The Smart Divorce Podcast
If you are separating or divorcing, this podcast is for you. Our host, Tamsin Caine is a Chartered Financial Planner and divorce specialist. Across the series, we speak to divorce professionals, divorcees, coaches, domestic abuse specialists, victim survivors and many others who we think would be of interest to you if you are thinking about separating, have separated, are going through divorce or are post divorce. There is also lots of information if you are supporting a friend through divorce and separation.
For anyone working in the family justice profession, there is plenty for you too. Although this podcast is aimed at the general public, we hear that many of our business friends in the divorce world find our conversations useful!
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The Smart Divorce Podcast
Pensions on Divorce - Update from an actuary
Unlock the secrets to fair pension sharing in divorce with expert Richard Nobbs! Learn how to simplify the process with the new PAG 2 report. Don't miss this essential episode!
Richard Nobbs
Richard is an actuary and the owner and a director of Excalibur Actuaries Limited, one of the leading pensions on divorce expert firms, with a team of over 20 including 6 actuaries. He is a member of the Pensions Advisory Group – colloquially known as PAG, comprising judges, barristers, solicitors and pension experts and who have provided extensive guidance on how to deal with pensions on divorce. He is chair of the PAG valuation working committee.
Richard is also a member of the Academy of Experts and Expert Witness Institute.
On a lighter note, he is married with two daughters and in his spare time Richard is an expert skier and an enthusiastic, if less accomplished golfer and photographer.
https://www.youtube.com/watch?v=ouEnvDmo7U4
https://www.advicenow.org.uk/guides/survival-guide-pensions-divorce
Tamsin Caine
Tamsin is a Chartered Financial Planner with over 20 years experience. She works with couples and individuals who are at the end of a relationship and want agree how to divide their assets FAIRLY without a fight.
You can contact Tamsin at tamsin@smartdivorce.co.uk or arrange a free initial meeting using https://bit.ly/SmDiv15min. She is also part of the team running Facebook group Separation, Divorce and Dissolution UK
Tamsin Caine MSc., FPFS
Chartered Financial Planner
Smart Divorce Ltd
P.S. I am the co-author of “My Divorce Handbook – It’s What You Do Next That Counts”, written by divorce specialists and lawyers writing about their area of expertise to help walk you through the divorce process. You can buy it here https://yourdivorcehandbook.co.uk/buy-the-book/
To learn more about our podcast sponsor Ampla Finance – access their product guide here: https://bit.ly/3Ieqmuc
Or complete enquiry form https://bit.ly/3W4J7pz and one of the team will be in touch.
Hello and welcome to the Smart Divorce Podcast. This is series nine and in this series we're going to explore what makes up the working week of various different professionals who work in the divorce world. You'll start to understand what they do, both during the time that you see them, how they prepare for meetings, and what work goes into the work of a divorce professional outside of the time that you spend with them. I'm really looking forward to some amazing clients in this series. We talked to a barrister, family solicitor, financial planner, divorce coach and really hoping that you're going to enjoy it and get a lot from it as well.
Tamsin Caine:Hello and welcome to another episode of the Smart Divorce Podcast. I'm really happy to be joined again by Richard Nobbs, who is absolutely convinced that nobody would want to listen to an actuary chatting about poetry books, but actually it's been one of our most popular episodes when he joined us previously, so we've invited him back to talk to us about some of the complexities around instructing a podriport and also to give us a brief update on the re-released or the new version of TAG. Welcome, richard, Richard lovely to see you again.
Richard Nobbs:Yes, great to be back.
Tamsin Caine:Fantastic. You look like you're in the Arctic or something from your background.
Richard Nobbs:Yes, I was in the Lingen Alan alps north tip of norway um doing some ski touring, so climbing up the mountains, uh, for four or five hours or something like that, and then skiing down in half an hour. So, uh it was, it was different and, um, just the scenery was spectacular it looks pretty.
