Tamsin speaks to actuary and head of Mathieson Consulting, Jonathan Galbraith about the complications of uniformed pensions and dividing them on divorce. If you or your spouse have this type of pension, this is an essential listen!
Jonathan Galbraith
Jonathan Galbraith is the CEO of Mathieson Consulting and Pensions on Divorce Expert (PODE) with around 8 years of experience. He is the creator of the Galbraith Tables, intended for use in placing a broad value on DB pension rights in divorce settlements. He is also the co-author of Pensions on Divorce: A Practitioner's Handbook, 4th Ed, alongside HHJ Hess, Rhys Taylor and Joe Rainer.
More info here:
Website: https://mcact.co.uk/
Tamsin Caine
Tamsin is a Chartered Financial Planner with over 20 years experience. She works with couples and individuals who are at the end of a relationship and want agree how to divide their assets FAIRLY without a fight.
You can contact Tamsin at tamsin@smartdivorce.co.uk or arrange a free initial meeting using https://bit.ly/SmDiv15min. She is also part of the team running Facebook group Separation, Divorce and Dissolution UK
Tamsin Caine MSc., FPFS
Chartered Financial Planner
Smart Divorce Ltd
P.S. I am the co-author of “My Divorce Handbook – It’s What You Do Next That Counts”, written by divorce specialists and lawyers writing about their area of expertise to help walk you through the divorce process. You can buy it by scanning the QR code…
Transcript
(The transcript has been created by an AI, apologies for any mistakes)
Tamsin Caine:
Hello and welcome to the Smart Divorce Podcast. I am really happy to be joined today by the very famous Jonathan Galbraith. Now, on this podcast, I don't think I've ever been joined by anybody who has actual tables named after them. So I'm very honoured that he was happy to come and take part today. So for anybody who hasn't heard of Jonathan before, and if you work in the family law world, you absolutely will have done. But if you haven't, he is the CEO of Mathieson Consulting, which are an actuarial firm set up by George Mathieson, very, very, very well known in our world. If you are needing a pod report, no doubt whatsoever that somebody will have suggested that you go to them. He is also the creator of the Galb raith Tables, which I'm sure we'll come up later on in our conversation. They are intended for using to give an idea, sort of broad brush approach to a DB or defined benefit pension rights. He's also the co-author of the Pensions on Divorce Bible, a practitioner's handbook, the fourth edition, alongside three other eminent authors. We're going to talk today about complex public sector pensions. Don't turn off. This is really important. I know it sounds complicated. We're going to try and help you to understand why you need somebody clever like Jonathan to help you if you have a divorce where any of these types of pensions are involved. So we're going to start off talking about uniformed services. So if you are divorcing somebody who is in the armed forces, in the police, is a firefighter, please, please, please keep listening. If in fact you are divorcing anybody who has a defined benefit pension of any description whatsoever, please, please, please keep listening. And also, if you have a partner or a spouse you are separating from or divorcing, who has a defined benefit pension, please do not listen when they say, do not touch my pensions. Your pensions are part of your marital assets and they need to be considered as part of the divorce settlement. Jonathan is nodding away. Absolutely. Marvellous. Welcome, Jonathan. Thank you for joining me.
Jonathan Galbraith:
Thank you, Tamsin. Absolute pleasure to be with you today. And thanks very much for inviting me onto your podcast.
Tamsin Caine:
I'm delighted and uh and slightly overwhelmed to be in uh in the presence of uh of such a famous person in our uh in our in our world. We're gonna talk about uniform services mainly today, but I have a feeling that we're also gonna touch on some aspects of some of the other um define benefit pensions. Um so it's gonna be worth listening to, whatever the situation. So, in terms of the schemes that we're we're generally going to talk about today, can you just give us a bit of an overview and what makes these pensions special?
Jonathan Galbraith:
Certainly, absolutely delighted to do so. Um, yes, so really thinking here about the armed forces pension scheme, uh, the police pension scheme and the firefighters pension scheme. So, all defined benefit public sector uh pension schemes, anything that comes with a uniform in the job, and what they all have in common is they tend to have preferential early retirement terms compared to the other public sector schemes, for example, the NHS scheme or the civil service scheme or the local government scheme. And these are very much um cases, pension on divorce cases where such pensions are involved, these are very much the ones where the uh the the report of the pensions advisory group, which of course you and I both sat on, the the reformed PAG, uh the PAG two report does indeed suggest that code input, the input of a pension and divorce expert is likely to be required where those pensions exist.
Tamsin Caine:
Absolutely. And I mean, let's be clear, if you if there are any defined benefit pension schemes within a divorce, I think PAG would would generally suggest that that a pensions on divorce expert report would be pretty necessary. And I think when it comes to these uniformed pension schemes, I would say that they're largely quite tricky to understand. And um and that's why we need an expert like yourself involved at this point. So what are the generous early retirement terms like? What does what does it mean? I mean, early retirement sounds pretty straightforward to me. They can stop work and take their pension benefits early. And presumably we're meaning earlier than 55, which is the sort of normal earliest.
