Announcement from Peter Moore- Managing Director BDM Actuaries

Recalculation of CEVs for Divorce purposes

As a consequence of George Osborne’s Budget it has been announced that the actuarial calculation basis for the Public Sector Pension Schemes is to change with effect from 16 March 2016. At least one scheme has decided that no further CEV quotes should be provided using the current calculation factors and it is likely that the others will do likewise. Effectively this means that production of CEVs will be suspended until schemes receive revised calculation factors from the Government Actuaries Department (GAD).

Many will remember that something similar occurred the last time the calculation basis changed and there was a hiatus of weeks and in some cases months waiting for the revised factors. Pension sharing credit and debit factors and others used for pension sharing calculations will also be revised. As the change is effective from 16 March 2016 it also means where a pension sharing order is made or has been made and the valuation date for implementing the order is on or after 16 March 2016 the CEV must be calculated on the revised basis and revised factors used in calculating the pension credit. This will inevitably mean that in some cases the CEV applicable when pension sharing order is implemented will be calculated on a different basis to that when the order was made.

HM Treasury has notified Government departments about the procedure to be followed for divorce and dissolution cases where a CEV has been issued but the final determination has not yet been made (pension sharing order?). In short, to avoid potential maladministration claims schemes they have been told to notify the court of the change where it might be in a position to take into account the new valuations and also to provide revised valuations.

At BDM we have established a project group and have prioritised research into the potential implications of the calculation basis revisions. As developments unfold we will contact clients for whom we have produced or are in the process of producing reports involving public sector pensions and also post further comments on our LinkedIn Pension on Divorce Forum.