Tamsin Caine:It looks pretty amazing'll need to join us on YouTube if you want to have a look at Richard's background so you'll know what we're talking about. So since we last PAG2, has been released. I know that sets out a draft letter of instruction to instruct codes a draft letter of instruction to instruct codes and we're going to talk about some of the niche areas around that instruction letter. Can you tell us a bit more about how that instruction letter can be used in practice the version that's in Pag2?
Richard Nobbs:Yeah, you've got in Appendix E in the PAC report the letter of instruction. It's also got a number of notes in there, so it gives you some directions or some suggestions as to what retirement ages that you might want to use, whether to ask for equality of income, equality of capital offsetting approaches, income equality of capital offsetting approaches. And just to set out how the letter of instruction should be laid out, by either instructing solicitors or it can easily be adapted if people are acting as litigant in person. But if they can have reasonably standard questions along those lines, they'll find that the process is a lot easier. If you start asking non-standard questions, you will find that the costs can easily escalate quite dramatically and you might find that the time taken to actually respond to all of those questions can be a lot, lot longer. So making sure that there is standardisation effectively across the industry from solicitors and also from PODEs should make everybody's life easier.
Tamsin Caine:Let's hope so. Let's hope so because I think getting the letter of instruction right and asking the right questions at the right time, the right information that you want back, will not only, as you say, keep the cost and time down, which is something that everybody's keen to do when it comes to the PODE report, but also simplify the report that they get back and make the information easier to understand.
Richard Nobbs:Yeah, one of the things that concerns me is the length of PODE reports. I'd much rather provide a report which deals with a smaller number of issues smaller number of retirement ages, smaller number of calculations, fewer tables. That means that there's less to negotiate as far as the individuals are concerned. It means that it's easier for us to provide the report. There's less information generally that is requested from the pension schemes and it accelerates the entire process. It normally takes a few months to actually produce a POED report, from instruction to the report being issued, and the more complex things are, the longer it takes, and then, I think, the longer it will then take to negotiate a settlement between you negotiate a settlement between you.
Tamsin Caine:Yeah, absolutely.
Tamsin Caine:I think one of the reasons that we hear quite often for not discussing the pensions and just going, oh, we'll just keep our own and leave it at that, not worry about it, is the cost of having an expert look at the pensions and the time that it's going to take, because they just want everything done and dusted.
Tamsin Caine:So I think, as you say, if we can simplify those things, keep the costs down, simplify the negotiations afterwards, I think hopefully everybody will get something out of that and more people, hopefully, will start taking account of this massively valuable asset that quite often is more valuable than their family home. So, yeah, I'm keen that more and more people consider pensions when they're when they're getting divorced. So we're going to get stuck into some of the some of the nitty-gritty on some of the areas that you've uh, that you've mentioned. So one of the one of the things that I'm often asked about is what ages we should use when it comes to the report. So what retirement age should be the age that we're asking for asking the questions about? So are there any general rules of thumb around this?
Richard Nobbs:Well, the choice of the retirement age is mainly for the parties to decide, and it can make a big difference to the pension sharing. There are a few key points as far as I'm concerned. If the parties are not yet retired, we generally require that the retirements are at the same age, so both at 60 or both at 65. Otherwise you can end up with an unfair outcome. For example, if you're going to say one of them is going to retire at 60 and the other one is going to retire at 65, but we're seeking equal incomes, then the 60-year-old is going to be getting five years more payments and so that wouldn't necessarily be fair. Where they're already retired or they can both retire now, then immediate retirement may be appropriate. So that's a fairly common one for people who are either retired or very close to it. For defined contribution pensions, I would say that actually the retirement age is generally not that important as far as pension sharing calculations. Clearly it's more important to decide what actual income they'll be getting, because if they leave the pension invested for longer they're likely to get more. But as far as the pension sharing calculations are concerned, defined contribution pensions and the retirement age not generally that important For defined benefit pensions. On the other hand, generally the best point to take is the age at which the benefits can be taken without reduction without reduction, normally the normal retirement age of the pension scheme, but not always. Some pension schemes allow people to early retire without reduction, without any penalty, and that's the age at which the pension is most valuable. So why wouldn't the individual be taking it at that age? So we'd normally use that, particularly if it's the dominant or the main pension, the largest pension in the pension sharing calculation. So those are the general sort of rules of thumb.
