The instructions in the previous sections of this guidance should be sufficient for the majority of divorce calculations. However, there may be some cases that need different treatment, as described below. If other cases arise which are not covered by this guidance, these should be referred to GAD.
These should be valued as though they were pensioners.
Pensioner cash equivalent (not ill health) =
(Current Member's Pension x Factor DIV1A)
+ (Survivor Pension payable on the death of the member x Factor DIV1B)
- [(Annual Pre 88 GMP*/** + 0.15 x Annual Post 88 GMP*/**) x Factor DIV1C]
* If any GMP liability has been transferred into the scheme.
** Annual Pre 88 GMP and Annual Post 88 GMP should be set to zero for members who reach State Pension age on or after 6 April 2016
Points to note in using the factors:
- The appropriate factors should be taken from table DIV1 for the member's age last birthday at date of calculation. The appropriate factor for Factor DIV1C will also depend on the sex of the member.
- Current member's pension should include uplift for late retirement (where relevant) using the appropriate factor from table LRF1 based on age at date of calculation.
- If the member's pension is due to be reduced because an allocation option was taken out, then the benefits after allocation should be used i.e. reduced member's pension and increased dependant's pension (including subsequent pension increases). If allocation has been made to someone other than the partner, please refer to GAD.
- Where GMP amounts are required to be used in the calculations, they should be revalued/increased to the calculation date
- Where a member could obtain a lump sum by commuting pension it should be assumed that the member does not exercise their option to commute pension for the purpose of determining the Current Pension.
- Where a member has contributed to an Early Retirement Reduction Buy-Out (ERRBO) contract and has some entitlement which is only payable subject to actuarial reduction the cash equivalent for that part of their entitlement should be determined in the normal way as for a non-Club transfer. The portion of their entitlement which is not subject to reduction should be valued in accordance with this section.
There may be additional information requirements and considerations required where members have previously elected for Scheme Pays. In general the determination of cash equivalents in respect of benefits yet to be put into payment should take Scheme Pays debits into account.
Where a member has one or more pension debits (either in respect of a previous divorce or one or more annual allowance tax charges), the cash equivalent should be calculated in two stages.
- The gross cash equivalent should be calculated ignoring all pension debits.
- The value of each pension debit (revalued to the calculation date) should be calculated as the cash equivalent of a deferred pension of the same amount as the debit.
The final cash equivalent to be used for divorce purposes is the gross cash equivalent calculated in stage one, less the value of all pension debits calculated in stage two.
Where a member has taken some benefits through drawdown, the cash equivalent should be calculated in two parts: 1) a pensioner cash equivalent for the amount of pension in payment following the guidance as in Calculation of cash equivalents: Members already in receipt of benefits and 2) a cash equivalent for the remainder of the benefits following the guidance in Calculation of cash equivalents: Contributing Members and Deferred Pensioners not entitled to an immediate pension without actuarial reduction.
In applying the pension debits to the member, the pension already in payment would be reduced from the date of the order. The debit applying to the remainder of the benefits would be applied when the member takes their remaining pension.
If the pension sharing order had been made prior to the member claiming their pension and the member takes partial retirement, only a percentage of the pension debit would be applied at the date of partial retirement, equal to the partial proportion taken.