Jonathan Galbraith:
Exactly. Yes. Yes, it's the fact that um usually when one seeks to retire early from a pension scheme, you have to take a bit of a haircut to do so. So the pension's payable at 60, you want to retire at 55. If you're not on grounds of ill health, you will suffer a reduction in your pension for going early, because it's more expensive to provide a pension from a younger age. Um, but what these uniform services uh schemes have is generous early retirement terms, where if certain service-related criteria are met, you can then retire on pension, on full pension without it being reduced. Um, I mean, the the terms they differ from scheme to scheme, and it does depend when the individual joined, but the the legacy schemes, the the older ones, are especially generous. So by that I mean for joiners before 2005 or 2006, what's known as the police 1987 scheme, the firefighters 1992 scheme, and the armed forces 1975 scheme. Um, the police and the firefighter schemes, they will allow active members to retire at age 50 as long as they've got 25 years of service, or at age at any age with 30 years of service. So, for example, if you join the police at 18, you spend six months at Hendon, then you actually properly join the police at 18 and a half. You can actually then retire after 30 years of service at age 48 and a half and become a pensioner. And that's quite a bit younger than retiring at 60, at 65, or at 67.
Tamsin Caine:
Wish somebody had told me to join the police. That might be a great idea. I could be feet up somewhere by now, that'd be amazing.
Jonathan Galbraith:
Indeed.
Tamsin Caine:
So that that's quite that's quite a difference to the minimum age of 55. What does that mean? Because those those are some of the older schemes. I mean, you mentioned the armed forces 1975, was it? Yes, that's right. Are there different rules for more recent schemes?
Jonathan Galbraith:
Yes, there are. So the the previous Labour government did change the schemes around about 2005-2006. So there's a police 2006, firefighters 2006, and armed forces 2005 scheme. Uh, those schemes uh will allow active members to retire at age 55 rather than normal retirement age of 65. And then there are even newer 2015 schemes, um, which will allow typically allow active members to retire at age 60. Whereas if you are not an active member, uh you you have to wait to state pension age, which might well be 67 or indeed 68 before you can retire. So um the the the the under retirement terms still exist, but they're not quite as generous as they used to be.
Tamsin Caine:
They've got yeah, they've got they've got less less good. So you might not want to run off and join the police now if you're uh if you're 18 for the uh for those, but then if the but then who knows?
Jonathan Galbraith:
I think that's the I think that the point there is that uh that they recognise that generally people are not becoming properly pensioners at 48, that most people will be doing something else. And the argument is yes, we will give you a generous pension, but if you're going to have another career afterwards, we'll give you the generous pension from a more normal retirement age that is maybe 60 or rather rather than around about 50.
Tamsin Caine:
That sounds pretty reasonable. My uh painter and decorator uh used to be a firefighter, so that's probably proof in the pudding, isn't it? Exactly. There you go. What about these schemes causes so many problems when we're looking at divorce?
Jonathan Galbraith:
Gotcha. Well, it's a number of things, really. I mean, first thing to say is that any any pension that's being shared comes with a cash equivalent value. So this is a valuation of the pension rights that's uh produced by the scheme. And we we we pose, we pension divorce experts, we need to know that figure to then perform calculations uh to determine how the pension can be shared with the ex-spouse. Um, and the thing that's interesting about this is the fact that the when the member becomes entitled to an immediate pension, that can just, if you like, creep up. So police, police member, police 1987 uh member reaches age 50, then all of a sudden that pension is deemed payable now rather than at 65. And this greatly increases the value of the benefits. Would you rather have a 20,000 pounds per annum pension starting now or one starting at 50, um, having the same pension starting 10 years earlier? And uh that is reflected within the cash equivalent value, because it will then jump up overnight, if you like. And the thing that's interesting there about the timing is if you were to share that pension before the member reaches the entitlement to have it payable immediately, it then means that the ex-spouse is going to get less, and the the holder of the pension will then bank all the gains associated with the with that afterwards. So I really do think that solicitors and and people getting the votes really do need to be savvy to this. And I think um the the other thing to note is that the arithmetic associated with sharing these pensions with the ex-spouse becomes quite a bit more complicated when the member is able to retire immediately but isn't going to. So, for example, someone's in the army, he's got a commission of another uh three or four years or something like that. So, you know, barring something happening, he's going to be in the scheme for another three or four years, but theoretically can take the pension immediately. So, when when we're writing reports with uh with these pensions, we really do need to understand what what is the individual's actual plans for the future. Should we assume immediate retirement? Should we assume state pension age, or is it 60 or is it 65? And we do need something of a realistic uh steer there. And I think that the other point that's important to note is that these generous early retirement provisions are not extended to the ex-spouse. So the terms very much differ from scheme to scheme. Um, but the the old police scheme will insist that the ex-spouse can only retire at 60, uh, or or if the member's older than the ex-pouse is older than 60, then immediately uh can't go early, can't go late. Uh the other ones, the armed forces one, for example, will um permit uh normally it will assume that the ex-spouse takes the pension at 65 or at state pension age, um, but will permit early retirement on reduced terms only. So that that makes it quite difficult, really. How can we seek to equalize pension incomes and retirement? How is it fair if husband can retire at 52c and wife cannot retire to 65?