Richard Nobbs:There are a few other, shall we say, quirky areas. You've got public sector pensions. You've got the change of normal retirement age, typically the old final salary pensions you could take from 60, and the new career averaged revalued earnings you could take from state pension age. So you might have a couple of retirement ages there in the calculations. And you've also got the armed forces and police, the uniformed services, where there are some peculiarities, if I can say it, as far as the pension benefits are concerned.
Richard Nobbs:Some of those individuals can retire at very young ages, sometimes below age 50, and still take full benefits, and so that requires some thought there as to when they will actually retire. I think it's important to actually think about when the individuals are actually thinking of retiring. What are their retirement plans? So if that can be built in to the analysis, then so much the better. It's probably worth flagging that just because we're instructed to assume age 65, for example, is the retirement age, it doesn't mean that they have to retire at that particular age. It's just an assumption used for achieving a fair split between the pensions. It doesn't actually commit them to retiring at that age.
Tamsin Caine:Sure. So if you write a report that says we're assuming a retirement age of 65, you could still have one retire at 60 and the other retire at 67. It doesn't matter. This is all done and dusted. Like with everything, Once the divorce is done and dusted, it's in the hands of the pension holders.
Richard Nobbs:Absolutely. It's how to divvy up the pension sharing at this point in time, and then they're free to go their own ways, their separate ways, and they can sort out their actual retirement plans at a later stage.
Tamsin Caine:Absolutely. Can I just take you back to one of your answers? One of your answers, so um, we took. You mentioned about the um public sector schemes, where you've got the final salary bit and the and the career average bit and they've got different retirement ages. In that circumstance, would you would you suggest that you use the 60, which tends to be the final salary bit, or the 67, 68 state pension age, or would it depend on which is the bigger pot, or how do you deal with? How would you suggest dealing with that?
Richard Nobbs:It's an interesting one, particularly where they are still in service. Particularly where they are still in service, I think if one of the pensions is considerably larger than the other, then I'd like to take that particular age. But if they are, you know, reasonably evenly split, then actually getting both can make sense and I think that there can be some real benefit here in actually asking for both ages. As far as the calculation is concerned, because typically for the final salary, the old legacy pension, if they take it at an age after age 60, you were saying that that was the retirement age there's often no enhancement for taking it later. But often they can't actually take it at 60 unless they have left employment.
Richard Nobbs:So the key question is when are they actually going to retire? Because if they end up taking the benefit the final salary benefit at 67, a state pension age, they're effectively losing seven years' worth of income and that needs to be incorporated into the analysis. Otherwise they could find that they're giving away too much and it may well be that after the divorce they're having to work until state pension age because they can't now afford to retire at age 60. So in those circumstances public sector, where they are still in service.
Richard Nobbs:I think actually asking for both retirement ages is a sensible one. You don't have to ask for every single age 60, 61, 62, because that would just be ridiculous. But if you ask for 60 and 67, and you'll get two sets of results, it will give parties an idea of what income they're going to get at both ages, and they can take it from there as far as negotiations is concerned. And if they think that they're going to retire, shall I say halfway through, then pick the average of the pension sharing. You don't need to have every single scenario modelled.
Tamsin Caine:Perfect, that's really interesting. I'm glad I asked that because that's something that comes up a lot and so it brings us nicely on to. Should we generally be asking for calculations for a number of different ages?
