Case study
How the same two pensions, in the same report, produced opposite answers, and why the fair one was neither party's first guess.
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General information, not advice on your own case.
Based on a real case. The details have been anonymised and some figures rounded, so that no one involved can be identified.
A husband and wife in their fifties, divorcing after a marriage of around fifteen years. He had a large private-sector final-salary pension, but almost all of it was built up before they met. She had been steadily building a public-sector pension throughout the marriage. He was the older of the two and the lower earner, and he needed his pension to provide his own retirement income.
He has the far bigger pension, so he should share a chunk of it with her. The expert's report duly led with a figure: to equalise the value of their pensions, he should transfer about 43% of his pension across to her.
The same report, read past the headline, contained the opposite answer. A pension built up before a marriage is treated very differently from one built up during it, and here the two histories were mirror images: almost all of his pension predated the marriage, while almost all of hers was earned inside it. So which spouse was the "richer" depended entirely on what you chose to count. Count everything, and he was far ahead, so he paid her. Count only what each had actually built during the marriage, and she was ahead, so she paid him. The direction of the transfer reversed.
And even the "equalise the value" answer flattered to deceive: a pound of his pension and a pound of hers did not buy the same retirement income. Equalising the cash value would have left him, the older and lower-earning one, on little more than half her income.
On one basis, he owed her 43% of his pension. On another, she owed him. Same two pensions, same couple, same report.
Taken at face value, the 43% headline would have stripped the older, lower-earning spouse of nearly half a pension he had built almost entirely before the marriage, and still left him on little more than half his ex-wife's retirement income. On the basis that actually fitted the case, the fair transfer shrank towards nothing, or ran the other way. "Equal", taken from the front page, would have been badly unfair.
"Equal" is not a single number. It changes with what you count, the whole pension or only the part built during the marriage, and with what you equalise, the cash value or the retirement income. Those choices can even decide who pays whom. A transfer value on a statement tells you none of it.
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