Tamsin Caine:
Yeah, I I recall some uh toing and froing about this. Yes. I'm sure it was called a pension income gap, I feel like it was referred to um when we were when we were in um in Pag, and how how that might be uh how how we might look to equalise that or how we might look to cover that or bridge that gap. How do as a pod, how how on earth do you go about dealing with that pension income gap?
Jonathan Galbraith:
Gotcha. Well, we we can't always, but certainly we do seek to explain the issue and suggest, excuse me, things that might be done to uh mitigate this. So um when we're writing reports at Maths Consulting, we will always draw this to the solicitor's attention, both at instruction stage and also when we're actually writing the report. And what we will tend to do is to place a value on the rights that the scheme member, the husband, in the example I just gave, would receive before reaching the common retirement age. So for example, it might be 10,000 pounds a year of pension that he's receiving from 52 to 65, which is the point at which wife can take her pension. And at a very simple level, 10,000 pounds for 13 years is £130,000. What we do is going what we're going to do is a bit more sophisticated than that. We'll think about tax, we'll think about probability of survival. But you know, in broad terms, we're going to give you a pound note number and say that the calculation that we've performed does not allow for this. You will have to think about whether you're going to allow for this somewhere else in the settlement.
Tamsin Caine:
Okay.
Jonathan Galbraith:
And uh, I think, I mean, you're quite right. That this was covered off in PAG as an income gap. And you know, there is another way to look at it, which is to say that if we share husband's pension now, he'll suffer an immediate reduction in his pension, but wife won't receive anything for years to come. And so the actual pension benefits payable in the interim period are reduced. Now, there are there are ways around this. For example, you could seek to settle pensions matters at a later date when wife is able to take the benefits to be awarded to her, but there's a huge number of risks associated with this, and almost all of those are borne by the ex-pouse, by wife in this example. What happens if husband dies in the interim period? She's not then entitled to any pension share at all. She's not entitled to the spouse's benefits because once the decree absolute of the final order has been has been given, she's no longer a legal spouse. Um, what happens if husband remarries and then seeks to get divorced again in that interim period? A bit messy, um, but there is an argument that a second claim could be made over his pension. So it can be done. You can look at ways of deferring this, but it's it's gonna be one party that will suffer more than the other one uh if this goes wrong.
Tamsin Caine:
Wow. I mean, that's a whole lot of uh a whole lot of risk. So just going back to this, because this is complicated. What you were saying when we started talking about the issues about the cash equivalent value is that the cash equivalent value suddenly gets much more valuable on entitlement. Could you just give me some? I I can't get my head around why that would be.
Jonathan Galbraith:
It's well to to explain that one, excuse me, it's the fact that the pension is valued by the scheme, excuse me, based on when it can be taken. So if the member's not entitled to receive the immediate pension, suppose there's an accrued pension there of £20,000 a year, and that's payable at age 65, and the member is currently just shy of 50. That that is valued as a pension payable at age 65. And um, I I can't come up with the immediate figure, but let's just say that that that's worth £250,000.
Tamsin Caine:
Then all of a sudden those Galbraith tables, John.
Jonathan Galbraith:
I I could look up you put me in the spot now. Um, but if the the pension then becomes payable immediately at age 50, the CV might it might well double or something not far off doubling, it might then become £450,000 because we're now valuing a pension that's payable immediately from now 50, not from not 15 years deferred. Now, would it make sense to wait for that point to come? Um, it certainly would for the recipients of the pension. It would be in in wife an example that I gave there. Um, it it depends though. Um, supposing that point's going to be attained in 10 years' time, I don't think we'd really suggest that a divorcing couple are going to wait 10 years for this to be for this entitlement to be received. And again, for whatever reason, the member might leave the scheme before then. It's not guaranteed that the member will stay in the scheme up until the point at which this entitlement is reached. If it's going to happen tomorrow, then I think fairly obviously I think we we allow for it. It's the thing, if this is going to come up in, say, 12 months' time, that's the point at which you think, does it make sense to hold on here, or do we really want to settle matters now? Again, we we know what to look out for when we're writing when we're writing these reports, um, when these points come up at which benefits suddenly become more valuable, and we will always flag that to say you do realize, don't you, that in X months' time this pension becomes more valuable. Do you want to proceed now or do you want to wait? And it's not for us to see what people should do, but we're at least we're going to draw it to the attention of all the instructing solicitors.
Tamsin Caine:
Yeah, no, that makes absolute sense. So I deal with lots of clients who have DB schemes, who have um I guess government pension schemes, public sector pension schemes. I've not very often seen armed forces and police advising firefighter schemes randomly. Do these sectors do they have lots of like in the NHS scheme, you're likely to be a 1995 member and a 2015 member. Do we have the same situation with these uniformed forces as well?