Richard Nobbs:I think one or two ages generally suffices, and certainly you know, giving the earlier example of 60 and 67, you know that seems to be sensible. I generally would try and avoid sharing at, shall we say, 65 and 67, because a two-year age difference, you might find that the difference in the pension sharing order is only a percent or so, and so why spend hundreds of extra pounds in fees for getting that extra analysis? Certainly if there are other parts that are being argued as far as pension sharing is concerned, you could find that you end up with an inordinately complex report if you've got multiple retirement ages, three at the most. Anything more than that, I would suggest, is complete overkill.
Tamsin Caine:Absolutely agree, absolutely agree. And the reports just end up being inches thick and incredibly complicated and so many different percentages for negotiations then to take place around. It's often asking me whether, when I'm guiding solicitors and clients on drafting an instruction, whether the PODEs themselves would recommend a pension age and I know this is difficult because you're not strictly advice givers more information providers, but is that something that PODEs are willing to do?
Richard Nobbs:Well, my understanding is that not all PODEs will recommend an age to use. But if we're not given an age, then Excalibur will normally suggest an age that we think is reasonable on the circumstances of the case. And you're right that there can be some difficulties there. But our obligation, our duty as a single joint expert is to the court and we're here to advise the court. So I consider that it should form part of our advice. And so if they are saying you know equality of income at retirement, then if we've got, if the circumstances of the case mean that there's a clear recommendation, then back to them and make some suggestions there. There may be some further dialogue, but normally we'll be able to make a recommendation either at the outset or just report on it, depending on how comfortable we feel.
Tamsin Caine:Excellent, Okay, Well, that's good because I think that will put at ease some minds in solicitors' heads that they are in a position where they can ask for that information from someone who knows what they're talking about around pensions. Okay, so we're going to move on to another aspect of the POAD reports that you mentioned earlier on. So we've talked about during the ages about equality of income. Can you explain what equality of income and equality of capital calculations establish and for you how they go around about the offer? Should I say how you would go about doing that?
Richard Nobbs:So what's the difference between equality of income and equality of capital? I'll give you an example and I think that might help illustrate. So if we take a 90-year-old husband, an extreme example a 90-year-old husband and £10,000 a year worth of income Okay. 60-year-old wife, also with £10,000 a year of income Okay. So, as far as pension sharing for equal incomes is concerned, well, there's no pension sharing that's required.
Richard Nobbs:For equal incomes is concerned, well, there's no pension sharing that's required. They already have equal incomes of £10,000 a year. However, the 90-year-old husband may have a life expectancy of, let's say, five years, so the value of that, in broad terms, might be £50,000. The wife, being 60, on the other hand, maybe has a life expectancy of 25 years, so the value of her, the capital value of her pension, is £250,000. So we've got equal incomes on the one hand, but the wife's got £250,000 of capital, of pension capital, the husband's £50,000 of pension capital. So, essentially, the wife would need to share £100,000 worth of pension capital over to the husband, so that they've then got £150,000 each. That £100,000 would be expressed as a percentage, so she would have to share 40% of her pension.
Richard Nobbs:Now, that's an extreme example and I can't say that equality of capital would be particularly appropriate in the circumstances of that case.
Richard Nobbs:But that is essentially what an equality of capital calculation is compared to an equality of income. You'll appreciate that that was an extreme example, and most of the cases that we're dealing with are people in their 50s and 60s and so sometimes they haven't, or a lot of cases they haven't yet retired. So what we are doing on an equality of income calculation is projecting their pension income when they retire at the specified retirement age. So if the letter of instruction is saying retirement at state pension age, we are projecting their incomes up until state pension age, both for the husband and for the wife, and then calculating the sharing that's required on the party with the larger pensions so that after that pension sharing they both have the same income from state pension age. So that's essentially what the difference between pension sharing and pension sharing for equality of income and equality of capital is, and for most of the cases, actually, the difference in pension sharing is often very small. So that's one of the reasons why we generally prefer one instruction rather than both.
