Tories to look at pensions.

[Al R]

<Article 10 reduces the age at which Pension Credit Members are entitled to a pension from 65 to 55 for those with a pension sharing orders made on or after 6th April 2009. Article 11 gives those with orders made before this date and who are entitled to a pension at age 65 the option to receive early payment of a pension from age 55 with actuarial reduction.>

The G’ment introduced that Amendment) Order to allow pension credits to be taken earlier than previously (some might remember the Lt Col’s wife who sued the MoD a couple of years back, and this seems to be partly in response to that). So, I imagine that this is going to be, primarily, news for divorcing couples who have been a party (either directly, or indirectly) to the scheme for quite a few years and who are in their late 40’s and 50’s, who are getting divorced and who want some clarity with their disengagement (for want of a better word) financial planning. That SI also only refers to the 2005 scheme, but I imagine that as this has been introduced to avoid discrimination, the rules will apply for all pension credits (ie; from both schemes). It also impacts on folk who got divorced before April 2009.

Before the SI, and previously when pension sharing, all scheme credits remained untouched until the credited member (usually the ex-missus) reached 65, at which point her slice of the pension benefit could then be taken. This change means that the pension credit can be taken by her far earlier (in fact, from the age of 55). And because that is going to have a huge impact on the length of time she can receive benefits (10 years longer), the current Cash Equiv Transfer Value (CETV) which is invariably used, is going to be skewed in proportion to the total amount of benefits that that person is going to be able to draw upon. In other words, if the ex wife is going to have access to benefits for longer (from 55), then does the same amount need to be shared right now? As the scheme is unfunded (in thne technical sense), there is little chance the g'ment defaults (gulp, famous last words).

The CETV wasn’t designed for use in the divorce process – although it has become so. It is the simply the amount of cash a scheme will transfer out should a member leave, which is what pension sharing usually focuses on.. and which is what a divorce court usually focuses on.

The 05 scheme does not allow for Early Departure Payments - members between 39 and 55 and who have got 18 years service in, have CETVs only valued from the age of 65. This anomaly is despite the fact that if they left they would receive a lump sum and between 50% and 75% of their pension immediately. There are many tales of servicemen who have huge differences in the value of benefits and CETVs and it ignores the fact that if the member ‘stays in’ for just a few more years they might be eligible to take their pension early, rather than waiting until 60 or 65, at which point, the value changes dramatically. CETVs therefore, are invariably lower, which might of course, appeal to some.