I would have been able to provide more assistance if I had been involved at an earlier stage. Different schemes deal with pension shares in different ways, some of which may not be appropriate for you. New pension forms will soon be available which will make it important that advice is sort before finalising the divorce.The law creating pension sharing permits schemes to deal with pension shares in one of three ways. They can insist that your pension credit remains in their scheme or must be moved out. Alternatively, they may leave the decision to you. The pension miselling scandal occurred when insurance salesman transferred people’s pensions away from good final-salary schemes into the riskier area of personal pensions. The pension sharing legislation has actually legitimised this process. An example of this is the BT pension scheme. The BT pension scheme insists that your pension credit is transferred out to an arrangement of your own. I understand that you have no pension arrangements at present, which means that your benefit will need to be transferred to a personal pension. The advantage of this is that you will have access to the fund at any time from age 50. From next April, under new legislation, a quarter of the fund will be available as a tax-free cash payment while the remainder of the money must be used to provide income. By being forced to move out of the BT scheme, you are losing out on the guaran- teed benefits normally associated with such a good final-salary pension scheme. The police pension scheme, being a public-sector, unfunded, contracted-out occupational scheme, deals with matters in the opposite way. Like all public-sector schemes, it insists that your pension credit remains with it. You have no choice in the matter. The good news is that you will have a benefit in this scheme which is similar to but not the same as your former husband’s, with all the guarantees and statutory inflation-linking. Unfortunately, you will have no flexibility as benefits will only be available to you when you reach age 60, regardless of when your former husband retires. If this suits your circumstances, this is very good, due to the excellent benefits provided by this scheme. But you have to accept that you cannot have access to any benefits from this scheme until age 60. The local authority scheme deals with your pension credit by leaving the choice up to you. You can choose now or in the future to transfer your pension credit into a personal arrangement or leave it as a benefit in the local authority scheme. In most circumstances, you would be best served by leaving your pension credit within the local authority scheme. If access to benefits is required earlier than the normal retirement date, you will have to give up the guarantees offered to you at age 60 in exchange for a transfer out to the unknown benefits available under an individual arrangement. As you can see, you have no choice with the BT and police force schemes, being required to transfer your credit out of the BT scheme but leave it in the police force scheme. With the local authority scheme, the decision is left up to you. We will have to set up a new pension scheme to accept at least the BT pension arrangement and here the decision is going to relate mostly to the investment area in which you would like your pension credit placed. If you wish no involvement in the investment of your monies and are happy to take a relatively neutral position, then a low-cost stakeholder pension, like Axa Sun Life, could well be the best option. However, if you wish to become involved in the investment of your money or let others invest your money in more adventurous ways, then multi-manager pensions, such as offered by Skandia, or self-invested personal pensions, as offered by the Sipp Centre, might be suitable. Unfortunately, at present, we cannot place contracted-out monies in self-invested personal pensions and, under current legislation, these will be required to remain in an insurance policy.
Whenever there is extensive pension transfer activity, the “c” word will inevitably be mentioned sooner or later and debate can quickly become emotive and personalised. But it is helpful to have informed discussion about which transfers are appropriate and which could be construed as churning.
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