Tamsin Caine:Are there any points at which it might make sense to ask for both? Because I see a lot of instructions where solicitors feel that it's a good idea to ask for both, and often it's because, well, that's what we've always done. So are the reasons we've sort of said you know, quite often it's worth only asking for one. It's more expensive, more time consuming, et cetera. Longer report all the things we've said about lots of different ages. So are there any situations where it's a good idea to ask for both? Or whether it's good idea to ask for just capital rather than asking for income?
Richard Nobbs:yeah, it depends on the different types of case and it's talking in parts four and six of what it calls needs cases and sharing cases. And let's take the easier one first. So sharing cases are where the assets and the pensions of the parties after any redistribution, after any pension sharing, are more than enough to meet both of their needs, both parties' needs. So they're typically big money cases, so they're fairly few and far between, whereas needs cases are more the everyday type of case where the assets and the pensions after any redistribution or pension sharing just don't cover their needs or only just meet them. And I suppose a divorce case may have elements of both. But for needs cases typically it's found that equality of income will lead to the more fair outcome, whereas for the sharing cases, the big money cases, then equality of capital is generally more appropriate, but a divorce might have elements of both. I think where it is helpful to have both questions is if the parties are a number of years apart, it'll actually bring out the differences in pension sharing and you can see the impact of that, because not only are you looking for what is the pension sharing that's required, but if the parties are actually rapidly approaching retirement, it's helpful from a financial planning perspective. It's helpful from a financial planning perspective. How much can they live on? What do they actually need? But if they're several years apart, it's handy, I think, to have both equality of income and equality of capital.
Richard Nobbs:If there are health issues, if one of the parties or both of the parties have health issues, you know, if one of the parties or both of the parties have health issues and by that I'm talking about, you know, a reduced life expectancy I don't mean, you know, is one of them smoking or slightly overweight, or something like that.
Richard Nobbs:We're talking about material changes to life expectancies. And the other area is probably where there are income, what are known as income gap issues, and typically that's where they're in the uniform services. So it's, for example, if you find that the pension scheme member can retire at, let's say, age 50, but the other party, the spouse, can't actually retire until age 60, then you've got 10 years' worth of pension differential there. How is that going to be taken into account? Now, that can easily be taken into account in an equality of capital calculation. It may be a bit more difficult to deal with an equality of income calculation, depending on how the POAD actually goes about those. But yeah, certainly where I would ask for both are, you know, large age differences, health issues or income gap, public sector uniformed services cases. I think they can be helpful there.
Tamsin Caine:Yes, absolutely. Moving on to another controversial area of POED reports, we like a bit of controversy, and this one seems to cause more controversy than anything else, to be honest. So should premarital pension accrual be excluded from PODE calculations?
Richard Nobbs:Right. So it's worth clarifying that, excluding the premarital pension accrual, what is that actually doing? You're just asking for us to equalize the pensions that have been built up over the marital period. So what's premarital is ring-fenced for the individual and they're just sharing the pensions that have been accrued over the marriage.
Richard Nobbs:And I suppose this then goes back to PAG and PAG's talking about the needs cases and the sharing cases, and typically it's found that in needs cases ring fencing of assets is not appropriate, whereas in sharing cases ring fencing may well be appropriate. But yeah, on the needs cases, which is the vast majority of cases, then generally there shouldn't be ring fencing and the courts can have access to assets, as I understand it, no matter when they're built up. But because sometimes cases have got elements of sharing and elements of needs, you may well find that that is actually incorporated into a number of the POAD reports. It does surprise me the number of cases we are still asked for relationship periods, and so I would say probably around half of our cases we are asked for relationship calculations, despite the fact that they clearly appear to be needs style.
Tamsin Caine:Yeah, absolutely. You call it relationship rather than marital and I know that that will be for a reason. So are you taking something that's not just the marriage period when we're talking about excluding certain pension accrual?
Richard Nobbs:yeah, we've.
