The £80 Actuarial Report should only be used where the pension is a Defined Benefit (final salary) pension scheme. It uses an Express Pension Valuation (EPV) online system to get an appropriate value of a pension up to 30% more than the CETV, to help a suitable divorce settlement, or to justify that the cost of a Pension Audit is proportionate.
When is it suitable
It can be used for the following types of schemes:
||Pension schemes for public service employees
||Most private sector defined benefit (final salary)
It is appropriate to use in the following circumstances:
1) When Form E's are exchanged
It is important to check the information from the other party is complete and accurate. The CETV undervalues defined benefit (final salary) pensions and an appropriate valuation should be obtained to understand the true financial position.
2) When determining settlement options
In ancillary relief cases when determining which option of offsetting, attachment or pension sharing should be used, it is better to work with appropriate valuations rather than inappropriate CETVs.
3) Collaborative proceedings
Where the parties are working together to resolve their financial matters the
£80 Actuarial Report provides a cheap and appropriate valuation of pensions that can be sufficient for their purposes. However, when dealing with pensions of significant value a Pension Audit is recommended.
When is it not suitable
It is not appropriate to use in the following circumstances:
1) To value a Uniformed Services pension
The police, fire & rescue, armed forces and prison service pensions require specific valuation criteria and so are not suitable to use this report. Alternatively you should use the £100 Uniformed Services Report that applies a different calculation where an appropriate valuation of 3 times the CETV value is not uncommon.
2) To value a defined contribution (money purchase) pension
A fund valuation is sufficient. The CETV
normally gives this though sometimes early surrender penalties, market value adjustments or the existence of valuable guaranteed annuity rates mean that the CETV is less than the fund value.
3) To value a Small Self Administered Scheme pensions
These SSAS schemes are for small groups of employees who usually have greater control over their pension benefits. A share of fund basis may be more appropriate than valuing the defined benefits, requiring a Pension Audit.
4) To value the State Second Pension
The State Second
Pension is defined by historic contributions and the equivalence of a CETV obtained from the DSS using Form BR20, or by a Pension Audit.
5) To value "average salary" defined benefit pensions
Some defined benefit schemes have benefits formulae unsuited to simple valuation. The main example is where the pension is set as a proportion of the average salary of the member throughout their scheme membership. In this case an Pension Audit is required.
6) Where the pensionholder is in ill-health
The Actuarial Report assumes an average life expectancy. If the pensionholder is in ill-health then a longevity assessment and Pension Audit is required.
7) When the pensions(s) are ring-fenced and shared equally
There is no need for a valuation in these cases and a Pension Audit should be obtained to ensure true equivalence of value to both parties. However, ring-fencing pensions will rarely be an optimal solution and full or partial offsetting alternatives should be considered, for which the £80 Actuarial Report or Uniformed Services Report can be appropriate.
8) For cases outside of the UK
The EPV is designed specifically to value UK pension schemes in UK divorces and dissolutions. It is not suitable if the pension is not a UK occupational pension scheme, or the divorce or dissolution is outside the UK.