On top of offering outstanding services in the pensions realm, our next expert witness is often called to assist in pension division and sharing matters. Here to talk Lawyer monthly through his role in this field, discussing the variables in divorce cases, and touching on the legislation that has changed the landscape of pensions law through the years, is Mark Penston, a Chartered Financial Planner at BlueSky Chartered Financial Planners, in the UK.
In your role as an expert witness, what are the primary matters you are instructed to advise on in divorce cases?
Generally we are asked to assist with calculating how existing pension funds should be shared. This might just be a discussion that can help give direction on how to approach a case, or more often, an instruction to produce a pension sharing report to show how the pensions should be divided to produce equal incomes in retirement. Additional information may also be requested, such as how to offset a pension share in lieu of cash or property equity.
What are the particular complexities that arise therein?
Pensions can often be complex, with even apparently straightforward money purchase plans having complexities that are not immediately apparent. Often Defined Benefit pension valuations do not represent the true value of the pension benefits, which means that sharing pensions based on the capital value alone can have some dramatic unintended consequences. Approach with caution!
In divorce cases, to what extent to do you get to engage in the full capacity of your expertise, in financial planning for example?
With larger cases (CE’s in excess of £500k) where we have a good understanding of the respective clients’ financial circumstances, we are able to create solutions to maximise outcomes when sharing assets. It draws on our technical and financial planning skills and also our ability to put solutions in plain English that all parties can understand.
How do you efficiently and fairly advise on the division of pensions and other assets in divorce cases?
Our preference is to be instructed as a single joint expert and work with the instructing parties to produce clear and relevant instructions (conversely, we dislike ‘standard’ letters of instruction asking multiple questions to ‘cover all bases’ that are likely to result in pension sharing reports with too many irrelevant results!). It’s worth spending time getting the instructions relevant and focused.
Once instructed, we have an efficient process of collating and checking the required data and good turnaround times in getting reports produced.
What would you say has been the milestone legislative change that has impacted your work in this legal segment over the past 20 years?
The introduction of pension sharing legislation nearly 17 years ago triggered a number of initial enquiries. We became involved in this business because we had a depth of pensions experience and expertise and it fitted well with our client profile. Good work gets recognized and we’ve therefore increased our involvement in this specialist field as a consequence.
The most recent changes in pension legislation have introduced flexibilities that allow more creativity in how pensions can now be shared.
If you could see any UK pension laws changed, especially following Brexit, where would you start?
Pensions legislation keeps changing and in part I think it undermines people’s confidence in them. Pensions should be long term / stable products that aren’t constantly being ‘tweaked’.
Having said that, there are some anomalies in the current legislation. For example, why is there a cap on what you can put into a pension AND a cap on the maximum fund size you can have without punitive tax consequences? This can restrict the ability for someone to rebuild a pension when they have lost a large chunk of it through pension sharing.
I think Brexit is more likely to change the economy dynamics rather than pension laws. Pensions flexibility and portability into Europe never happened, so Brexit is unlikely to change much there!
Overall, what would you say makes you the go to expert witness for pensions law in the UK?
Being financial planners, we can offer creative solutions with both the division of pensions and other finances.
Our success as a business with our financial planning clients has come from our ability to convey complex solutions to clients in an easily understood format. I believe our reports are much easier to understand than many actuarial reports, perhaps evidenced by the number of actuarial reports we are asked to interpret and make relevant to the client!
We have worked hard over many years to hone our processes to enable us to offer an accurate and timely service, despite the many challenges that pension trustees often present us with!