Richard Nobbs:We get asked all sorts of questions as far as in our yeah and it's sometimes it's sort of quite frustrating, but we will get, uh, asked for um calculations based on um, just the marital period, so from from date of marriage up to the date of the report. Sometimes we get asked to add the period of premarital cohabitation if there has been some, so if they've lived together for a number of years before marriage, to include that. Sometimes we get asked to take out the post-separation accrual. So we get asked all of those scenarios. Sometimes they don't agree on when they actually started cohabiting, sometimes they don't agree when they separated. So we can get asked for relationship calculations. So we can get asked for relationship calculations we can be given quite like that. So cohabitation up until the date of the report is now a very common instruction there.
Tamsin Caine:Brilliant. Thank you for that, because I'm sure that that'll be another aspect that gets regularly debated. So what's the situation regarding post-divorce accrual? Are you asked about that? So I have a client. He's in his mid-50s, wife is 10 years younger, so mid-40s. I'm sure you can calculate that on your own. I don't think I needed to do that for you. But they earn relatively similar amounts, but she's obviously going to have let's assume, 20-ish years of being able to accrual pension benefits, and he's going to have 10. So what would the POE do in terms of taking that into consideration? And do they need to take that into consideration, or does that depend on what the solicitor or the court wants them to do?
Richard Nobbs:So. When we carry out a pension sharing report, the pensions are normally based on the pensions built up to the date of the report. It's very rare, very, very rare, for us to allow for pension accrual from the date of the report, from now, shall we say, up until the date that the parties retire because they haven't built those pensions up yet, they haven't earned that income. Will they still remain in a job or remain in that job up until retirement? So it generally isn't taken into account and I suppose it would contravene the sort of principles of a clean break because if you take it one extreme, somebody who's sort of 40 years old, then if we're having to allow for their pension accrual up to retirement, so we could be allowing for another 25 years or plus worth of accrual. So generally not taken into account, we can share it.
Richard Nobbs:But it is rare and I think I've only seen this when the pension holder in your case the husband where the pension holder has been prepared to share more than usual because the parties are very close to retirement within a year, shall we say, and the divorce is amicable. But those are the only cases that I have seen where the parties have been prepared to share future pension accrual. So the example that you gave was where the husband is 10 years older than the wife. Have they been married for a long period? Is this a long marriage or a short marriage?
Tamsin Caine:A long marriage.
Richard Nobbs:Okay, okay, because one of the suggestions I was going to come up with is perhaps ring-fencing some of the pensions. So certainly, if the husband had accrued some of the pension prior to the marriage, then that could be worth considering. Ring fencing, it may be possible to allow for some future accrual. But, as I say, I'd be wary about that, particularly if it's going to court, and I certainly wouldn't recommend doing that without taking legal advice on the matter. But what you've got here is, if the husband is getting very close to retirement but the wife is further away, this could be a needs case. Most of them are and both parties have needs. So yes, the wife does need perhaps extra pension, but on the other hand, the husband will also have their own needs and those needs are, you know, retirement is coming up fast.
Richard Nobbs:So it may be that actually an equality calculation may not be appropriate and we have, on a number of cases, been asked for an unequal split because, you know, just because we are doing pension sharing, the courts are looking for a fair and equitable outcome. They're not necessarily looking for an equal outcome and we've been asked for splits, you know, 70-30, 60-40, as well as 50-50. And that way you can get a table setting out you know what the pensions are going to be, what they're after after that sharing, and the parties can then look at that and say, well, ok, will that meet my needs? And OK, it's based on pensions that have been accrued. And the wife can look at that and say, ok, that's what I'm going to get, based on my accrued pension after sharing. But she may well have to make future pension provision, and if she is 20 years away from retirement she's probably going to have to make future pension provision, and that'll give her an idea as to what provision she needs to make.