Jonathan Galbraith:
Uh yes, we do. So just to confuse matters. Just to confuse matters. Uh so uh anybody who joined before, I think it's 2005 in armed forces and 2006 in police and firefighters is in the old schemes. So that's I think I said police 87, firefighters 92, armed forces 75, but will then have moved to the new 2015 scheme as at April 2015. There's then sort of the in-betweeners that joined between 2005 and 6 and 2015, who are then in the 2005 or six schemes. And then anybody who joined after 2015 is in solely in the new 2015 scheme. But then, of course, this was all revisited somewhat because of the the McLeod ruling and subsequent remedy, whereby uh for affected members who are active in both 2012 and 2015, they will have been ruled back such that their 2015 to 2022 service uh is then put back into the old scheme and the member then gets to choose at retirement whether they want the the old scheme rules or the new scheme rules to apply. I do realize I've just started shouting a lot of dates at you there, but the names of the schemes.
Tamsin Caine:
Uh brain hurts. Okay, right. Very slowly for simple people like me who are not actors. So if I have a my spouse, let's say, has an armed forces scheme, they joined it in time to have the 1975 scheme, they've got some of that, and then they were still active members in 2015, and we jumped into that one as well. But I've got to have 30 years of service in order to take my 1975 bit let's say 50 for nice round numbers. How does that work if I'm also in the other one? Like, does it does it does the 30 years stop when I joined the other the new one? Or how how does that work?
Jonathan Galbraith:
No, it it it doesn't. Um I should I should just flag for the armed forces scheme, they've got slightly different rules. Um if you join if you join the old scheme as an officer member, you could retire after 16 years of service, or if you were non-officer, so what they call other ranks is 22 years. So that's slightly different. Okay. Um but but yes, um, the simple answer is you can count uh service in the new scheme towards the 16 or the 22 or the 30 years. If they hadn't done that, it would have been quite unfair because it would then mean that anybody who had just missed it when they were moved to the new scheme would never ever be able to retire early. So that's actually based on, if you like, years of employment rather than explicitly the scheme service in the old scheme. So you can count the new scheme service as well.
Tamsin Caine:
Okay. Fab. And the new schemes for all of those uniformed services, are they all still final salary? Are they in this um career average situation that lots of the other public sector schemes are in?
Jonathan Galbraith:
Uh yes, they they've all moved to career average. So that's true across all of the public sector schemes, uh, including the NHS when we like sort of all they're all career average. So what career average means rather than final, final salary meant that the the pension that you received in retirement was a function of the last salary you received and the number of years of service that you had. Career average revalued earnings or care is where what we do is we look at what was the salary uh that I had in every year that I was working, and it's then an average of those salaries, but those are all inflation adjusted. So that will be inflation adjusted to take you from 2025 to 2045, recognizing that the time value of money has changed. And I think it's also useful to know that um for the active members of these schemes, uh, they do get some form of enhanced increases. So I think for a member of the police pension scheme, it's not just that the pension gets uplifted every year in line with uh CPI inflation. There's also a further 1.25% bonus that's given in top for active members. And it should be understood that um that might well be more than the rate at which salaries have increased at, particularly when uh there is or has been any kind of freeze in public sector pay. It may well be that price inflation plus 1.25% is more than your salaries are going up by. So uh the thing that's always got to be remembered about these new schemes is they are not necessarily uh a raw deal. Depending on people's circumstances, they might actually give you a better pension than you would have received under the old rules.
Tamsin Caine:
Yeah, absolutely. No, that is a that's a fair point. Just want to go back a little bit and pick up on McLeod, because this is another mind-bending uh horrible situation that that we all find ourselves in. So let's take it very slowly, one step at a time. So, can you start by telling us what is McCloud? Why are we talking about it? What is the relevance in divorce situations? Lots of questions there, sorry.
