Thousands of divorcing couples could be affected by chaos and delays in the family courts due to lingering uncertainty over the details of chancellor George Osborne’s changes to pension schemes
In the emergency budget, in June, the Chancellor announced a major change to the way the value of a pensions fund is calculated—that benefits from public sector pension schemes would increase in line with the CPI inflation index rather than the RPI inflation index.
According to family law firm Manches LLP, however, HM Revenue and Customs is yet to publish any detailed guidance either on the reform to public sector pensions or the extent to which private sector pension schemes may be expected to follow suit.
This means couples going through a divorce are unable to have their pension funds valued. The courts often ask for a snapshot valuation (known as a CETV) of each party’s pension fund so they can calculate the couple’s assets and decide whether to make a pension sharing order.
Manches LLP say the uncertainty “could potentially affect thousands of divorcing couples”, such as:
a couple negotiating an out-of-court amicable settlement, who must wait for confirmation of CETVs in order to negotiate terms; and
a couple with an imminent court hearing where confirmation of CETVs is required, who will need to have their hearing adjourned until guidance has been issued.
Joanne Edwards, a partner at Manches, says: “The family court system is already stretched to breaking point and is braced for further cuts.
“A lack of joined-up thinking now risks putting it under greater strain.”
Dani Glover, a pensions expert at Smith & Williamson, says: “Historically the CPI measure of inflation has tended to be lower than the RPI level of inflation.
“CETVs are likely to drop for members of public sector schemes as a consequence of the proposed changes. As a consequence of this announcement, most public sector schemes have suspended the quotation of CETVs and some have suspended the implementation of pension sharing orders.”
Guidance from HMRC could take up to three months to be provided, Glover said.
