When faced with a legal problem we all want it resolved as soon as possible. Achieving this may depend on who we engage to help us. If professional advisors do not have sufficient and up to date knowledge of all the areas of law that influence a particular matter, one problem may evolve into several others. Complete advice will solve problems and provide satisfactory results for clients.
Pensions are an area that is always changing. Understanding these developments is not only relevant at retirement but must also be considered at other significant moments such as making financial investments, changing employment or divorce. Decisions taken without all the relevant knowledge of the type of pension scheme or the applicable law, may result in things going wrong, and ultimately less money than expected being received on retirement.
Our dispute resolution team was asked by a client to help him with such a problem: his ex-wife had received a substantially higher pay out from his public-sector pension scheme than had been agreed in their divorce settlement. She refused to return the money. This had a long-term effect on the value of his pension and his own financial security.
Our investigations revealed that the financial settlement agreed to on divorce included a Pension Sharing Order entitling our client's ex-wife to be paid one third of the cash equivalent transfer value (CETV) of his public sector pension at a specified date, and a lump sum in lieu of her share of the gratuity element of our client's pension – the latter to be paid out of the proceeds of the sale of the matrimonial home. The client understood that this settlement meant that his ex-wife would have no further claim on his pension.
There was a delay in the pension scheme giving effect to the order. When it finally made payment, it incorrectly calculated the CETV at the date of payment and in addition it paid out a further one third of the gratuity element of our client's pension. These unintended payments accounted for our client's ex-wife receiving significantly more money than had been agreed.
With our intervention the pension scheme acknowledged its calculation error and took steps to recover this amount and reinstate our client's pension to the correct value. But it could not recall the payment of one third of the gratuity element of the pension. Public sector pension schemes are not regarded as two separate pots of money which may be treated differently. Therefore, to give effect to the Pension Sharing Order, one third of complete pension pot had to be paid to our client's ex-wife. This should have been explained to our client by his advisors at the time of his divorce so that he had a proper understanding of how a public sector pension scheme works. They should also have ensured that his financial position was properly protected and that the pension sharing order was properly implemented.
As a result of this negligence our client's ex-wife had double recovered: both the lump sum agreed and an additional payment from the pension scheme. We successfully recovered this additional amount from the solicitors who represented our client during his divorce.
While public and private sector pensions have many similarities it is important that advisors also understand their differences, particularly as these may apply to pension sharing orders. Earlier this year changes were announced to the calculation of CETV for public sector pensions. This affected the settlement agreements of all divorcing couples at that time where at least one of them was employed in the public sector. Advisors who ordinarily deal with private sector pensions may not have been aware of this change.
What should you do if you have not received correct advice about matters that affect your pension? As litigation specialists we successfully assist clients, not only because we are skilled at dispute resolution, but also because we are able to draw on the specific experience of others in our firm – such as matrimonial and pension solicitors. This enables us to pursue the most appropriate corrective actions, and to help you successfully recover all amounts to which you are entitled.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