Jonathan Galbraith:
Yep, no, no problem at all. Um, so it it's it is uh uh a court ruling that affects the public sector pension schemes. And it goes back to what was the uh Conservative led them coalition government that came into power back in 2010. Um, they had a go at reforming public sector pensions, and they actually tried to do something more radical than the previous Labour government had done, in that they wanted to come up with reforms that would affect existing members of the schemes, not just the new members of the schemes that were joining thereafter. And what this involved was they wanted to move to the career avenues schemes. They wanted to come up with uh schemes that would pay benefits at state pension age rather than at 60 or 65. Uh they they made the accrual rates more generous to compensate for some of the other changes. And uh these schemes also didn't come with uh an automatic tax-free cash lump sum. You might be aware that many of these old schemes uh is pension plus three times tax-free cash lump sum. They wanted to scrap the automatic lump sums. And uh the, I think the legislation was passed in 2012, the reforms came in in 2015, and members moved across. But not all members moved across. Uh, they did something, uh this is probably an old-fashioned name for it, but they did something called grandfathering, whereby members who were reasonably close to retirement within 10 years of normal retirement age would stay behind in the old schemes. And members who were, I think it was 10 to 13 and a half years away from retirement, would move to the new scheme, but at a date after 2015. And that's the issue there. This was challenged by McLeod, who is a judge, um, with reference to the judicial pension scheme. You might have also heard of sergeant, who is a firefighter, and it was the issue sometimes called McLeod and Sergeant, although it's two separate cases. And it was challenged on grounds of age discrimination. You have done something different for older people than for younger people. Um, again, I think sometimes, I'm not a lawyer, sometimes these things can be objectively justified, but I think it was it was held that uh his majesty's treasury had not properly justified this, and so the whole thing then had to be unwound off the back of having lost the court case. Um, it wasn't as simple just to say, all right, well, we'll just put everything back the way that it was, um, because you cannot level pensions down. We're talking about leveling up and leveling down. You cannot just say, oh, well, we're just going to reduce your pension then. It has it, the the way they've had to tackle this is this sort of heads I win the member, tails you lose the taxpayer thing, whereby the member for this remedy period of 2015 to 2022 then ultimately has to be able to have the better of what the old rules would have been or what the new rules would have been. And that's what gives rise to uh affected members then being rolled back into the old schemes for this seven years of accrual, but then having the right to have the new scheme rules applied if those give a better outcome than the old scheme rules. And again, for those of us who deal with this public sector pensions used to be quite straightforward to deal with, but this really has thrown a spanner in the works, and some of this gets a bit messy, not least when there is an entitlement to take benefits at a comparatively young age in the old schemes that is not extended to the new schemes.
Tamsin Caine:
Wow. Okay. So the impact for quite a long time of McLeod for those of us who work in this area was that public sector schemes were having huge problems in actually even getting a cash equivalent value. We seem to be, touch wood, getting through that now. And then we seem to be receiving suitable cash equivalent values. Do we still so for cash equivalent values that are being received now? If I'm advising a client now, I've got a cash equivalent value that's been received in 2025. Do I still need to ask the actual pod to comment on McCloud and any impact that McCloud will have?
Jonathan Galbraith:
I think it's perfectly valid to ask that question. I think any good POD who knows what he's doing should be doing that automatically, but by all means ask that question. Um it should be made very clear on the cash equivalent statement uh that McLeod has been allowed for. The easiest way that you can check for it is if you have the old scheme. So again, police 1987, NHS 1995. If it says final date of service is 31st of March 2022 rather than 2015, then that makes clear that they have allowed for McLeod. Perfect. They have back those seven years of service into the old scheme.
Tamsin Caine:
Wow, okay, so we are getting somewhere with McLeod, because that's just been an absolute just a pain in the neck, hasn't it?
Jonathan Galbraith:
It has. I mean, I think um the one that's had a particularly bad press of late has been the the teachers' pension scheme. Absolutely. Yeah, and that's that's the one that I think has really made the papers. And I think there's a Facebook group out there called I I Want My CETV uh of teachers again who are getting divorced. And uh, you know, this is the only thing that's been hanging about, but they can't complete the the financial uh remedies piece because they can't get the CETV. I think um what we've seen is that almost all schemes now are largely up to date for non-retired members, so active and deferred members, where the decision on the cloud doesn't need to be made until retirement, the schemes are coping with that. The issue is for pensioner members who have to make an immediate choice as to do I want the old rules applied for the 15 to 22 or earlier exit period or the new rules, because the fact the member is retired, it is now quite cut and dried. Uh, the old scheme rules will give a pension of X, the new scheme rules will give a pension of Y. Uh you've got to choose which one. But the schemes need to tell the members what the options are, and the members then have a year to decide. And it's my understanding that the schemes will not issue cash equipment transfer values uh until that decision has been made. So it's possible if you have McLeod affected retired members that they might still be struggling to get CTVs, and that might well be the case for a few, a few more months.
Tamsin Caine:
Let's hope it's only a few more months, not a few more years. Right. Crumbs, right. Okay. So then we have the additional complication, because we like additional complications. Of course we do, of course we do. Of early departure payments. What are they? What do we need to think about?
Jonathan Galbraith:
What is an early departure payment? This is a feature that is unique to the armed forces pension scheme. Uh, it doesn't come up with police, it doesn't come up with firefighters, it doesn't come up anywhere else. It's just the armed forces scheme. And what it is, it's um it's uh a bit like a pension. But it's not properly a pension. So, as I said earlier, the new Armed Forces scheme, the 2015 scheme, will pay benefits at state pension age to members who leave service before age 60. The EDP, the Air Department, it's uh it's an arrangement that pays a lump sum and a temporary pension until state pension age to compensate for that later retirement age. Uh and it's payable for those members who've passed what they call the 2040 point, in that you need to have 20 years of service in the scheme and be aged at least 40. And the issue that you've got here is the EDP benefits are not shareable upon divorce. They're not included in the CEV or the Armed Forces pension benefits. They don't have a CEV of their own. It is questionable whether they are genuinely pension rights that should be even considered in a report because they're not payable for life. But when they come up, I would always seek to mention them where relevant. And the thing that's really horrible is where you've got this interaction of EDP with the McLeod issue, because it's one of these things that the EDP benefits are also affected by McLeod because they are calculated as a function of the 2015 scheme benefits. And it may well be that members might want to have the new rules applied to their McLeod service because it will give them better EDP rights. And again, this will all be set out to the member. Uh the arms for suspension scheme is sending out statements to members that explains this is what you get under these rules, this is what you get under these rules. But I've seen some of these statements, so they're not necessarily the easiest thing to follow.
