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When couples go through a divorce, the financial settlement can be one of the most complex aspects to resolve. Among the various assets to be considered, pensions often hold significant value and require careful evaluation to ensure a fair division. This is where a Pension on Divorce Expert (PODE) comes into play.

What is a Pension on Divorce Expert (PODE)?

A PODE is a specialist who provides an independent analysis of pension benefits and their potential division during divorce proceedings. Given the complexity of pension legislation, regulations, and valuation methods, a PODE assesses these factors to guide an equitable settlement. Their role is crucial in ensuring that both parties receive a fair share of the pension benefit and that pensions are properly and appropriately valued.

Why is a PODE Essential in Divorce Proceedings?

Dividing pensions on divorce is not straightforward. Unlike liquid assets such as savings or property, pensions have various scheme rules, tax implications, and future benefits that must be considered. Appointing a PODE ensures that the division is calculated based on fair and informed assumptions, preventing any party from being unfairly disadvantaged in any way.

PODEs provide expert reports that help legal advisers and the court understand the implications of pension sharing. However, it is important to note that while a PODE can calculate and suggest an appropriate division, they do not provide financial advice to either party. For that, individuals will need independent financial advisers.

What Does a PODE Report Include?

A PODE will assess various pension schemes, including defined benefit (final salary) and defined contribution pensions. Their reports typically include:

  • Valuation of pension assets – determining their worth in the context of divorce.
  • Tax implications – assessing how different settlement structures may impact each party financially.
  • Pension sharing orders vs. offsetting options – helping divorcing individuals understand their choices.
  • Lifetime Allowance and Annual Allowance considerations – ensuring no unexpected tax liabilities arise from pension division.
  • Impact of pension age and early retirement factors – taking into account when and how pensions can be accessed.
  • Indexation and inflation considerations – ensuring the long-term value of pensions is properly accounted for.
  • Comparing valuations – Pensions have Cash Equivalent Transfer Values (CETV`s) but crucially one pension with a CETV of £100,000 (for example) may be quite different in terms of benefits to another pension worth £100,000.
  • Apportionment – Pensions that have accrued outside the relationship may be relevant to take into account and set apart from pension accruals inside the relationship period. This is a complex calculation but can be relevant issue in some cases.

Qualifications and Regulations

Interestingly, there is no single qualification or professional body governing PODEs. Instead, experts in this field come from a range of financial and actuarial backgrounds. The Pension Advisory Group (PAG) has established guidance—most recently updated in December 2023 (PAG2)—which provides best practices for PODEs when conducting pension calculations and producing reports.

While some believe that only actuaries can perform these calculations, many experienced financial professionals with a deep understanding of actuarial principles and pension structures are equally capable. PODEs often use specialised tools, to ensure accuracy in their assessments.

Independent and Impartial Reporting

A PODE acts as an independent expert, reporting directly to the court. Their responsibility is to provide a neutral assessment of pension values and division scenarios, rather than to advocate for either party. This impartiality ensures that both spouses / the Court receive an objective evaluation of how pension benefits could be divided in various scenarios.

If financial advice is needed beyond the report’s scope, divorcing parties may choose to appoint their own independent financial advisers.

Experience and Expertise

Most PODEs have extensive backgrounds in financial services, particularly in pensions. Many have worked in roles such as pension trustees, technical specialists, compliance officers, or consultants before specialising in pension division during divorce. The best experts continuously update their knowledge and skills to remain at the forefront of pension regulations and best practices.

How to Find the Right PODE

When selecting a Pension on Divorce Expert, it is crucial to look for:

  • Proven experience in pension calculations and divorce settlements.
  • A thorough understanding of the latest PAG guidance.
  • Impartiality and court-recognised expertise.
  • Clear, comprehensive reporting skills that aid legal proceedings.
  • Knowledge of various pension schemes including public sector pensions, defined benefit and defined contribution schemes.
  • Ability to explain complex pension calculations in a clear and understandable manner.

Common Pension Division Methods in Divorce

There are several ways in which pensions can be divided as part of a divorce settlement:

  1. Pension Sharing Orders – A court order specifying a percentage of one spouse’s pension that must be transferred to the other. This is a clean break solution that allows each party to have their own pension pot going forward.
  2. Pension Offsetting – Instead of dividing the pension, its value is offset against other assets. For example, one spouse may keep the pension while the other takes a larger share of property or other financial assets.
  3. Pension Attachment Orders (Earmarking Orders) – A portion of one spouse’s pension is paid to the other when they start drawing pension benefits. However, this method has drawbacks as payments cease upon remarriage or death of the pension holder. This method is extremely rare.

Each of these options has different tax implications, benefits, and risks, which a PODE can help to analyse.

What Happens If Pensions Are Overlooked?

Failing to properly assess pensions during a divorce can have significant financial repercussions. Since pensions are often one of the largest assets in a marriage, ignoring them can lead to an unfair settlement. Many individuals assume that pensions should be divided equally, but due to factors such as tax treatment, retirement age, and benefit structures, a 50/50 split may not always be fair. This is why a PODE’s expertise is crucial.

Final Thoughts

A Pension on Divorce Expert (PODE) is a vital resource in ensuring that pension benefits are fairly divided in divorce settlements. Their expertise in calculations, legal requirements, and financial projections ensures that both parties reach a well-informed agreement. If you are navigating a divorce and need assistance with pension division, consulting a qualified PODE can provide clarity and confidence in securing a fair financial future.