joint venture development€¦ · new linkedin pensions & divorce group shortly. pensions...

Joint Venture

DevelopmentNorth Laine Financial Management Ltd

Celebrating 10 Years

of Fee Based Impartial Advice

North Laine Financial Management Ltd

• Planning and Service Orientated

• Chartered Financial Planners

• Focus on Costs and Transparency

• SIFA (Solicitors Independent Financial Advice) Member

• FCA Directly Regulated, RDR Compliant

• Solicitors Regulation Authority (SRA) Accredited CPD

Provider

• Strong and Well Capitalised

SRA Accredited CPD

First seminars run in January 2009

Training topics covered:

•Pensions & Divorce

•Elderly Client Matters

•Investment

•Tax Planning

•Business Property Relief

SRA Accredited CPD

First seminars run in January 2009

Training topics covered:

•Pensions & Divorce

•Elderly Client Matters

•Investment

•Tax Planning

•Business Property Relief

Any suggestions? Email cpd@nlfm.co.uk

Technical Support

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LinkedIn : North Laine Financial Management

Twitter : @financial_NLFM

•We will be communicating the launch of a new linkedin Pensions & Divorce group shortly

Pensions Update

Clive Weir - Director

Hove and Gatwick

25 March 2014

Agenda

• Budget 2014

• Anomalies of Public Sector Pension Schemes

• Bear Traps on Implementation

• Latest Pension Ombudsman Determinations

• Cash Flow Modelling on Divorce

• Empirical report on Pensions and Divorce

• Ongoing Structured CPD program

Budget 2014

Changes from 27 March 2014

• Trivial commutation

• Capped Drawdown Limit

• Flexible drawdown

• Small pots

Consultation Paper

• Unlimited Income

• Are annuities really dead?

• Minimum Pension Age

• Tax on pension drawdown death benefit

• Ban on transfers from public sector pension

Anomalies with Public Sector Pension Schemes

Teachers Pension Scheme

• Early retirement on the grounds of efficiency

• Cash equivalent does not reflect the component paid by Local Authority

• AVC administered by Prudential

– Completely separate scheme

– Requires a separate pension sharing annex

– Different percentages can apply

NHS

• Mental Health Officer benefits payable from age 50

• Enhanced service

• If goes into academia then this benefit is protected within the USS but not the Teachers Pension Scheme

PCSPS

• Multiple schemes for member but only one set of factors for a spouse

• Buy back of early retirement reduction

• Early retirement – Civil Service Compensation Scheme – see Slattery

– Compensation is non shareable rights

Local Government PensionScheme

• Rule of ‘85

• Allows internal and external pension credits

Police Pension Scheme

• Benefits payable from 30 years of service or from age 50 with 25 years

• Benefits ‘double’ accrue – 1/60th for first 20 years and then 2/60ths in the last 10 years

• Cash equivalent will only reflect benefits as if an early leaver and so may not be ‘fair’

GAD Factors

• Cash equivalents are calculated by factors published by the Government Actuaries Dept specific for each scheme

• Pension credits are also calculated using GAD factors

• DO NOT TRY USING ANNUITY RATES!!!

Pension Income Gap

• Arises when member’s pension is in payment but the spouses income cannot start until later

• Particularly relevant within the Armed Forces Pension Scheme and Police Pension Scheme

• Income lost from ‘Transfer Day’

• You cannot defer a pension sharing order

• You can however adjourn application

Issues with adjourning a PSO

• Changes in cash equivalent / pension credit factors

• Changes in circumstances

• Death of member

• Application for PSO by second spouse!

• Changes in legislation

Pension Credit Ages

• NHS – 60 or 65 depending on member’s scheme – (Early retirement from 55)

• Armed Forces – 65 (Early retirement from 55)• Police – 60 or 65 (No early retirement)• Firefighters – 60 or 65 (No early retirement)• Local Government Pension Scheme – 65 (Early

retirement from 60)• PCSPS – 60 (Early retirement from 55)• Teachers – 60 or 65 (payable from age 55 if

former spouse in teaching on or after 30 March 2000

Implementations

• Growing evidence of problems with implementation

• Nobody project managing the process

• No financial adviser because no product!!

• ‘Black hole syndrome’

• Consultancy service to implement – 3 to 4 hours of chargeable time?

Cash Equivalents

• New factors will have to be prepared for the changes in public sector schemes

• Will they take the opportunity to ‘update’ existing arrangements?

• If so could see another embargo on cash equivalents in the next 12 – 18 months?