Richard Nobbs:So yeah, unequal splits is one way perhaps of looking at it. Another way in which we have been asked is to actually set out a set amount of income. So what is the pension sharing that's required for every £10,000 worth of income for the wife, for example? And so we calculate the pension sharing required for that and we'd also set out what the pension debit is, ie how much the husband's pension is going to be reduced, and you can look at the table there and see whether that is an appropriate level of income, whether they think that that meets his needs If it doesn't, or the figures effectively can be prorated up or down in order to make sure that it does meet his needs or they can use it for negotiating both of their needs.
Richard Nobbs:I've not seen that, but I like that. Yeah, I've seen it quite a few times. We get a of those uh type of cases um every every year, uh, and I can see that it can be very helpful in in that respect yeah, absolutely well, that's it.
Tamsin Caine:That's really interesting. So the other area or the other. The other thing that I wanted to talk about was, obviously, we've mentioned Pag 2, which is the revenge of Pag 1, and an updated version of the original documents. What are the main areas that have been updated in Pag?
Richard Nobbs:I think the main legal area is this discussion around cohabitation and it going into the marriage, particularly talking about short marriages and how you might go on the apportionment side there. So that's a key change. As far as the valuation aspects which is the area that affects me, is mainly concerned, aspects, which is the area that affects me is mainly concerned, there's something called McLeod in the public sector, which has been a bit of a nightmare, it must be said, for most of the public sector pension schemes, in that when the government introduced the new career averaged revalued earnings that they did in a way that was age discriminatory and are now having to unpick that. And so there is a section in Pag2 around McLeod it's in section I and the main thing here is that from the 1st of October 2023, the Public sector pensions are changing the way in which they are implementing pension sharing. So if the last cash equivalent transfer value, the last cash equivalent value, was obtained before October 1st of October 2023, they will calculate pension sharing. They will implement pension sharing in one way. If, on the other hand, the cash equivalent is on or after 1st of October 2023, then they will implement pension sharing in a very different way. So it's really important that the parties and the pension and the PODE the pensions expert understand how McLeod is being implemented. Otherwise you can end up with something that is very different to what the parties and the courts are expecting. It can fundamentally undermine their intentions. So McLeod is really important and I would encourage people to read through the McLeod section of PAG2, and we've actually got a quick summary of it on our website so we might even send a link to that for listeners there.
Richard Nobbs:Then the next area is offsetting, and so there's more discussion there around the approaches that can be used, including the Galbraith table. So one of the poets is called Jonathan Galbraith and he and his colleagues have developed some tables that can be used to provide indicative and illustrative approaches for offsettings, albeit with health warnings, but parties might find those useful for getting some offset values. There's also some more discussion of the tax adjustments that might be used for offsetting. So probably more details, but there's more technical details for more from the POAD user there than instructing solicitors or litigants in persons. The final area is the scrapping of the lifetime allowance. So whilst Pag2 was all being developed, the lifetime allowance was expected to stay, and then Jeremy Hunt announced the scrapping of the lifetime allowance and we had to go through the entire report from start to finish and find out all of the reference to the lifetime allowance and update them. So that is another area that has changed in PAG 2.
Tamsin Caine:Yeah, I think there are lifetime allowance issues. It's going to be a watch, this space bearing in mind. We don't know what's going to happen with the government over the next couple of months, who knows but certainly they've introduced some new and exciting replacement allowances?
Richard Nobbs:well, yeah, and labor have said that they'll reinstate the lifetime allowance, or words to that effect. I can't remember the precise, precise wording, but there may well be some changes in the not too distant future. So, yeah, that could further complicate matters.
Tamsin Caine:Yeah, they did say that. I think if they look at what has actually changed, labour might decide that it's probably not worth reinstating it and they might just stick with what they've got. But we will see. That will be a watch this space one. Once we uh, once we get the new government, we might have to have you back at that point, richard it will be a major.
Richard Nobbs:It will be a major headache if they reintroduce it it.