Tamsin Caine:
That doesn't surprise me. So they're not rare, they might be pensions, sort of.
Jonathan Galbraith:
Yeah.
Tamsin Caine:
But we're not sure whether they they they kind of might not because they're a temporary thing. But they are based on a pension scheme.
Jonathan Galbraith:
Yes.
Tamsin Caine:
They are impacted by McLeod.
Jonathan Galbraith:
Yes.
Tamsin Caine:
They're not shareable. Yes. They we don't do this anymore, really. But can they have attachment orders attached to them?
Jonathan Galbraith:
It's my understanding that they cannot have attachment orders uh put on them. Um it's not it's an offset situation with exactly uh okay. It falls outside the jurisdiction of of the of the pension regime as it as is applied upon divorce, but it's still certainly something that the parties need to know that one party's going to receive and the other party's not going to receive. And there's an argument that it should be allowed for in a report. And I again I said they don't always come up, but when they do, we certainly do. Uh if if it cannot be allowed for in the calculations, we will certainly make it clear you do need to understand this member is going to receive this benefit for the following number of years.
Tamsin Caine:
Wow, and it could be quite a long time.
Jonathan Galbraith:
Yes. Yes, absolutely. I mean, uh as I said, that this could be payable from age 40 onwards upon leaving service until age 68. So yes, that could be 28 years of temporary pension.
Tamsin Caine:
And that I mean that could that could really add up, couldn't it? To quite some to quite some money. Right. Craike. So we've mentioned that potentially the way round or a way round that, if there's cdapital available, might be to look at offsetting because it's sort of the only option.
Jonathan Galbraith:
Yeah.
Tamsin Caine:
Is offsetting ever appropriate for other parts of uniform service?
Jonathan Galbraith:
It can be, um, it definitely can be, but it does depend. That's always the answer to everything. It depends. Um, I think what has to be understood is that these are disproportionately valuable pensions, um, certainly compared to the salaries that one might receive in these rules. And uh the other assets may not necessarily exist for offsetting purposes. Take, for example, armed forces where the couple are in forces accommodation, they might not own any actual property, and you then have a pension that might have a cash equivalent value of half a million pounds. Uh, where are the assets to offset that? They're probably not going to exist. And if that's the case, then you don't have an offsetting option. You the only thing you can do is sharing because there's literally no other assets. And I think if you're going to go down that road of offsetting, you need to make sure that the pensions are being valued fairly. Something that I'm sure Thomson, you and I have both been telling solicitors and people getting divorced over the years is that cash equivalent values of the fine benefit pensions are not necessarily reflective of fair value. It'll tell it'll tell you it's a big number, but it would it it's not necessarily something that can then be compared with equity in former matrimonial home. So you could use the Galbraith table, shameless plug, to value uh uh pension rights, or you could ask a poll, a pension divorce expert, to consider that in more detail. And I think you know the other point that I've made before is that do remember that the benefits can shoot up in value, um, in the same way that the CEV can go from 200,000 to 400,000 when immediate payment is reached. Any other value of those rights will also go up. And I think that this is often a thing that um that family solicitors are particularly wary of, um, to put it bluntly, being sued for negligence when when pensions issues have not been dealt with uh properly. I think the the important case of recent times is Joanne Lewis and Cunnington solicitors from 2023. Um, full disclosure, that was a case that I was involved in as an expert witness. Um, it was a negligence case where Mrs. Lewis had been, I think it's fair to say, poorly advised by her solicitor. She just wanted to finalise the divorce from her husband, but no one had no idea of what she was waving goodbye to. Husband had a legacy police pension with a cash equivalent value of over £500,000. Even if that's not the fair value, even if that's not the right number, I think we're all agreed that the right number is going to be a big figure as well. And she didn't know what she was saying goodbye to. That that was the point there. And that was what what the what she won on, really, that she's not she'd not really been properly advised. So I think it always comes back to the point that solicitors do need to know what they're doing with these sorts of pensions. And parties, particularly the spouse, um, if husband's got the police pension, particularly wife, needs to know, at least in very broad terms, what husband's pensions are worth.