Bear Traps for Implementing Pension Sharing Orders

Timing the application of the Decree Absolute

• PSO becomes effective 28 days after its issue or if later date of decree absolute

• If apply for Decree Absolute at same PSO you are no longer the legal spouse and you don’t yet have a PSO

• If member dies (particularly if in defined benefit scheme) no death benefit payable and no entitlement to share pension

Implementation Charges

• Guidance set by National Association of Pension Funds (NAPF)

• BUT if already quoted can only be increased in line with inflation after 12 months not the new schedule

• Particular relevant with scheme transfers such as seen with the Police

• If not quoted within the statutory timescales cannot charge at all!

Implementation Charges

• Are we due another NAPF review soon?

• 2011 saw a significant increase in the scales

Second Bite of Cherry

• Only allowed one pension sharing order per arrangement per marriage – FACT

• However what happens if they then transfer to a new pension arrangement? – often done to consolidate pension arrangements or to utilise pension drawdown

• New arrangement is now fair game• S31 application to capitalise maintenance• Answer – consolidate before application of

PSO

Recent Pension Ombudsman Determinations

Dr D Collinson v NHS Pension Scheme

• Ref PO – 128

• Dr Collinson maintained that the implementation should be seamless and that no ‘overpayment’ should have occurred

• Ombudsman ruled that NHS notified that an overpayment would occur during implementation and Dr Collinson should have made provision.

Mrs M Morton v Scottish Life

• Ref PO – 378

• PSO awarded against Scottish Life plan

• Court documents served but awaited W’s destination for PSO

• H in the meanwhile asked for transfer to Aviva – took TFCS and went into drawdown!!

• Scottish Life ordered to reinstate lost funds to Mrs M regardless as to whether recoverable from Aviva

Mr D Payne v Anglo UK Pension Scheme / AON

• Ref PO – 107

• Early retirement quotes provided by AON did not include the pension debit

• Mr Payne made decision to retire based on expected incomes

• AON directed to pay £54,850 compensation to Mr Payne

Mrs N McNicholas v Scottish Widows

• Ref PO-408

• Scottish Widows quoted CE of £608,436

• Settlement reached providing W with 50%

• Funds transferred to L&G SIPP – Sc Wids then advised figures calculated wrong from outset and wanted £97,626 back

• W could not reopen divorce settlement and had disabled son

• Injustice to her repaying outweighed injustice to Scottish Widows

Cash Flowing Modelling on Divorce

What is Cash flow planning?

• Overview of financial position now and in the view

• Plan for change in financial circumstances

• Identify changes needed to meet objectives

– Savings required

– Investment performance

– Alterations to expenditure

Who is Cash flow planning suitable for?

• We understand that not required for all clients on divorce

• Understand that cost is an issue for many clients

• Can be made as simple or as detailed as required

• Can be used to quantify offers and settlements

A quick word on Duxbury

• How realistic are the assumptions?

• Understanding the other underlying assumptions.

• Not wrong – perhaps in need of an update!

• BUT what is the client’s expectation?

Would you invest in this fund?

Do you remember –Where are house prices going?

Where did they go then?

Nationwide average house prices adjusted for inflation

Case Study

Benefits of cash flow planning

• Allow for changes in circumstances

• Creates basis for on going planning

• Tailored to clients own circumstances

– Life after the divorce

– Risk profile

– Realistic investment returns

Overview

• Cash flow planning integrates all the clients financial information

• Projections are based on ‘realistic’ returns in accordance with clients risk profile

• Pension reports are also based on assumptions – are the clients investing appropriately or being advised of the implications?

• Provides client with peace of mind

Pensions and Divorce –An Empirical Report

Background

• Report prepared by Cardiff University and the Nuffield Foundation

• Most significant review of pensions and divorce

• Looking to create an action plan to deal with some of the issues highlighted.

On Going Structured CPD program

Proposed Webinars

• Understanding defined benefit

• Understanding defined contribution

• Implementation of orders

• Offsetting methods and Attachment

• State Pension and Public sector schemes

• Significant case law and Pension Ombudsman

• Cash flow modelling

• Update 2015

Proposed Webinars

• SRA accredited CPD

– Formal if watched ‘live’

– Informal if watched as a recording

• Usual cost of £85 per webinar - or all 8 for £575

• Bespoke CPD package if booked directly with North Laine

Question and Answer forum

The information in this presentation remains the intellectual propertyof Albert Goodman Financial Planning Ltd and must not be re-producedwithout written consent.

Albert Goodman Financial Planning Ltd is not responsible for any loss asa result of reliance on the material contained within this presentation.

Albert Goodman Financial Planning Ltd is authorised and regulated bythe Financial Conduct Authority.

Tallford House40 Walliscote RoadWeston Super MareBS23 1UPTel 01934 642222Email clive.weir@albertgoodman.co.uk

Joint Venture

DevelopmentNorth Laine Financial Management Ltd

Celebrating 10 Years

of Fee Based Impartial Advice