Tamsin Caine:It's just going to be a. I don't even want to think about it because that will make my life very complicated. What are the differences that the updates to PAG will make it? I mean, this is difficult to say because obviously it's kind of court and case law dependent really on how these differences impact things. But what do you think the differences are likely to be really on how these differences impact things? But what do y ou think the differences are likely to be?
Richard Nobbs:Not massive at the end of the day. You know, pag 2 was really an evolution of PAG 1, the first PAG report. It's not a revolution. So there was some general updating but ultimately the principles didn't change. So what is likely to happen? Yeah, there may be some different relationship periods.
Richard Nobbs:So now, yeah, more cohabitation and marriage rather than marriage calculations, and I think that's largely it. It's actually the things that are behind it that are going to have much more of an impact. So, yes, mcleod itself, the fact that the public sector pension schemes have decided how they are going to implement all of their rectification, that has a major impact on PODA reports and that is still keeping us busy there. One of the things that parties might want to look at is making sure that the pension holder gives undertakings so that they don't go and get a cash equivalent transfer value if that's going to undermine the intentions of the court or the parties. But you've still got to be careful there.
Richard Nobbs:So, for example, I've just had one of the cases that I'm working on doing an update report, doing an update report, and we have just been sent update a January 2024 CETV and the member actually asked for the CETV in March 2023.
Richard Nobbs:It had taken them 10 months to actually provide the CETV. So, you know, even if they'd given an undertaking back, you know if they'd given an undertaking six months ago, it would have been absolutely no use. So it's just a great deal of care needs to be taken. Also, consider going and providing a draft pension sharing order to the pension scheme administrators and saying, nick, can you just confirm that this is how the pension sharing is going to work? I mean, it's best practice, in any event, to send a draft pension sharing order to the pension scheme administrators just to make sure that things don't go wrong. But I would say it's really important in the context of McLeod cases. And yeah, the other area of change obviously is the lifetime allowance, and so, yes, clearly that saves a load of tax for those with large pensions and it will simplify the reports. But that's the change that makes the difference, rather than the updating of PAG. Pag is just reflecting what's happened in reality there.
Tamsin Caine:Perfect, that's fantastic. Thank you for that, richard. Um, I know that it's it feels like a complex and and not altogether exciting subjects, but these things that are really helpful for our listeners and really helpful for some of our list to listeners as well who, uh, who like to uh understand what they're doing when it comes to instructing code reports and using best practice.
Richard Nobbs:So very grateful to you for joining me today you're well, you're, you're welcome, and I think it actually is it. It goes to show, though, that you know, when looking at the letter of instruction, taking um some advice, particularly from an independent financial advisor who knows you know what is actually happening and and gets the reality of it, can end up saving a lot of heartache all around and can help streamline the overall process. So, yeah, I hope it does help.
Tamsin Caine:Absolutely Thank you for that. And yeah, I think you know, even if you've got to pay for an hour of somebody's time to get the right advice, it's probably going to save you a lot more of the actuaries time and a lot more fees from the actuary as well. So I absolutely agree with you on that. Thank you for your time today and thank you for listening, and I hope you'll join us again soon, hi, and I hope you enjoyed that episode of the Smart Divorce Podcast. If you would like to get in touch, please have a look in the show notes for our details or go onto the website, wwwsmartdivorcecouk. Also, if you are listening on Apple Podcasts or on Spotify and you wouldn't mind leaving us a lovely five-star review, that would be fantastic.
Tamsin Caine:I know that lots of our listeners are finding this is incredibly helpful in their journey through separation, divorce and dissolving a civil partnership. Also, if you would like some further support, we do have a facebook group now. It's called separation, divorce and dissolution uk. Please do go on to facebook, search up the group called Separation, divorce and Dissolution UK. Please do go on to Facebook, search up the group and we'd be delighted to have you join us. The one thing I would say is do please answer their membership questions. Okay, have a great day and take care.
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