Tamsin Caine:
Yeah, absolutely. So I wrote uh an article some time ago um about whether a post report is necessary. Um it's still the most well-read article that I have available on my website, despite having written hundreds of others. Um because broadly speaking, people don't well, this they're divided, but don't want to pay, they don't want to pay, spouse doesn't want to pay for the report, or one of them has said we're not going to touch each other's pensions. So generally when I receive an email saying I don't know whether we need a code report, I think maybe once out of, and I probably get these weekly, um, maybe once I've said probably, probably you don't, because they were both GC schemes, no guarantees, very very small, um, and similar, you know, so probably not, but the majority of times you need to spend the money. So could you just explain why it's worth spending the money on a pod report and why why it's essential that both parties pay the money out? Because there's a kind of feeling that, well, hang on, it's my huge pension. Why would I want to pay uh my ex to be able to have a share of it?
Jonathan Galbraith:
Yeah, good good questions all. I mean, I think uh uh we're not lawyers, but I think it is it is established within family law that pensions should be considered on divorce in some form that the the individuals don't just get to hang on to them and then we just deal with all the other assets that pensions ought to be considered. And I think it is then it's the fact that it is easy to get it wrong. Um, particularly, I think, as we said, if you define benefit pensions and we're just going to use the CVs and come up with some offsetting solution, it is quite likely going to be unfair to one party or the other. It's perhaps not immediately obvious to whom such a blanket solution would be would be unfair too. And so I think that's one of the reasons why one gets the polled report that it's it's somebody it's somebody having a fair and objective look at this and saying, well, this is this is this is what would be fair, and obviously somebody's going to gain and somebody's going to lose compared to simply using the CVs, but then everybody can everybody can then be agreed that it's that it's fair. I think um for the solicitors as well, many of them will have uh perhaps some PI requirement to look into this. I think many solicitors, particularly after the the Cunnington's case, do feel quite exposed. They don't just they they do not explicitly want to opine, say uh you don't need a report here. If if if they've got any doubts, they will probably err on the side of caution uh with getting a report. But I I do completely agree with you. If you've got parties who are young, which might be in their 30s or the early 40s, I decided I'm still young, um, then and they've only got defined contribution pensions. Uh these pensions are not going to have any guarantees. Guaranteed annuity rates, I think, I think it's fair. If you've taken any kind of arrangement after, say, 2000, you're definitely not going to have any kind of guarantees. Um, I again I I think it would be it would be overkill to seek to have uh a polled report then. But again, it's when you've got private sector defined benefit schemes, when you've got um schemes cases where the pension assets are maybe very material compared to the other assets. And in particular, where you've got these uniformed services schemes where you can have pensions at a at a young age in payment, but that will not be extended to the experts. I think these are the ones where it is mission critical to make sure that those issues are are properly considered by somebody who's going to have a fair and objective look at it.
Tamsin Caine:
Yeah, absolutely agree. I think the majority of the people who are approaching me to ask, do we need this report? I think the majority of them are not supported by solicitors.
Jonathan Galbraith:
Sure.
Tamsin Caine:
Or the solicitor has recommended it and they're not quite sure that that's absolutely essential. Yeah. Um so yeah, it's always it's always worth having the having the conversation. Uh, you know, yeah, fair play for people checking, but normally the answer is sorry, yes. It's it is necessary to spend the money.
Jonathan Galbraith:
Yeah, and I I get that, it it's it's a grudge purchase. Uh, I would imagine that all costs associated with divorce is a grudge purchase. This is even more of a grudge purchase, but uh again, I think that people would recognize though that uh pension assets that a couple in the 40s or 50s uh or in retirement would have might well be the most valuable or the second most valuable assets they have after uh a house. And you know, if you're getting divorced uh and the the house is being sold on divorce, you you are gonna make sure that gets valued properly. You're not just gonna say, oh well, we bought it in in 1987 for uh 50,000 pounds, so we'll just guess what it's worth. No, no, you're gonna look at that properly, particularly if one party's gonna stay in the house. And so as a result, why why wouldn't you do that with pensions as well?
Tamsin Caine:
Yeah, no, absolutely. So you created these tables. Yes. Um, and that feels a little bit malt like you might have been doing yourself out of a job. Um, I'm sure I'm not the first person to suggest that might be the case.
Jonathan Galbraith:
No, not closer enough.
Tamsin Caine:
Uh can somebody use a solicitor, for example, use your tables, and then their lovely clients not have to bother spending their several thousand pounds to get the report that we've just told everybody is essential.
