then you may have legal redress, even if the documentation is correct. Good luck.

[Al R]

Fin,

You refer to your former partner's pension increasing at 5% per annum. I wonder, are you referring to benefits being taken before the normal retirement date of 60 - something which was in the order, but unbeknown to you?

I was involved in a very acrimonious dispute a year or two back, one of the parties had originally suggested a clean break (i.e. they divorce each with their own AFPS pot intact). It was manifestly unfair for a number of background reasons, least of all because the person suggesting it had accrued in excess of thirty three years service, compared to the other person who had accrued six years before surrendering her own career to raise the family (as you had to do then, of course) and support him to lofty heights.

She (the homemaker) argued that as she had surrendered her own military career to raise the family, she too, had earned the right to draw a benefit at aged 55 (as she would have been able to do if she had stayed in). The other party (the career follower) argued that convention dictated that the value of her allocated income (based on a % split) should be assumed to be taken at the more conventional (aged) 60 (even though he had taken benefits at fifty five) and accordingly offered a % split valued for delivery to her at that date.

No one could make the numbers work, mediation was declined by him and we all duly trooped off to court where it was eventually agreed that the split that had been decided was in fact fair, and should in fact be extrapolated to aged 55. This meant that the (e.g.) 35% split which was proposed (and rejected by her) at age 60 was determined instead to be valued at 35%.. but at aged 55. I.e. The same split but in payment for five years longer. It meant that should the homemaker's allocation of the cash equivalent value was subsequently bigger because the AFPS trustee had to assume she would take the income for five years longer. Is this what has happened to you?

It was argued, successfully, that the amount at that age should not be reduced and that both parties should have a value split determined to be aged 55. If the homemaker (the pension credit member) decided not to draw the benefit at aged 55, it would increase by an average of c5%. But the careerist (the pension debit member) would not suffer a decrease in income because he had retired already. The other party (the pension debit member, 'him') argued that his former partner could decide not to draw benefits at aged 55, and instead delay until 60 when the income would have compounded upwards by inflation as well as the annual c5% actuarial increase.

I was retained by the pension credit member so I 'won' for my client and I was delighted to have done so - she deserved absolutely nothing less (I am posting this with her permission) under the much broader circumstances. And if anyone is thinking about retaining the services of a quite well known barrister proclaiming to be a military pension specialist I would delighted to tell you who *not* to use. He/she was absolutely useless, I was stupefied at the lack of detailed insight and her conspiratorial approach to me in the county court car park to negotiate was nothing short of risible.

If you feel that you have had poor advice, then you may have grounds for an appeal. I have to say, I found nearly all of the specialist companies and bodies proclaiming to have knowledge of the workings of a pension sharing order, and AFPS, utterly appalling. Someone nameless, and who have known much, much better, told me to leave well alone as it was 'his pension'.

General tip to anyone - the essence of a good case is to be had in the actuarial report. You have to know what questions to ask - garbage in, garbage out. The other party employed an online joe who wanted me to approve his cut and paste actuarial report. It took two months before he realised that mine and mine alone was the one that was going to be presented for approval and without alteration. It was a three page instruction in the end. But it won my client all that she fairly deserved, despite the hostility from the other party.