Jonathan Galbraith:
An excellent question. Have I climbed up a tree here then to say to solve the branch that I'm sitting on? Um, I think it's uh it's fair to say that there are uh a huge number of divorces where no pensions uh report is is sought. I think there's a hundred thousand divorces in England and Wales. There are most definitely not a hundred thousand pension and divorce reports being written. And I think I think it was said very busy, wouldn't you? Exactly. I would be very busy indeed. Um, I think it's it's it's fair to say that in in many cases it's quite right that a report isn't sought. Um, but that there maybe are cases where um solicitors who are comfortable using the tables uh and read all the caveats that go with the tables are happy to use it. I mean, I think the tables are they're useful for uh placing a ballpark value on pensions. That's what they're designed to do. They don't get into all the intricacies that might exist, and that's made very, very clear within the tables themselves. Um, but again, they could they be used at letter of instruction stage um if a pose is going to be appointed? And it goes back to that question: is it worth asking for offsetting numbers if there are no real assets against which the pensions can be offset? Uh and again, exactly. I mean, what's the point in doing the offsetting figures if there's if there's no assets? Um, so I I think they can be useful there. And I think, yes, they can be useful in other cases, but uh it in all honesty, I I've still got lots to do in terms of writing reports. And since we published the tables, that that hasn't uh that hasn't dried up uh the work in this space. There I think there's always going to be cases where um proper uh expert witness testimony is going to be sought because the the issues are sufficiently complicated. But if at the simpler end of the spectrum the tables make life easier for uh family solicitors and indeed people getting divorced, then then I would be delighted to think that. Excellent. Okay.
Tamsin Caine:
We're coming to the end of the of our time together, um which is probably a good thing because my voice is giving up now. Um but is there anything that I should have asked you that I haven't? Um and are there places that people listening can go to for further information?
Jonathan Galbraith:
Uh I think we've I think we've thrashed this one out pretty comprehensively. I can't think offhand of anything of anything that else that needs to be said in that. Um useful resources. I think I made a reference to uh the PAG report, PAG two, as it's now on to, which again, which uh we we both sat on that. This is, I think, seen very much as uh the standard text that uh is followed for dealing with um uh pensions matters on divorce. It's been uh endorsed by by two leading judges, and I think it's one of the things it's sought to do is uh uh encourage the a more uniform practice of how such matters are dealt with in court on divorce. I know that solicitors do refer to this document very much. And then shameless plug is uh you mentioned it earlier, uh Tanzan Pensions on Divorce, a practitioner's handbook, volume four, uh written by myself, uh His Honor Judge Hess, and Barristers Reese Taylor and Joe Rayner. And uh this as it said is the fourth edition of this book, and uh the first one that I've been involved in. And I have somewhat rewritten what it says on the actuarial chapters and particularly on those public sector pensions that's all been rewritten to reflect McLeod, um, the all the new schemes that they introduced and so forth. Uh, all the issues that we've referred to today are discussed in the book in some detail.
Tamsin Caine:
Perfect. And that that book, not necessarily one that you want to get your hands on if you're uh going through divorce yourself, it's it's quite a tone. But certainly if you're involved in the area of ventures on divorce as a as a um practitioner, as a professional, it should be sat on your desk um day in, day out. It's certainly uh certainly my Bible. Um in terms of the PAG report, the PAG report itself, I would say it's fair to say it's relatively readable. Yes, not in lawyer speak, which is good for me because I don't speak lawyer very well. Um and it is quite readable. However, it is quite long. You might find that it's not particularly been written for the general public for the divorcing people. However, that is a, if you go to advice now, I think it's.org.uk, um and you will find the pensions on divorce uh guide, which is a survival guide for pensions on divorce, the yellow guide, uh sorry, it's not a yellow guide, it's an orange guide. It's fabulous, it's written in very, very much in plain English, but based on the findings of the PAG report. So if you're going through divorce yourself and these wonderful publications that Jonathan's talked about make your head want to explode, uh please use the survival guide because it does, it's pretty comprehensive in what's it's very good. Yeah. So last thing I need to check with you before we disappear is how can people get in touch with you, Jonathan, to instruct you to write their report or at least maths and consulting?
Jonathan Galbraith:
Certainly, you can find us online at uh www.mcac. That's mcact.co.uk. Uh as a general rule, we uh take instruction via solicitors. Um, we would typically expect both parties to be represented by solicitors. We will often consider cases where one party is represented by solicitors and the other party is uh is self-represented, what's known as a litigant person. Uh but we we would typically take cases when when neither party has solicitors, but we do judge cases under all individual merits.
Tamsin Caine:
Perfect. Wonderful. Thank you so much for joining me today. That's been absolutely enlightening. I hope that you listening have found it useful. Um if you do have any questions or queries, please uh please do get in touch. Hopefully this has laid to rest some of the uh some of the queries that you might have. And um if you have enjoyed today, please do leave us a review. And thank you for joining me, Jonathan.
Jonathan Galbraith:
Thank you very much indeed, T amsin.
Speaker:
Hi, and I hope you enjoyed that episode of the Smart Divorce Podcast. If you would like to get in touch, please have a look in the show notes for our details or go on to the website www.smartdivorce.co.uk. Also, if you are listening on Apple Podcasts or on Spotify and you wouldn't mind leaving us a lovely five-star review, that would be fantastic. And I hope that lots of our listeners are finding this is incredibly helpful in their journey through separating divorce and dissolving a civil partnership. Also, if you would like support further support, we do have a Facebook group now. It's called Separating Divorce and Dissolution UK. Uh, please do go on to Facebook, search of the group, and we'd be delighted to have you join us. Um, the one thing I would say is do please answer their membership questions. Okay, have a great day and take care.